In today’s environment where retention is critical, the quality of a carrier’s claims service and handling is a major source of competitive advantage. Other than the bill, claims are often the only contact that a customer may have with an insurance company. A new study from J.D. Power found that while the majority of claimants would prefer to check the status of their claims online, consumers would also like the option to call a representative for first notice of loss. This study highlights that digital service is a complement to call-center service, not a replacement for it. Early business strategies around what used to be called e-business focused on the cost savings of “self-service.” But digital is about engaging customers where they are, not pushing them to lower-cost channels.
I had a chance to speak at the recent North Carolina CEO summit and one of the key takeaways was that one of the hardest things for companies in any industry to do is adjust their business processes to reflect appropriately on the challenges and opportunities made possible by new technology and changing consumer expectations. This is especially true in insurance. The majority of carriers have perfected looking at the world from the inside out, which may be fine in an era of limited change, but it is exactly the wrong response in a period of dynamic activity and shifting expectations, punctuated by the threat of new market entrants.
This inside out thinking leads companies to focus on service-level agreements and other metrics which completely miss the importance of getting the actual customer experience right. Companies may well understand the correlation between poor customer experiences and financial outcomes (e.g., poor persistency rates or a failure to loss of assets under management), but they seem to fail routinely in understanding what the root cause events are driving these results.
A personal customer experience with business as usual
As a case in point, I recently went through a series of unfortunate customer service events with a large, national, life insurance carrier. The start came through a phone call to one of their support centers. This particular facility was in Ireland and their function was limited to letting callers know that the company was closed in the evening and would be open during “normal business hours”. Of course, “normal business hours” turns out to be the same hours when most consumers are at work, making it remarkably inconvenient. On the next day, a call during normal business hours and was routed to a call center in Manila. After almost an hour on the phone I discovered that this operation was only able to deal with non-registered products; that issue wasn’t picked up by the VRU when I dialed in. Once we got past that confusion, the call was routed to another call center in the Midwestern United States. At that point, a knowledgeable representative walked through the issue but concluded that since the transaction spanned multiple internal business units there was nothing he could do. The best response was to have an agent call me. The SLA for a call was 24 to 72 hours.
The empowered customer finds an alternative
Two weeks later, when no call came, I gave up and went looking for an alternative company to manage the assets. The multiple contracts involved were 30 years old, so this was not a new customer issue. It was however a life event issue which a new financial institution was happy to address. In this case, the company in question was a brokerage firm who happens to sell life and annuity products on behalf of a range of manufacturers. They were happy to set up the new accounts and handle the 1035 exchanges and had the experience wired before the original life carrier understood what had happened.
So, from a customer standpoint, I was quite happy. I was able to move the funds into an experience where there was a knowledgeable entity on the other end of the wire; the account opening experience was very Amazon-like, inasmuch as routine updates on the status of the transactions came to me in my preferred channel of communication.
Too little, too late
That might’ve been the end of the story except that the life carrier now seemed spurred into action. However, the action invoked processes that are little exercised and had unintended consequences. For example, multiple conservation letters were received offering to discuss options for keeping assets at the original carrier. Unfortunately, the conservation letters arrived after the proceeds had already been distributed to the new financial services company. Another bit of detective work found that the time lapse between producing (and dating) the letters and their actual delivery was 10 days. Based on the postmark, it was six days between the production of the letters and having them sent. They came via a bulk mail rate resulting in further delay.
The operation was successful, but the patient died
Through this whole effort, it is possible that the service-level agreements for every component in the process were met. The whole of the experience was very different than the sum of those parts, however.
Fixing this kind of problem doesn’t need to be particularly difficult or expensive. It does require, however, the recognition that there is a problem. One approach that we see taking hold now is the introduction of the position of Chief Customer Experience Officer. Frequently coming from outside of the insurance industry, from banking or consumer products, the individuals taking these roles have a charge to look at the carriers “from the outside in”. This is a promising development that many more carriers should consider as they kick off 2016.
To discuss this topic further, please contact Rob McIsaac at firstname.lastname@example.org
Everything old is new again. Like the E-Venture Investment Groups of the late 90′s and early 2000′s, a new crop of investment activity is springing up in the insurance industry, with the hope of giving the industry a preview of tomorrow’s capabilities and approaches.
This includes single company initiatives like AXA Strategic Ventures and American Family Ventures, as well as the Des Moines-based Global Insurance Accelerator incubator, and the recently announced ACORD Insurance Innovation Challenge showcase for start-ups.
How about an insurance company that empowers you to make smart lifestyle decisions? Examples: the car insurance company that routes you around dangerous intersections; the home insurance company that automatically summons a plumber when it detects water on the floor near the water heater; or the health insurance company that connects you with friends that are also trying to lose weight?
By encouraging us to keep safe, insurance companies can keep their payouts low. And we all bask in the glow of an insurance company that has our best interests at heart — because even though our interests are really aligned, it doesn’t always feel that way
Combined with the recent news about Google’s recent moves in auto insurance, it’s pretty clear that tech is starting to smell blood in insurance.
The barbarians are coming. Insurers need to suit up.
