Tip of the iceberg: creating digital customer-centric strategies
Exponential advances in technology are raising the bar for what good insurance customer service looks like.
As an indicator of how much has been written about the concept of customer centricity in insurance, I did a couple of Google searches before writing this article. I expected high numbers, but even I was somewhat taken aback by the 289,000 results returned for searching on ‘customer centricity in insurance’ and the colossal 971,000 for ‘customer centricity and insurance’. The numbers are irrelevant; the point is this is a subject that has been discussed – a lot.
Given this level of background noise, it’s hardly surprising to have seen many insurers joining a global shift towards digital and customer-focused strategies. In delivering these strategies, the general trend has been for companies to focus mainly on the customer-facing elements of the end-user experience, such as faster, intuitive websites and user-friendly apps.
As much as those things are important, in our experience they represent a small fraction of the effort needed to attain the customer-focused ambitions of many insurers. Most of the hard work has to go on behind the scenes. In this respect, the iceberg analogy, so loved by many consultants, really is appropriate. More likely stumbling blocks are the limits of legacy systems, technology, organisational structure and supporting processes, and having the right talent to execute the transformation and deliver value.
Over the years, insurers have typically accumulated an assortment of legacy systems that play a significant role in their businesses operations. Often, these systems were built when data storage, for example, was unwieldy and expensive, and therefore don’t store data in a way that supports shifting needs. Moreover, the process flows that may work with these legacy systems don’t necessarily apply in the new world. The resulting assortment of old and new technologies, internal and external data and creaking processes makes it very hard to achieve the levels of IT connectivity that provide the foundation for unlocking the potential of data and technology. Fortunately, software is now available to act as an interface umbrella for the compendium of systems and technology, helping insurers to integrate their data and provide a seamless integrated customer interface across all communication channels.
That connectivity is particularly important when considering the three main improvements that a connected, digital insurer typically wants to deliver – analytics; distribution and customer service; and efficiency and expense management. To date, many insurers have tended or have been forced to concentrate on only one, whereas if they have the required level of connectivity, they can quite easily do it all.
Analytics arms race
Enhancing analytics capability has often been the first port of call for insurers, led by property and casualty (P&C) companies. This isn’t that surprising when the rapid development of big data and associated technologies, coupled with an explosion in potential data availability and more powerful predictive analytics tools, are already changing the face of competition in much of the insurance market. Consequently, the increased use of analytics and swift deployment of insights at both the case and portfolio levels are keys to success for a growing range of insurance businesses. Indeed, we are among a growing band of insurance insiders to refer to the situation as an ‘analytical arms race’.
But the analytics on their own aren’t enough. Companies need to be able to deploy them into the business and get the right people seeing the right business intelligence and decision support materials at the point where they are making a decision.
Distribution and customer service
Technology needs are closely allied to distribution and multi-channel customer service. That’s because, across industries, the balance of power at the point-of-sale is shifting towards customers. Largely thanks to technology, many expect to be able to obtain the products and services they need or want, when and how they need or want them. This applies not only to end-customers, but also increasingly the intermediaries that represent them in personal and commercial markets. Back-office systems need to be up to the task of packaging information for the customer-facing technologies.
Furthermore, expectations of customer experience and service are being shaped by the likes of online retailers, who have taken attributes such as ease of use, algorithms that can pre-empt customer needs, fast or realtime service, and individual customer recognition to new levels. Distribution and customer service nirvana for insurers is therefore increasingly likely to involve an omni-channel approach to customer connectivity, allowing customers to interact with insurers in a way that suits them. Recent examples of insurance propositions that reflect the changing approach include Ageas’ ‘Back Me Up’ and Discovery’s Vitality initiative.
A further incentive for insurers to focus on the elements below the waterline is to improve expense management and operational efficiency. Relatively simple but often surprisingly hard-to-achieve goals, such as streamlining processes so that they’re not constrained by legacy systems, increased automation and removing duplication such as data rekeying, are often a vital part of success in this area.
Crucially though, delivering efficiencies doesn’t mean framing every aspect of serving customers in the changing business environment in terms of how to cut cost. The point is that customer centricity doesn’t just hinge on eradicating inefficient processes. Instead it needs to involve looking at the value and cost chains of an omni-channel business model in a completely new light. Understandably, this can seem rather daunting, but it’s definitely achievable.
The art of the possible
Insurers need to recognise that, while they may not be Fintech 100 organisations, they have a lot working in their favour.
For a start, most have capital with which to turn ideas into reality. Second, they have customers – and normally lots of them – providing plenty of data with which to work and develop new analytics insights.
Crucially, they also have people with deep industry knowledge and relevant experience – and that includes actuaries and their analytical skills. Where adjustments may need to be made is in how teams work together. The days of actuarial, underwriting, claims, marketing and actuarial departments working in silos certainly won’t be compatible with the needs of a more customer-focused business model and improved customer experience. Actuaries, for example, are likely to need to communicate more broadly their progress in areas such as price optimisation, so that they can be used more widely across the business.
The challenge for many insurers will be to organise the capabilities they already have differently to meet more customer-focused and cross-functional goals. Having done that, they will also need to be prepared to experiment and try new things. A useful approach may be to identify opportunities that can deliver pockets of value to the business, but with a ‘if you’re going to fail – fail fast’ mentality. This requires a culture of confidence, where the management can act at pace – a situation facilitated by accurate realtime analytics and rapid monitoring.
Ready for take-off?
There are all sorts of legitimate reasons why higher levels of customer centricity have been rather slow to take off in the insurance sector, such as the innate complexity of the insurance contract and onerous regulation. But until insurers fully address the back-office implications and the delivery of realtime analytics, the benefits of more customer-focused business models are likely to fall short of expectations, no matter how great the front-end proposition looks.
Initiatives already taking place across large swathes of the industry can provide a ready-made vehicle to assist progress. Handling and manipulating data, applying new technologies and using analytics to improve performance: all of these represent familiar territory for insurers. Insurance companies and the actuaries working within them should be able to use their experience to rise to the challenge that developing more customer-centric business models poses. And as these technologies become enterprise-wide, actuaries will need to assume a wider role in driving the adoption of analytics tools.
Heloise Rossouw FIA is a senior consultant in the insurance management consultancy at Willis Towers Watson