China's home insurance market has expanded by an average annual rate of 23% over the past three years to almost USD 1 billion premium in 2017. In spite of this, the home insurance represents less than 0.7% of total Chinese P&C market. This is not only significantly lower than the developed countries, such as Australia (21.6%), but also lacking from other BRICS counterparts like Russia (6.2%) and Brazil (5.3%).
Over the last two decades, China has seen both strong increase in household income and raising risk awareness among the common people. Insurance experts now believe huge protection gap exists in China's home insurance market and it can become one of the most promising growth engine for China's P&C market. In order to explore the demand, Swiss Re recently conducted consumer survey and in-depth market research to better understand the Chinese consumers' buying behaviour on home insurance.
Increase penetration rate through more effective marketing
Our research showed that only 40% respondents have awareness towards home insurance, compared to the 75% for travel insurance and about 60% for health insurance. Furthermore, we found that the top triggers for considering to buy home insurance are when the consumers have just heard about fire/flooding/burglary events close to their homes (54%) and read about other's loss experience going through the aftermath of the loss events (45%). These findings have paramount implications on how to conduct marketing activities to increase the buying rates.
In the developed markets, such as Hong Kong and Australia, insurance companies like to contextualise the impact of losses and the reliefs that insurances brought to the consumers. This marketing approach is effective because it is easy for consumers to relate to and touches their heart. Chinese insurance companies can also adopt these elements in their marketing to awaken the awareness of the public towards household property and liability risks. For example, simple posters in the neighbourhoods, bulletins on insurance effort in the aftermath of significant loss events and testimonials of claimants on insurance reliefs received would be effective in educating consumers about home insurance protection.
Customers' experiences through "buying journey" need to be enhanced
The natural next step after gaining awareness is to go through the "buying journey". Through our survey, we found this journey takes on average 5 weeks to complete for home insurance, substantially higher than 1.5 weeks for travel insurance and 3 weeks for personal health insurance.
Our research found that 54% and 16% of dropouts happened when the customers are researching for the right product and after spoken to agents respectively. The main reasons for the dropouts are hard-to-understand terms and conditions, over-complicated sign-up requirement and difficult to decide on the right product.
In order to improve the customer conversion rate, the "Buying journey" needs to be optimised. For example, agents can be trained to be better skilled in helping customers to find suitable products and the signing up process can be simplified to improve conversion rates. Swiss Re's Behaviour Economics team has spent many years studying customers' behaviour and helped many foreign insurance companies to achieve higher conversion rates by enhancing customers' experience throughout the buying journey.
More professional and simpler claim services are required
Apart from individual insurance company's marketing approach, consumers' perception towards home insurance industry or specific company's products also affect their willingness to buy. Our survey respondents voted Professional service and efficient claim handling to be the two most desired improvements. In essence, claim service seems to be the core of what consumers is looking for when purchasing home insurance, but many Chinese consumers feel that claim process is over-complicated and often takes long time before relief is arrive.
Future is bright for China's home insurance market
Despite the challenges ahead, there is still great potential for home insurance protection. Although the current penetration is low, Chinese consumers have the needs for home insurance. Through the survey and research, Swiss Re has learned that insurance companies in China can improve their marketing effectiveness on home insurance, optimise customers' experience through their buying journey and uplift some key services, such as claim services.