When Farmers Insurance Group conducted testing on a Web-based customer self-service program, the Los Angeles- based property/casualty insurer considered implementing a capability that would enable customers to make changes to their policies.Farmers executives recognized the value of self-service capabilities. After all, enabling a customer to instantaneously make a change to their auto or homeowners policy represents the spirit of customer self-service. But earlier this year, as Farmers executives examined the concept further, they uncovered a flaw with the concept: Giving customer unfettered access to make changes was considered an affront to Farmers' agents.

"The original idea was to enable customers to make a policy change and then have it transmitted directly into our policy administration system," explains Riko Metzroth, vice president, business & technology integration, Farmers Insurance. "But our agents, who were involved in testing the program, took exception to this idea.

"Let's say that a customer wants to reduce the liability limits or the umbrella of an auto policy to save some money," he says. "They might think that reducing coverage is a good idea, but their agent might have a second opinion."

So when Farmers activates the policy-change capability of the self-service program later this year, policy-change requests will be routed into an agent's electronic mailbox, where that agent can consult with the customer before a change is executed.

As they move to establish a Web self-service plan, insurers are treading cautiously. A growing number of consumers-particularly younger, Web-savvy individuals-are ready for a greater degree of online functionality. Many consumers want a level of self-service with a far greater level of autonomy and control-not content to just check the status of a claim or receive a quote.

"The emerging 'Playstation' generation, as I refer to it, is one that fully trusts the Web," says Oscar Alban, principal, market consultant for Roswell, Ga.-based Witness Systems, a provider of performance optimization software and services. "And they will be the ones that demand a higher level of self-service functionality. The Playstation segment will make demands on providers like no group has to this point."

Meeting needs

As consumers become more tech-savvy, insurers are confronted both with an opportunity and a potential headache. Pushing business to the Web could provide relief for insurers from an operational standpoint-from reduced printing costs to scaling back the call volume at a customer care center. Insurers that aren't prepared to meet their customers online will pay the consequences, industry experts say.

But that's not to say insurers must unfurl large-scale self-service programs. The jury is out on just how self-service needs have, and will, change over the next few years. Some insurers have not witnessed a so-called sea change in priorities-and don't expect to. The demands, industry observers say, are predicated on the type of insurance a provider markets.

Terry Povey, director of Web business development, market research and statistics for Columbia, S.C.-based Blue Cross Blue Shield of South Carolina (BCBSSC), says "the capabilities that customers want today are similar to what they wanted two years ago from our site, and that's the ability to check a claim status and view and print benefits."

Those capabilities are supported by BCBSSC on its Web site at SouthCarolinaBlues.com. The site was launched in 1999 and new functionality has been added each year.

"We're fairly confident we have all the pieces in place for a very nice customer experience online," Povey says. "We have to make sure that we can accommodate the 100,000 members in our network, because many of them value the Web site to independently conduct business."

The goal that Blue Cross Blue Shield of South Carolina has established for consumers is to gain access to account data in 30 seconds or less. To achieve this goal, internal IT people conduct load balancing and server deployment during peak usage.

The site's most popular component, My Insurance Manager, is a secure area within the site that offers numerous transactional, fulfillment and service features to policyholders and physician organizations. Due to the capabilities within My Insurance Manager, 97% of customer inquiries can be completed without engaging "live" support.

Bracing for change

Although BCBSSC doesn't anticipate a dramatic shift in its Web self-service blueprint, other insurers are fully bracing for it.

"Consumers have developed base-level expectations of a Web site. Many have been influenced by other popular Web sites. Their bank might offer electronic bill payment, so they expect their insurance carrier to provide it too," says Fred Pantaleano, assistant vice president of Web services for Columbus, Ohio-based Nationwide.

"Two years ago, a customer might have been able to report a claim online, but not all claims. They could look up a bill, but not all bills, "he says. "It was very selective. They wanted a quote, but could not get it if they lived in a particular state. There's been a lot of heavy lifting to provide all the capabilities they want."

The demands of the "Playstation" generation have placed a premium on self-service scalability and quality. To maximize this, insurers have embarked on testing and research to drill down and identify basic needs requirements.

From the formulation of focus groups involving employees, agents and consumers to the deployment of "usability labs," a strategy used by Mayfield Village, Ohio-based Progressive Insurance Co., insurers are attempting to remain one step ahead of consumers.

"A Web site should give customers the information they need to make good saving and investment decisions," says Paul Henry, director of strategic planning and market research for Boston-based Manulife USA's Group Pensions division. Manulife recently launched a Web site to enable individuals to select and manage 401(k) funds at www.manulife401k.com.

"The problem is that most self-service sites require too much time and too much information to provide a solution," Henry says. "Another problem is that most sites unintentionally hide the information that participants need to make the decisions they frequently go online to perform-how much to save or how to invest."

Pass the test

Farmers piloted a customer self-service program from a servicing center in Portland, Ore., where the company gleaned key insights about the shape the program-known internally as CSS-should take. It did so by recruiting employees and agents to provide constructive feedback on the pros and cons of Web self-service.

