Marques of quality

No one is in any doubt that motor insurance remains a tough market.

Perhaps more than in any other area of the industry, competition on price is fierce and that is how most brokers strive to differentiate themselves.

However, recent evidence suggests that, by focusing exclusively on price, many brokers might be missing out on another significant opportunity for building a competitive advantage.

The Bristol Business School recently carried out an extensive independent survey of motorists around the UK who were questioned about their experiences of dealing with insurers. Specifically, the research showed that only 33% of drivers believe that price is the most important factor when dealing with motor insurance. In fact, customer service emerged as a vital factor, with 25% of claimants unhappy with the quality of service provided during their claim. And as for meeting these demands for good service, the automatic provision of a replacement vehicle tops the list of services that policyholders want.

This research has demonstrated that there is a real opportunity for the industry - for both brokers and insurers - to provide a more consistent and well-developed level of customer service and that the replacement vehicle is key.

Matching products to customers

Brokers are keen to develop additional revenue streams but it is worth noting that this does not come at the expense of customer service. Total loss or theft is a prime example, as many policies still do not include the provision of vehicles to claimants whose car is written off or stolen.

This is an opportunity for brokers to both add value and generate revenue, by pushing insurers to include replacement vehicles for policyholders even after theft or total loss. The objective is to offer the customer a guaranteed mobility solution no matter what. For example, there are intermediaries that include an additional paid-for element on top of their motor policies. These guarantee the policyholder a high-quality replacement vehicle if a claim is made.

Then there is an emotive issue. A policyholder whose luxury executive saloon is being repaired is unlikely to be happy with a small hatchback as a replacement, whether it comes from the body shop or the credit hire company.

By working together and delivering on customer expectations, both insurers and brokers will be able to build their revenue streams. Currently, brokers rely on a combination of credit hire suppliers, repairers and rental companies, each providing vehicles at different prices and of greatly varying quality.

The objective should be to provide customers with guaranteed yet appropriate mobility. They should be able to access a wide range of different, high-quality vehicles from the supplier, rather than being forced into accepting only what is available.

Opportunities for differentiation

The research also found that brokers remain the most popular way of buying motor policies, used by one-quarter of all drivers surveyed. However, the second most popular method was telephoning an insurer directly and it is arguably an option that is growing with each passing year.

This means there is even more need for brokers to develop a clear competitive advantage. By persuading their insurers to offer a guaranteed mobility solution, such as policies that offer a car even in the event of theft or total loss, they can generate an additional revenue stream while marking themselves out from the competition. Plus, as the research demonstrates, they will be giving the public what they want.

Of course, all of this only works if the replacement vehicle provider is up to the challenge. It has to offer a suitably wide range of vehicles and levels of customer service that match not only the broker's brand values but what policyholders demand.

Locations all around the UK are vital, of course, because when a policyholder is stuck in the middle of nowhere with a defunct vehicle, it helps to be able to say the replacement is just a short distance away.

Moreover, the staff in each branch have to offer customers a dependable, professional approach during the process of the motor claim. It is, after all, a very stressful time for any driver.

Adding value

Replacement car hire is less popular because the revenue generated is not as significant. However, although there may be no initial opportunity to gain commission, the bonus for brokers comes at the time of the claim.

There is a genuine opportunity here. The current system is extremely complex and relies on an array of different vehicle suppliers with their own agendas. Insurance has to move with the times and the answer may be to bring everything under one roof.

However, despite the importance that is clearly placed on the replacement vehicle by claimants, only 40% of them were provided with a car while their own was being repaired. Of this figure, 45% were provided with a replacement vehicle of an inferior model to their own.

The findings went on to show that most non-fault accident victims are unaware that they are entitled to a replacement vehicle of a similar marque to their own. Tellingly, only 8% of claimants provided with an inferior car said they would renew their policy with the same insurer.

It is this final statistic that should ring alarm bells in the minds of the industry, as customer retention clearly relies on a lot more than just offering the cheapest policy. The most important thing is to give customers what they want - they bought the policy and with it they need uncomplicated mobility.