In a brilliant marketing move, the largest auto insurance companies announced rebates following the shelter-in-place orders due to COVID-19.
The headlines were phenomenal. Nearly every media outlet in the country ran one or more stories on the size of the rebates. The figures in headlines ranged from as little as several hundred million dollars to over $2 billion. In total, the estimates are that $8 to $10 billion was returned to drivers through some form of rebate. Put into perspective, in an industry known to be one of the largest advertisers on the planet, this was a modest increase in marketing spend. The positive press received was probably worth the cost.
Marketing Message Versus Customer Need
Unfortunately, brilliant marketing is not helpful to consumers in need. People have very different driving patterns due to the rapidly changing economy. The rebate tactic in no way considered the individuals’ situations or the risks those situations present. This was an opportunity missed. Giving rebates to everyone did not take this simple fact into account.
The insurance industry is built on detailed data including driving habits, accident rates, claims costs and much more. Analyzed by both actuaries and business professionals, the data is transformed into a business model that predicts risk and ensures profitability.
Expectations of changing driving patterns thanks to shelter-in-place mandates clearly informed the PR move. The rebates were based on a calculation and designed to court public opinion, not truly address the needs of deeply impacted customers. It worked. The initial wave of positive press for a few fast-moving insurers caused much of the rest of the industry to quickly follow with similar programs that didn’t truly affect those who needed financial relief.
Customers Upset About Good News?
As soon as the rebate notices were sent, our company began hearing from disgruntled consumers. One customer reported that his six-month price increase from Allstate was $40. Almost simultaneously with receiving notice of the price increase, he received his “shelter-in-place payback” notification. The payback was $8 less than the price increase.
The customer was angry and felt that rebates were just for publicity instead of helping customers who are suffering financially and emotionally right now. Rebates were a missed opportunity to tailor solutions for those who lost their jobs and incomes and stopped commuting.
The Lessons Learned From A Pandemic
The pandemic rebates demonstrate how insurers deploy large-scale advertising and marketing budgets. The top three insurance advertisers spent approximately $5 billion last year. These ongoing ad blitzes drive consolidation in the industry, narrow consumer choice and present no meaningful information from which to make insurance purchase decisions.
Consumers buying a car read reviews, performance specifications, reports by test drivers and evaluations of quality. They also do test drives to truly experience their chosen vehicle. When it comes to protecting that valuable possession, consumers don’t have the same advantages and opportunities. Insurers would have you believe that price is the only thing that matters and that every carrier is the same. The lessons learned from these rebates is that insurers know a good advertising hook when they see it, and they’re willing to spend big in an attempt to sweep up more market share and profit dollars.
What Consumers Need To Know When Buying Insurance
Insurance is like every other product Americans buy. Product quality is not the same from all providers. Insurance is not the commodity that some carriers would have you believe. Price is not the only factor that matters. Claims handling matters. Service is critical. Consumers must ignore the advertising and look more deeply at this important purchase.
In an industry shrouded in opacity, finding the best insurer can be difficult. Consumers often think of web reviews first as a way to judge quality. Unfortunately, web reviews don’t work with insurance for the simple reason that consumers aren’t interested in reviewing insurance companies unless they’re angry or are getting paid. Neither leads to an honest and accurate review.
User surveys are another frequently used method of reviewing insurance companies. The challenge with user surveys is the questions are easily manipulated to yield the desired result for companies paying the fees and using the results in their marketing. Furthermore, it’s impractical to present user surveys on a broad set of companies. This makes it nearly impossible to accurately identify both the best and worst performers. Instead, only the largest companies are surveyed. Not surprisingly, all perform similarly.
Data Analytics Enables Insurance Transparency
With large amounts of data available on insurance companies, mining and analyzing the data to provide true transparency and an accurate measure of performance is possible. The data can identify how companies perform on the three important criteria: value, claims handling and service.
With the pandemic clearly demonstrating the U.S. insurance industry is a marketer’s game, consumers need to be vigilant in understanding the quality of the product versus the entertainment of the advertisements. When buying insurance, be sure to check the efficacy of the claims-handling process for companies you are considering. After all, insurance that won’t pay a claim is overpriced, no matter what the cost.
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