Customer experience in the insurance industry
Over the past five years or so, the phrase customer experience (CX) has come to dominate the boardrooms of almost every sector in the UK. All of us are consumers in one way or another and through the huge strides made in CX over the last few years, our expectations are now extremely high.
The likes of Amazon and Ocado have taken this to new levels, with products ordered arriving the next day with a constant stream of communication before, during and after purchase. This is the level most consumers expect from all aspects of their lives now. The insurance industry is not isolated from this, with insurance firms having to deal with a multitude of ‘customers’ they need to ensure that they are offering the best possible levels of service.
Covering the basics in a competitive market
The very nature of insurance means that most people experience interaction with the sector at multiple times during their lives. Whether it is insuring their home, business, equipment or lives, customers are interacting with insurers and those associated with the industry constantly, and yet they can expect, generally speaking, marginal customer service.
Indeed, in July 2019 the Institute of Customer Service launched its UK Customer Satisfaction Index. The insurance sector saw a decline of one point since January 2019, following the 2018 report which saw the insurance sector named as one of the three sectors that had a year-on-year decrease.
However, in an increasingly competitive market, CX can effectively make insurance firms stand-out. A McKinsey report from 2017 estimated that CX leaders in the insurance market are 80 percent more likely to retain customers, and have been able to grow sales at double the rate of those not embracing CX.
The reduction of customer churn, whether it be in the consumer or business markets, has to be one of the main focuses for the insurance sector in 2020.
Data is a key aspect of this. Insurers need to be able to interrogate the books of business that they work with in order to identify those that they want to retain and those that they can afford to lose. Therefore, insurers can then tailor their customer experience to the type of customer that they want to retain.
Retaining customers is the most effective way of growing a business. Invesp found that it cost five times as much to attract a new customer, than to keep an existing one, and in a hugely competitive market ensuring that customers are not attracted to rivals is crucial, especially with margins being squeezed as a result of premium deflation.
Indeed, the insurance sector is now catching up to the idea that different demographics and customer segments require tailored products and different communication styles. Where brokers are involved, much of the customer experience lies with them.
However, many brokers find themselves at a disadvantage when it comes to delivering a superior CX due to a reliance on their broker software providers capabilities, particularly around the lack of products available to trade digitally. Many lower volume or niche product lines are administered via insurer extranets with no connected trading with broker systems and this makes it challenging for customers to truly self-serve and impacts broker efficiency.
Where there is an e-tradeable product, it is often inflexible with limited ability to develop tailored insurance products and schemes for their customers (without significant investment and development time). As a result, a broker will have very few customers (with a need for non-complex products) that can enjoy a seamless digital experience.
In addition, Broker systems have limited CRM capabilities and make it challenging to create a single view of the customer which is crucial for marketing, decision making, product development and personalisation. In addition, broker systems are not geared up for end-to-end multi-channel communications that today’s digital customers expect and very few offer the ability for an integrated app or chat bot solution to enhance customer service.
This inarguably highlights the need for a change in tact from a technology perspective in order to deliver digital innovation.
The market is shifting
The insurance market is starting to harden with insurers reducing the cover they offer and increasing premiums. Therefore, consumers in need of insurance will find it harder to get insurance, the cover will be less than is offered currently and likely cost more in premiums.
For insurers to win business, the Customer Experience that they offer becomes much more important. Those who are seeking insurance will be faced with getting less for their money, so as insurers can’t really compete on price, they need to look for other ways to differentiate and Customer Experience is one way to do this.
This is most relevant in the personal lines area, but commercial insurers will have to follow and look at the value-add they can bring. Access to up to date data for all parties will become more valuable as insurers monitor their risk exposure and insureds look to reduce premiums wherever they can.
Good quality risk management data and the ability to interrogate that data will also become even more important to insurers, so they need to be able to capture it in a user-friendly way that gives the customer a great experience and the insurers the data they need.
David using technology to beat Goliath
Many in the insurance sector have been relatively slow to react to the increasing expectations of their end users. However, there are a few disruptors making a move in this space, such as the smaller, more agile, players in the market such as Trov, Oscar and Lemonade that have a ‘customer first’ strategy. As a result of this these smaller organisations have been particularly effective in taking customers away from the larger, more traditional, insurers.
It has appeared that these large insurers have been unable to react, with new, smaller, agile players running rings around them, offering a superior customer experience. These agile companies have an additional advantage, not having spent thousands on IT infrastructure in the past decade, investment that simply can’t be ignored, or scrapped. However, it is this infrastructure that is holding many insurers up.
Their IT systems often contain outdated customer portals, poor levels of responsiveness, and very poor user experience for those customers trying to use outdated technology on phones or portable devices. Contrast this with new insurers who are immediately prioritising a mobile user experience.
These trends translate across the B2C and B2B insurance markets, with the large players now having to play catch up.
Recent research into digital innovation conducted by the British Insurance Brokers’ Association (BIBA) found that 40% of brokers believe that the sector has not embraced innovation, with 77% said the cost of innovation was the main stumbling block. However, BIBA also suggested that forward thinking brokers could potentially outrun the competition through smart investment in technology from agile vendors which also has the potential to improve the customer experience between brokers and insurers and their end users.
Data is the key
One way for the Goliaths to get back on even terms with the new, agile firms, is ensuring that they are making the most of the data they have and use it to ensure the sector delivers the best possible customer experience.
By gaining actionable insights from data and bringing disparate and complex intelligence together in one place, firms can gain real value. Having the ability to generate greater insight into customer data and understanding the trends that can be identified with data visualisation, larger players suddenly have the tools to make a real difference to their ability to offer the best possible customer experience, without having to rip and replace existing infrastructure.
Digitising elements of customer service
2020 will be the age of customers managing their relationship with a company without interacting with a human. Gartner suggest that 85 percent will be doing exactly that. The insurance sector has, generally, been slow to recognise this, but is now starting to get it right in small pockets. In order to allow the customer to experience the type of CX they get in almost every other aspect of their personal and professional life, insurers and brokers have to develop an intelligent digital offering. By using solutions to provide the customer/broker experience, insurers can immediately make a huge impact on the level of customer experience they are able to deliver. The use of customer portals, apps and online chat, will give the end user, the type of experience that they now expect.
Those large insurers who do not, or feel that they cannot, commit to such changes due to legacy infrastructure, will be left behind. The new, more agile companies, whose businesses have been set up with customer experience at the front of their offering, will and are taking customers, who are no longer loyal to the older, slow moving brands, but prefer to have a great customer experience instead.