Extending the Scope of Services in the Insurance Industry

The study at hand explores the influence of value-added services offered in addition to a motor insurance product on the customer's preference structure. It addresses the need of insurance companies to extend their core business with different types of supplementary services. A choice-based conjoint analysis is conducted which considers the price for the insurance product, the insurance franchise, the non-claims bonus as well as post-accident services and value-added services. Based on the results from the conjoint study among 1053 car drivers in Switzerland in August 2009, Hierarchical Bayes estimation is applied in order to assess individual preference values. In addition to a significant influence of the value-added services on the overall preference structure, different customer groups are found in an adjacent cluster analysis which is based on the individual preference values. While two clusters represent the traditional price-driven customers, two further clusters are identified, which are dominated by the presence of the supplementary service offerings. The results provide evidence that customer segments exist which are strongly influenced by the provision of value-added services. The findings challenge the perspective of insurance companies on their customers which they believe are almost purely driven by price.