Business Ideas in Romania

Auto insurance cynicism

• Posted by Sara on March 13th, 2007 filed in Financial services

Opportunity: Stripped-down, bullet-proof services

The most common business model is “pile-on-more-features-until-the-customer-is-overwhelmed”. In this framework, you take an inventory of the ‘features’ that your competitors offer, and then add something. This ‘added value’ is heavily marketed via mass-media, sales efforts, etc. It’s difficult to argue against this approach - however, customers are increasingly disenchanted, frustrated and even cynical with entire industries that follow this model.

For their class this morning, a group of my students at ASE prepared a role-play on the sales process of insurance companies - a very simple situation where a person with a brand-new car is shopping for a simple auto insurance (CASCO) and comparing offers from a number of vendors. I was quite amazed at the reaction the students in the audience had to the offers: extreme cynicism. They booed, sniggered and jeered.

Afterwards, we discussed their reasons. Most of them had cars, CASCO insurances, and very bad experiences with their insurance - ranging from a 2-3 month waiting time to get a paint job, to the insurer simply not paying, to obscure small print in the contract that made the insurance all but impossible to use. All of them had a vast collection of similar stories from friends, family, colleagues. This assessment was independent of the vender, and seems to reflect the status of the industry as a whole. It is important to note that the complaints were all directed at the ‘basic’ level of the service, and all the extra features failed to compensate.

We came to the conclusion that buying insurance is a social event, at least in Romania today. People ask friends and even casual acquaintances for their experience with insurance, and listen carefully. Internet-enabled car owners will usually browse forums and read people’s horror stories before reaching a decision. This reflects the high level of customer distrust, and the need for reliable information. In this type of a market, insurance salespeople tend to have very limited influence, compared to a potential buyer’s social network.

This is a prime market for introducing “bare essentials”, “no-frills” services. Think of the Google homepage, compared to Yahoo! Take the service and strip it down to the most basic level, and deliver that to perfection. People really care if damages to their car are quickly and efficiently assessed, repaired and paid for, with the minimum amount of hassle on their part. And they want the guarantee that if for some reason you fail to keep that promise, they will be compensated. Reliability at the basic service level is the single important factor. Satisfied consumers will spread the word online and offline.