Covid-19 is reshaping insurance and wealth offerings

Covid-19 is likely to leave an enduring legacy in the financial and wealth management sectors, as consumer demands become ever more complex. This is according to KPMG analysis.

Much has been said about shifting consumer priorities since the start of the Covid-19 crisis, and how this has affected the purchase of goods and services. KPMG surveyed more than 1,500 consumers across Australia to find that these shifting priorities have a bearing on wealth management as well.

No doubt, the crisis has had a pervasive impact on the economy, driving many into income uncertainty. The primary casualty from an economic perspective has been discretionary spending, as consumers in Australia and across the globe go back to the basics. KPMG reports that a growing number of insurance and wealth management instruments are also falling under the ‘discretionary’ label for consumers.

Only car and home insurance are being viewed as essential by many, with private health, life, and income protection insurance instruments falling into the discretionary category. Some are also looking to opt out of their superannuation schemes under the circumstances, as liquidity becomes the need of the hour.

Providers are facing a direct threat to revenues as a result, and KPMG suggests that they work to meet evolving expectations in order to retain customers. To this end, the firm has laid down some changes in consumer expectations that providers in the insurance, superannuation and financial advice segments can consider.

In the insurance space, for instance, the most pressing demand is for providers to offer discounted rates under the circumstances, and there is also a call for reduced premiums. Incomes have taken a significant hit from the crisis, while claims in the health space have also presumably spiked amid growing health concerns. Consumers need respite from somewhere, and insurance providers could become a source for this.

Cheaper and more flexible

That being said, the respite sought is not necessarily in monetary terms. Many consumers are happy with paying the current rates, but are seeking more flexibility in financial instruments. KPMG presents a preference for “car insurance based on the distance driven” as an example of this, where consumers crave customisation to their individual situation.

Reduced fees are also a key consideration in the superannuation space. Consumers point out that contributions to pension schemes have dried up as jobs slip through the cracks, while recurring fee payments deplete current savings. More than a fifth want a cut in fees to tide over the situation. That being said, the primary expectation from superannuation funds is for advice.

More than a third of consumers in Australia seek guidance to navigate unprecedented conditions. Concerned about their long-term financial security, consumers expect superannuation providers to grow into the role of financial advisor, expanding their suite of services and offering more advice. Many want clear and frequent communication channels, and a more proactive approach.

While this scenario is promising for financial advisors, although even here consumer preferences have grown more demanding. People want more quality in their advice. They also seek more customer-centricity and better communication channels with their advisors.

So insurance and superannuation providers as well as financial advisors need to introspect. Underlying all the imminent changes, meanwhile, is better communication, which under the paradigm of social distancing guidelines means a focus on virtual. As a result, the first thing for most providers to focus on is the digitalisation of communication and customer service channels.

According to KPMG, the preference for communication via email, live chat, mobile apps and other online portals have all spiked since the start of the crisis. As they move online, consumers seek convenience, accessibility, time and cost efficiency, as well as a high degree of personalisation.

Barring demographic variations, most consumers are growing to trust digital channels more than before, and are looking to continue a digital-first interaction model with providers even after the crisis has subsided. This, and the growing desire for flexibility, personalisation and accessibility are all likely to persist in the future according to KPMG, representing actionable insights for providers.

“Our research has highlighted the critical window of opportunity that organisations have to make a break-out advance in their customer transformations. We have seen many organisations starting to make tracks on their journey to being customer centric, but in light of Covid-19, consumers are calling out for this now more than ever,” said Tim Thomas, partner at KPMG Strategy’s Insurance & Wealth practice.