P&C Customer Experience Improving, But is it Enough?

Acquiring a new customer can cost as much as seven times more than maintaining a loyal customer, and loyal customers tend to spend more, stay longer and, if they have positive experiences, are twice as likely generate referrals, all of which can lead to greater profitability, according to the 2014 “World Insurance Report,” from Capgemini.

“Though difficult to deliver, positive customer experience has become an increasingly important success factor in the commoditized, price-competitive insurance industry,” Capgemini said. “Insurers that provide positive experiences can turn ordinary customers into advocates. Such customers feel respected, valued and engaged, creating a competitive advantage that is hard to beat: a customer base that is extremely loyal, connected and ultimately more profitable.”

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Capgemini developed the Insurance Customer Experience Index (CEI) specifically to provide a granular view of how customers perceive the quality of their service interactions across three dimensions: products, networks/channels, and the customer lifecycle, the company said.

Insurance agents remain the primary channel for conducting insurance transactions, but customers, and especially younger customers, continue to place greater importance on digital distribution methods, Capgemini said.  Compared to all the other channels, customers who have positive mobile or internet experiences are the most likely to refer friends and are the most likely to buy additional products, Capgemini said.

“Insurers, however, are not delivering positive experiences in line with the level of importance being placed on these channels. To the extent insurers can better identify the products, services and channels most important to customers, and segment those preferences by region around the globe, the better they will be able to drive positive customer experiences and, in turn, greater profitability,” Capgemini said.

For insurers, a first step is to identify which channels are most important to customers and exceed their expectations around those channels, Capgemini said. While the highest rate of positive experience, 47 percent for non-life and 39 percent for life, happened through agents, insurers increasingly are turning to internet and mobile channels to accommodate customer demand, increase convenience and cut cost, Capgemini said.

While the agent channel is most important to all customers, Capgemini said, it is more important to customers over age 35. And, when only digital channels were examined, customers of 18 to 34 years preferred them compared to older customers, Capgemini said. More young customers, 42 percent, said the Internet/mobile channel was important, compared 23 percent of older customers, Capgemini found, and recommended insurers develop a full range of digital capabilities, especially for policy and claims services.

In most regions, Capgemini found that percentage of customers who intend to switch insurers is double for those with negative or neutral experiences when compared to those with positive experiences. In Asia-Pacific, for example, 44 percent of customers with negative experiences said they were likely to switch, compared to only 18 percent of those with positive experiences.

In the multinational survey, Netherlands posted the largest percent increase in customers citing positive experiences, making that country the leader in Europe and third globally, trailing the United States and South Africa.

The United States was the global leader with 51 percent of customers citing positive experiences, making it the first country to have more than half of its customer base reporting positive experiences, Capgemini said. Netherlands’ 18.2-percent increase was largest performance increase, and was attributable to improved online, mobile and broker channels.

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Capgemini found that customers with “neutral experiences” are twice as likely to switch than those with positive experiences, and said insurers can improve retention and avoid attrition costs by increasing the rate of positive experiences.