Insurance rebounds sharply
on strength of Asian business
Tech disruption makes branding more critical
The insurance category rebounded dramatically, increasing 34 percent in value after declining 1 percent a year ago. The performance of brands in Asia drove the strong increase, which happened despite large claims some insurers faced after three destructive hurricanes in the US and the Caribbean, and two earthquakes in Mexico.
A year ago, most of the Chinese insurance brands had declined in value, after government intervention to stabilize the insurance market against speculation. The insurance category has evolved in China since then, with more liberal regulations and a growing understanding and acceptance of the category among middle class Chinese who increasingly purchase insurance for protection rather than investment.
The relatively low penetration of insurance in China, and the expansion of online access, continued to drive strong category growth and attract competition from outside the insurance category, particularly among major internet brands, such as Alibaba, Baidu, and Tencent. For these players insurance is another product to make available to their many customers, similar to the motivation for Sears to establish Allstate, in the 1930s, to sell auto insurance.
Ping An is dominant in China, and dominance is important in Asia-Pacific markets, where insurance customers typically consider only a few brands, although brands loyalty can be fairly high. Ping An owns an online healthcare service and operates clinics throughout China as part of its broad positioning as a financial services company. After an investment in HSBC, Ping An is the global bank’s second-largest shareholder.
Zurich purchased the life insurance business of Australia’s ANZ bank, further strengthening its position in the Asia-Pacific market, following other recent acquisitions. AIA purchased the insurance business from Commonwealth Bank of Australia. AIA performed well in its home market, Hong Kong, and in Mainland China, substantially increasing business in both markets. where it provided insurance and related products to members of China’s rising middle class. Its share price rose significantly.
To better leverage its business in the robust Asian market, Prudential plans to divide the company into two parts, separating the slower-growing UK and European business from its US, Asia, and Africa operations. Announcement of the split drove up Prudential’s share price.
In a category of products that people do not want to buy and never want to use, differentiation can be challenging, but brand consistency and likeability have been important to build awareness and trust. Messaging has become more positive in tone, focused more on helping people progress through life than protecting them from life’s catastrophes.
Brand building remained important, particularly on the consumer side of the business, both in markets crowded with competitors, like the US, and in markets where online aggregators have proliferated, such as the UK, as brands try to build trust and salience.
State Farm leads in market share in the competitive US market, followed by Geico, Progressive, and Allstate, and then four more national brands and numerable local players. This level of competition slows the entrance of new brands and online aggregators and raises the importance of brand communication.
Of the US property and casualty brands, State Farm has built its brand around customer care, while Geico and Progressive have built salience on price, using humor and memorable characters that have become closely identified with the respective brands. The Geico ads featuring the Geico Lizard, have evolved over time but still make the price promise, “15 minutes can save you 15 percent or more.”
Progressive’s “Flo” ads, in an office setting with a character named Flo, have run for around 10 years. In the UK, the Direct Line brand uses actor Harvey Keitel as the fixer, referencing his role in the movie Pulp Fiction. The Churchill brand has a bulldog character.
Reaching new customers
Like financial services providers generally, the insurance brands has not fully kept up with societal changes as they attempt to reach new customers. The brands have not yet successfully understood the changing needs of women customers, from the customers’ point of view, according to recent Kantar research about marketing financial services to women.
Ads for homeowners or car insurance make the same assumptions, for example. The ads are usually pitched to women because brands presume they have more time to research and want to research, according to the Kantar research. In life insurance the language becomes more male boardroom, with campaigns positioned around sports with predominately male spectators.
Efforts to reach young people are more developed, as insurance companies are getting better at collecting and analyzing data to anticipate life events that may trigger an insurance need.
Both Geico and Progressive recently have focused more on millennials and Gen Y, and are expanding their offering to include homeowners, renters, and other insurance products.
The changing insurance priorities of young people also influence product mix. Homeowners or renter’s insurance is supplanting auto as the entry ramp insurance purchase. More metropolitan young people are less likely to purchase a car, but they are eager to insure their possessions—smartphone, computer—as contents covered in a property insurance policy.
Startup brands like Lemonade, which sells homeowners and renters insurance, have launched to cater specifically to the insurance needs of young people. Ultimately, more established, less nimble brands acquire some of these newcomers as a gateway into the youth market. Lemonade has sold a percentage of its business to Allianz, for example.
Germany-based Allianz operates in 70 countries and offers a wide portfolio of insurance products, including property and casualty, life, and health, as well as corporate services. Along with the Lemonade transaction, the company also acquired businesses in North Africa, Nigeria, and Saudi Arabia, and divested some underperforming assets. These moves, and strong business results, helped lift market capitalization and brand value.