Armonk, N.Y. - U.S. consumers want insurance companies to more effectively communicate new products and services available to them, provide customized policies to better meet their needs and bring their customer experience up to par with other industries, according to an IBM study of more than 3,000 P&C insurance policyholders. Yet, despite boasting one of the largest demographics of loyal and satisfied customers of any industry, few insurance companies are looking for new and innovative ways to connect with their customers to enhance their experience and drive organic growth.
Fewer than half of the policyholders polled are informed about new products and services by their providers. Additionally, only 43% of policyholders said their insurance companies customizes policies to meet their specific needs.
Andrea Eichhorn, GBS, associate partner in IBM's financial services customer focus strategy team suggests providing customers with more information online. "Maybe provide some Internet access—for when the customer is checking prices—that clearly explains what the different options are and how they can tailor the products to meet their needs," she says, "because, I think many people buy insurance blindly."
The study, "Surviving Climate Change in the Property and Casualty Industry By Growing Customer Advocacy," also demonstrates a widening gap between insurance customer demographics, product offerings and distribution channels. Younger policyholders are increasingly price sensitive and technology-savvy, and are more likely than other demographics to access a variety of distribution channels including the Internet and Web 2.0 technologies such as mobile text and instant messaging. Baby boomers are accustomed to more traditional insurance channels and are redefining the market as they age, forcing insurance companies to accommodate their varied needs and develop customized products that can be offered across multiple channels.
"Insurance providers can no longer follow the 'one-size-fits-all' approach to product offerings and channel distribution and expect to remain competitive," says Bill Busby, partner, IBM's Global Business Services, Americas insurance leader. "Younger customers want fast and easy transactions with little or no human interaction, while older customers continue to value a high touch experience and demand higher levels of service and quality. Meanwhile, customers across the board want their providers to offer more flexible products and deliver a greater degree of personalized service."
Insurers can more easily decide which services and products are best for their customers by using technology to capture customer data at the point of interaction, says Eichhorn. "Insurers can capture more feedback and provide more avenues and venues for policyholders to provide input on product development and product needs," she says.
As part of the study, IBM tested a new measure of customer loyalty, the Customer Focused Insight Quotient (CFiq) to drive the quantification of key interactions on policyholders perspectives and attitudes. Unlike other satisfaction or promoter measures, the CFiq goes beyond a single measure of satisfaction by combining policyholders ratings of three statements to obtain a more predictive and commercially viable view of advocacy:
- I would recommend their insurance company to others.
- I would consider my insurance company first for future insurance products.
- I would stay with my insurer if offered competitive insurance products from other insurers.
More than half of insurance policy holders (51%) surveyed strongly agreed with these statements and are considered advocates. This number is relatively healthy compared to other industries, such as banking or retail where only one in four customers is an advocate. Beyond their clear value as referrers and credible promoters, they deliver better financially. For example, advocates have 22% more products and trust their insurance companies 98% greater than low-value policyholders or antagonists. Advocates also tend to be long-time policyholders, with more of them staying more than 10 years with their insurance companies, nearly double the amount of antagonists. This result means more premiums are collected and sales investments can be more effectively managed.
Future success in the insurance industry will depend upon creating and delivering a compelling customer experience, according to the survey. Insurers need to begin to build a basic foundation that enables them to move to a more customer-focused enterprise that increases the relevance and attractiveness of products and services to policyholders. Specifically, the study lists five key areas for insurers to consider:
- Build a deeper understanding of the policyholder. Create or repurpose customer research to capture and analyze customer data from key interactions across the policyholder experience.
- Design customer experiences based on customer expectations and perceptions of operational performance. Use policyholder advocacy data to drive improvements to key front-office interactions and customer metrics to measure targeted improvements.
- Communicate and transact with customers intelligently during key interactions, on a customer-by-customer basis. Encourage customers to provide feedback and reward them for sharing information through personalized service, relevant offers and recognition.
- Improve the coordination and key activities across the delivery channel to improve effectiveness and quality of the overall policyholder experience. Provide agent- and direct-based channels with real-time access to key customer data to increase visibility into customer needs and wants.
- Increase policyholder involvement in the development and customization of insurance products. Collaborate with both advocates and antagonists (i.e., internet surveys, blogs, "Customer Jams" etc.) in the development and testing of products and services.
"Everyone's been focusing on cost reduction for a long time now," Eichhorn says. "But it's time to make a slight shift; keep reducing costs, but use some of the savings to improve the customer experience for the areas where we want to grow."
Insurers must find ways to intelligently evolve and differentiate their business by understanding and incorporating advocacy to enhance the policyholder's experiences, according to the study. Continued reliance on traditional competitive levers will contribute to a slow erosion of business value and contribution for today's leading insurance providers.
"The financial services industry is really starting to pick up on the importance of focusing on the customer experience," Eichhorn says, because consumers view the insurance transaction as a transaction, not necessarily an insurance transaction. "They expect the experience to be much like their experience of shopping at their favorite Web site."
To get a copy of the study, visit http://www.ibm.com/services/us/index.wss/ibvstudy/gbs/a1028725.
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