Erik Saelens

Erik Saelens, Founder and Executive Strategic Director of Brandhome, expert in brand management, discusses what exactly makes a brand. He touches on Brandhome method®, the challenges insurance brands face, and how we can tackle them.

Anyone who wants to build and brand in the insurance space faces two challenges: the low involvement and the negative consumption effect of the sector.

LOW INVOLVEMENT Research in Europe has highlighted that a person who has had no incidents, thinks about their insurance for an average of six minutes a year: when they get the bill from the insurer, wondering why they need this and why it’s getting more expensive, they pay it… and then forget about it. Compare this with the daily average time a UK based user spends on social media sites – one hour and fifty minutes! – and the point goes without saying.

NEGATIVE CONSUMPTION EFFECT This means that 95% of insurance products have a negative connotation when they are ‘consumed’. You interact with your non-life insurer because of an accident or a leak, and you interact with your life insurer regarding the loss of someone you love. Although these moments of contact can be very rewarding for your NPS, they have a short-term impact on perception, and thus commercial behaviour.

To these challenges, we must also add the fact that higherinvolvement brands and brands commoditising the insurance value proposition are beginning to enter the profitable insurance space. Most of these out-of-category players claim to be closer, more empathetic and connected to the consumer than the traditional industry players. Is this true? We’ll discuss this in a moment.

So, what is brand? It is so much more than advertising – if the brand is the car, then advertising is just the fuel. A brand is an economic instrument, it gives you the ability of commanding a certain ‘element’ over other comparative offers. This is what brand building is all about: how high this element can go, and correlating it with the strength of your brand. These two need to be well balanced, and this balancing act happens along the fair-trade line. This is the trade-off between the perceived value of benefits of your brand, and its price/premium. According to the Brandhome methodÒ, the brand premium is composed of four components. These make up the final brand premium clients are willing to pay: Price Element – this is the added price, benchmarked against the cost leader in your category, that a brand can charge. A nice example is the handbag brand, Hermès. A black Birkin Hermès bag, a similar sized Gucci bag, and an unbranded bag have asymmetric price elements. This shows the price inelasticity of a brand like Hermès. It bends your fair value line.

Service Element – this is the extra value a brand can ask for due to their service leverage. For example, BMW’s after-sales service is so wonderful; they have a higher repeat buying pattern with customers who have had a product problem, than consumers who have not.

Distribution Element – this is simple: be where your customers are anytime, anywhere, anyhow. Coca-Cola, McDonalds, Pizza Hut – wherever you go, they go.

Loyalty Element – this is a more complex element that holds a psychological aspect. This is the mental cost that consumers who want to earn from your brand need to ‘pay’ in respect to their peers. This adds to the self-esteem of your buyers.

Clearly, the final brand premium is valued in the price and brand equity. Brands need to have free cash flow to fund innovation to fight copycats, the commanded brand premium must continually increase. Needless to say, most insurance brands don’t have the same brand power as these new out-of-category brands.

So, how can you insure your insurance brand to be future-proof and resistant to all out-of-category entrants?

First, you must stay keenly aware of the direction the market is changing. The channels used by consumers to seek out insurance have changed. Now more than ever, they are researching and buying products online, and expect to communicate through the according channels. Likewise, consumers are expecting frequent, tailored and customised communications. As a result, legacy insurers need to update their current tools to make their offer more attractive.

Moreover, insurance brands must incorporate the use of big data to keep themselves relevant and profitable. Insurers are lucky to find themselves in possession of a wealth of sought after, and therefore highly marketable, data. By leveraging this data, they can establish new channels across the value chain. This data also has very important internal usages; its capacity to serve as an incredibly accurate decision-making tool, as well as a launch pad for improved product development and underwriting.

Incorporating emerging tech – such as AI and blockchain – into your brand’s value proposition is rapidly becoming a requisite for any competitive actor in the market. Both of these tools represent a threat and an opportunity for the insurance market. They are, or appear to be, a threat because their development is applying pressure to three key components of the insurance business: the updating of now obsolete legacy systems to industry standards, rigorous analysis of cybersecurity vulnerabilities, and blockchain implementation to protect from fraud detection, improve trust, and more efficiently manage claims. The opportunity lies in adopting these new tools to more efficiently solve the latter problems.

However, these considerations come with a caveat. With all of these advances – which surely promise a lot of financial upside – insurance brands need to stay faithful to their core, which is a human one. While trying to remain competitive in today’s market, we need to humanise the sector. To put it bluntly: a digital-only brand does not come to your mother’s funeral, your broker does – do not underestimate broker brand power!

It is worth considering whether the future of insuring lies in traditional insurance at all. Perhaps, using the databases acquired over years of operations, legacy insurance brands can dramatically change their business model. These possibilities need to be considered even though they do not have their place in this short article.

Erik Saelens is the Founder and Executive Strategic Director of BrandHome.