Market segmentation and how it can help insurers stay ahead

Lessons can be taken from Google's time in the insurance sector

Market segmentation and how it can help insurers stay ahead



The following is an opinion article in which Chris Cowan, managing director and co-founder of insights and analytics specialist, Clusters, shares his thoughts on how insurance companies can remain competitive and achieve growth in an already saturated marketplace. The views expressed within the article are not necessarily reflective of those of Insurance Business.

Like many sectors, the insurance industry has become overcrowded. As a result, established firms are finding themselves competing with a growing number of new arrivals, meaning they have to find new ways to engage consumers and stay relevant. With the stakes so high, those businesses that do nothing and maintain the status quo are in danger of becoming stagnant, or worse still shrinking, rather than growing market share.

But with new insurance companies emerging all the time, how do you ensure yours has the edge over competitors? As Google found when it launched its car insurance and financial products comparison tool, Google Compare, back in 2015, it’s not always straightforward.

After just one year of trading, Google wound down the service. A lack of understanding surrounding the intricacies of a marketplace as competitive as insurance was cited as one of the main causes of its demise, but what lessons can be learned from the failure?

Invest in professional market segmentation
Market segmentation is a powerful weapon to have in your arsenal and, when done professionally, it provides invaluable insights. Identifying those areas where your marketing spend is best placed, it pinpoints those customers who will be most beneficial to your business, suggesting ways to best target them so you can re-focus your efforts.

It can also help you avoid wasting marketing resources by highlighting those customers that are unlikely to ever buy your product or service and help you ascertain what is stopping them from making a purchase, suggesting the most effective ways to target them.

Don’t rely on preconceptions
For many years, businesses looking to move into a new industry or launch a new product or service have relied on demographics such as age, gender and class. However, this approach often creates broad generalisations, which inevitably lead to stereotyping. No surprise, considering it essentially assumes that people of certain ages, genders or class behave in the same way, which is clearly not true.

Segmentation, on the other hand, groups customers in relation to their attitudes, behaviours, motivations and barriers, providing much more effective and reliable insights. It can also help uncover the reasons one customer might choose one brand over another, or why they might be drawn to a particular offer. The data can then help you decide how to tailor your offering based on what your existing and target customers actually want and need, rather than what you think.

In short, there’s no room for assumption in the insurance industry.

Create a standout proposition
Standing out from the crowd is key, so it’s important to put some thought into how exactly you’re going to set yourself apart from the masses. We recently worked with Asian insurance brand, FWD. Although they were preparing to enter the market, there is no reason existing brands shouldn’t also be taking a similar approach and reviewing the impact of their current offering.

For FWD, we found that the only way they were going to successfully break into the market would be to focus on a disruptive strategy that would see them looking at the market from a new angle and targeting different customers.

In this instance, the focus was those that have the intention of buying insurance but haven’t bought it yet – a group overlooked by many other insurance providers, who tend to focus on encouraging existing buyers to switch providers. After rolling out this strategy, FWD were able to launch in three further countries in quick succession and in the space of just one year, was named as one of the top five most considered insurance brands in Hong Kong.

Ultimately, taking the time to understand your customers is vital, and segmentation is a good place to start. Rather than providing you with a snapshot of the industry, or assuming what your customers will do based on demographics, it pays to look at how they are likely to act based on their behaviour.

If you take the retail sector as a prime example, consumers are getting accustomed to personalisation and brands making them feel valued. It has almost become expected rather than a ‘nice added touch’. As a result, those who truly know and understand their customer base will be the ones that have staying power in 2018.

For more information on Clusters, visit


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