Executive summary and implications for managers and executives.
This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the articlein tototo take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.
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Increased competition and technological developments have transformed numerous industries in recent times. The insurance sector is no exception and the introduction of techniques more commonly associated with fast moving consumer goods is one of the more notable changes.
Many companies have exploited new communication methods to introduce business models which are less reliant on insurance brokers and other “traditional intermediaries”. It has become the norm for major underwriters to create networks of branches that provide a direct service. Dealing with the customer directly has also become the focus for some leading firms that promise such as more “convenience, speed and value” to the consumer. The growth of internet business models has been explored by researchers who found that the online organisation’s corporate brand image is determined by how customers evaluate its performance with regard to factors including security, customer care, personalisation of service and user-friendliness.
The entrance of powerful brands from other sectors has likewise altered the competitive picture. Leading supermarkets are a prime example of companies extending into the insurance sector, often partnering various financial institutions that provide the relevant knowledge and experience of the product category. Termed, “brandassurers”, the appeal to customers is the satisfaction that comes with dealing with reputable brands that are trustworthy. The anticipation that the retailer will offer a convenient method of delivering a dependable service product that is inexpensive balanced against alternatives increases the attraction.
Similar alliances with the banking sector are also in operation. Banks place a strong emphasis on customer service and secure loyalty in return. The renowned ability to sell is the contribution of insurance firms to a model labelled “bancassurance” that initially emerged during the 1980s in response to the impact of legislator changes and market developments on the financial landscape.
Such bancassurance initiatives are evident in Ireland, where motor insurance in particular has been subject to various new regulations over the years. Both domestic governments and European Union (EU) rulers have introduced various acts and laws which have made certain types of insurance cover compulsive. At the same time, customers have been given the option to select policies that offer more comprehensive protection.
The chance to earn a no claims bonus is a feature of most private motor policies sold in Ireland. Risk is usually calculated on the basis of driver age, type and size of vehicle, and location, although customers receive a discount on their premium for not making a claim. Since these characteristics are fairly standard, it is a considerable challenge for insurance operators to differentiate their largely homogenous product offerings to consumers whose ultimate purchase decisions are determined by price. Complimentary cover to such as windscreens, breakdown assistance and protection of no claims are among the common measures introduced.
Similar practices are typical where household insurance is concerned. Bundling contents cover with buildings cover is one frequently used initiative. Extra protection for such as personal accident and freezer contents is among other measures used by firms aiming to distinguish themselves from rival operators.
French insurer AXA has become one of the largest insurers in the Irish market. It is a leading provider of motor insurance in the country and in 2009 captured 19 per cent of total policy income in the sector. The firm specializes in this area and also provides insurance for taxis and other commercial motors. It likewise offers cover in niche areas like classic car, motor fleets and bus and coach. Household insurance is another of its largest products.
AXA entered Ireland in 2000 when acquiring the GRE PMPA insurance organisation, the company formed when British insurer Guardian Royal Exchange purchased PMPA in 1989. Widespread rebranding carried out by AXA resulted in the GRE and PMPA brands vanishing early in the current millennium. The company distributes its products through the established means of insurance brokers and direct channels. In addition, AXA utilizes different methods which include a bancassurance partnership with Allied Irish Bank for home insurance provision. Insurance products are now also available through the company’s website.
Sustaining its position of strength in the market has been helped by the various strategies introduced to successfully differentiate AXA products from those of its rivals. Consumers are particularly enticed by the prospect of acquiring a no claims bonus for motor insurance which can reach 70 per cent of the premium if no claims are made. The normal discount in Ireland is 50 per cent after 5 years. AXA also now allows certain policyholders to receive comprehensive cover when driving other cars, instead of the customary practice of issuing only third-party cover in these circumstances. Offering this superior cover has proved another vote winner among customers, who can increase their premium slightly to receive additional features on their policy. This “Extra Benefits” option gives added security in the shape of enhanced windscreen cover and the option to hire a replacement vehicle should an accident or claim occur.
The unique approach by AXA is illustrated by its AXA Plus loyalty scheme, launched in 2005. Initially targeting direct customers, the company soon extended the opportunity to those acquired through insurance brokers. Policyholders receive a personalised membership card and information about the range of discounts offered. A dedicated company website supports the program and provides further details about the benefits, which are arranged into motor, home, travel and leisure categories. Within each category, customers can obtain a host of discounted products and other extras.
Incorporated in the scheme is AXA Leisure Breaks, allowing members of AXA Plus unique access to various holidays and themed breaks in Ireland and the UK (UK). An AXA credit card is available too and those who use the card are able to earn reward points that can be offset against their next renewal premium. Although comparisons can be made with other major loyalty cards such as Tesco and Nectar, Brophy points out that all customers are entitled to the same benefits without needing to make further purchases as is usually the case with other programs.
Earlier research identified that customer satisfaction in Irish financial services is generated by the brand, together with transactional and relationship elements. These factors determine both good and bad aspects of the overall experience. Insurance is perceived by most consumers as a necessary evil, therefore purchase is made somewhat begrudgingly. It has been indicated previously that people are also negative when extra effort is needed to process information about the available products. The author points out that AXA has noted this and consequently deploys a customer relationship management (CRM) strategy that is simplified and straightforward to manage. Its selected partners for AXA Plus help reinforce the insurer’s brand values in a loyalty scheme that has helped retain customers in a market where price sensitivity is particularly strong. The loyalty program has proved a “unique selling point” that has enabled AXA to secure first mover advantage over other providers. This success has prompted the company to launch AXA Plus in places like the UK, North America and various other markets where the firm has established a presence.
To cite this document:
Richard Brophy, (2013) "Adding value to insurance products: the AXA Irish experience", Journal of Product & Brand Management, Vol. 22 Issue: 4, pp.293-299, doi: 10.1108/JPBM-09-2012-0183