With 10 million households in its network, Farmers' mission was to build a consensus of what its average customer would want within a self-service program at www.farmersinsurance.com.

"We learned a lot of small but crucial insights through testing," Metzroth explains. "When we designed our e-billing program, we originally planned to enable customers to see only the amount due of their premium. We discovered that customers want to be able to view a full copy of the declaration page.

"With the evidence of insurance (EOI) and memorandum of insurance (MOI), we had originally planned to enable customers to view the declaration page, but not to print it," he says. "But if a customer is sitting in an auto dealership preparing to buy a car and the auto dealer asks to see the EOI, to be able to print it from the Web site expedites the processing."

At Manulife USA, extensive customer feedback obtained over two years of intensive research enabled the provider to develop a 401(k) Web site that currently is drawing high marks, says Henry.

"We learned a great deal from our customers about their needs, expectations and attitudes toward Web-based self- service. In a nutshell, they want a Web site to provide information relevant to them, which will enable them to accomplish online tasks quickly and easily," he says.

Site re-engineering

By re-engineering its site, Nationwide is constantly striving to simulate the customer experience, Pantaleano says.

"It's come a long way. Three years ago, we asked the question, 'Is the site up?' Then it was, 'Is the navigation of the site fast?,'" he says. "Today, we measure the end-to-end performance from the back end to the front end."

Similar to Farmers, Nationwide has grown accustomed to customers who need hard copies of policy-related documents. Today, as many consumers refinance their mortgage loans, having quick access to an EOI and MOI is critical for loan processing.

Last December, Nationwide completely overhauled its public Web site, an effort that has received accolades. In its most recent Insurance Scorecard for first quarter 2003, Gomez Inc., Waltham, Mass., classified Nationwide as a "leader among carriers in document imaging, offering an impressive e-documents program." Nationwide ranked second behind Progressive in the Gomez scorecard (see "Top Insurance Web Sites," above).

Although the documents are inconveniently separated into two areas, policyholders are now able to access PDF versions of their unique declarations pages, insurance ID cards, state-specific policy contracts and endorsement request forms, according to Gomez, which measures and tracks online efficiencies across several industries.

Progressive Insurance, the perennial front-runner of Gomez' Insurance Scorecard, has been able to sustain its place at the top by sticking to one simple rule: "Conduct ongoing and intensive research about your Web site and, once done, make the site intuitive for customers," says Toby Alfred, direct experience general manager for Progressive.

"Each month, Progressive.com pulls in 2 million visitors. With volume like that, we have to make the experience meaningful for first-time users and for individuals who visit our site many times," she explains. "We're very cognizant that as you increase the number of users, you can't slow down or alter the experience."

Customer input

To stay on top of what consumers are demanding from self-service Web sites, Progressive developed its "usability" lab, which recruits individuals and runs them through a battery of online tasks and functions. These sessions help Progressive identify new features and functions to add to its Web site.

Often, the functionality upgrades aren't a case of rocket science, says Alfred. "We implemented a personalized tab structure on the home page, which displays a new quote field for new visitors," she explains. "We also designed a Retrieve Saved Quote field for returning quote recipients, and a log-in field for returning policyholders."

Once customers log on to www.manulife401k.com, the provider determines if they are on the site to enroll as a new 401(k) plan participant, or if they are an existing participant, Henry explains. After that, they have the option to go to one of four areas of the site: Looking at Investments, Account Management, Personal Finance, or Manage My Profile.

"In a typical year, approximately 20% of our customer base visits the site at least once, so we want to make it an enjoyable and useful experience for them," Henry says. "Through the use of drop-down menus, customers who want more information are able to get it. And if customers are interested in exploring different hypothetical situations, they are able to save and retrieve the information."

No guaranteed payback

Most insurers are reluctant to discuss the expenses incurred for making customer self-service a winning proposition. Pantaleano says that Nationwide actually incurred a substantial hit several years ago when it embarked on what he calls "behind the scenes" work.

Nationwide had to pave the way for a large degree of data integration on the back end-such as data cleansing and other systems integration responsibilities-so that the front-end Web piece could function to its specifications.

"It's very hard for insurers that have long histories to break down back-office inefficiencies required to make Web self-service a success," Pantaleano says. "The front-end piece is often carried out first, but the behind-the-scenes work is where the heavy lifting occurs."

But the effort appears to be well worth it: Nationwide currently measures Web-based transactions in the millions per month. In 2001, it measured transactions in the hundreds per month, he states.

Insurers concede that even with the large capital investment required to optimize a Web-based self-service initiative, many don't expect to garner a measurable ROI-such as they might with other electronic projects.

"Farmers hasn't really been able to reduce costs a whole lot because of Web self-service efficiencies," Metzroth states. "I suppose electronic bill payment helps reduce printing costs, but those costs are already pretty low anyway. We've found that the real payoff is with customer retention, and that makes the whole effort worth it."

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