The barbarians don’t care about tradition, or the way it used to be, or what yesterday’s customers liked. They see only need and opportunity. Insurers need to adopt this mindset quickly.
Related Novarica Blog Posts
There was an interesting article today on PC360 about the state of small business online. The article echoed many of the themes and issues we raised in our report last summer, Direct Online Small Commercial Insurance.
The article had some interesting quotes from direct players like Insureon and Hiscox, both of which were featured in our report. But it also contained this quote, which raises an issue we didn’t mention last summer:
“The Hartford is committed to a multichannel distribution model in its small commercial business and independent agents are at the center of the distribution strategy,” says Ray Sprague, senior vice president of small commercial insurance at The Hartford, but adds that the vast majority of small businesses operating in the U.S. today are often too small for many independent agents to profitably acquire and serve (emphasis added).
This resonates with several comments that small commercial CIOs made at a meeting I attended last week. There’s a big SOHO small commercial market that’s too small for most agents to care about. I believe insurers will increasingly look to the direct channel to be able to meet this market demand.
Related research and blog posts:
Our team is just back from the annual IASA conference, which provided the opportunity to meet with dozens of CIOs and solution providers over a couple of days.
In general, insurers and vendors appear to have been investing heavily in technology over the last year or so, with carriers launching major initiatives in core systems and analytics and vendors improving their products both in core engineering and in UI.
In contrast to prior years where technology investments appeared to be focused primarily on cost reduction or mitigation of technology risk, there was one overwhelming theme in the private discussions and panels our team participated in: meeting rapidly changing customer demands.
While we continue to see very strong interest and activity levels in core systems among insurers of all sizes and sectors, there was a notable focus this year on systems of engagement as well. Agent portals, customer portals, responsive technology, and mobile were frequent topics of conversation among the carriers our team met with. Some insurers feel overwhelmed by the problem and lack the expertise to develop a strategic roadmap in an effective way, and there’s a high level of interest in vendor partners that can help them get there.
We found many of the same themes in discussions at the Research Council Meeting. Our report from that meeting is available online and is free to clients and council members.
CERN, where Sir Tim Berners-Lee invented the World Wide Web (sorry, Al Gore), has re-posted the first ever webpage on its 20th anniversary. http://info.cern.ch/hypertext/WWW/TheProject.html
Accenture published a new survey this week about consumer preference on buying home and auto insurance. The headline of the press release was “U.S. Auto and Home Insurance Customers Turn to Digital Sources to Obtain Information and Quotes, but Prefer Using Agents to Buy Products.”
The first two bullets in the summary of findings were:
- Nearly three-quarters (76 percent) of consumers express a preference for setting up and paying for their auto and home insurance policies in person with an agent, and more than half (58 percent) indicate a preference for doing so via the Web.
- When asked where they prefer to obtain quotes, 43 percent of respondents choose websites, while 26 percent choose over the phone and 26 percent in person. A much smaller percentage (four percent) chooses mobile applications.
The first question seems to have allowed for multiple preferences. Despite the headline, this doesn’t look to me like a preference for agents. This looks like an openness to using agents, but a growing preference for online channels even to buy — more than 50% of consumers.
At The Life Insurance Conference this week in New Orleans, Rob McIsaac, Tom Benton and I had the opportunity to present on the topic of e-processing. The event, which is co-managed by LOMA, LIMRA, the Society of Actuaries, and the ACLI, had the largest number of carrier attendees we’ve seen in years. The topic proved popular with nearly a full house, which I found ironic since we’ve been discussing this topic for the last decade.
Our presentation focused on the “app through issuance” process, and approached the topic from three viewpoints—the high-level viewpoint of the analyst, a more narrowly focused view of bringing the theory down to reality, and the carrier’s viewpoint based on Tom Benton’s recent experience implementing a modern solution that included new business, underwriting, and issuance (among other areas). Topics included those three areas and how they can be improved through e-processing. We dived down into the implementation process and how to improve success rates through better implementation approaches and program structures, as well as developing models for execution and governance.
Additionally, we took a look at the common challenges carriers face when undertaking e-processing projects, as well as the potential pitfalls. We looked at the benefits that Tom expected from his implementation, as well as the benefits actually achieved. Overall, our joint conclusion was that these projects—though difficult—have a strong ROI and are a key aspect to staying competitive among increasingly tech savvy agents, brokers, and new distribution channels.
I’ve seen a number of blog posts and articles over the past year warning agents not to get too excited about social media, since insurance prospects still favor other sources of information over social media…like personal friends and family.
As if social media wasn’t one of the most important ways that personal friends and family communicate.
This reminded me of a general principle for insurance and financial services technology: Technology is not a “what,” it’s a “how.”
No company needs a web strategy, a mobile strategy, a cloud strategy, or a social media strategy. What they all need is an awareness of the roles that these technologies play (or will play) in how their customers want to do business and how their companies can operate most efficiently.
For example, our Social Media and Independent Distribution report this year showed that 25% of agents/brokers under the age of 40 use social media to communicate with their underwriters. But this doesn’t mean insurers need a social media strategy, it means they need to incorporate an understanding of social media into their distribution strategies.