In many ways, the world of insurance technology is the land that time forgot. Many policy administration systems were written 30 or 40 years ago in arcane languages with little documentation. They can contain hundreds, if not thousands, of products and were designed by actuaries and lawyers who retired a decade or more ago. To actually move to a new platform is akin to decoding the Rosetta Stone. Any conversion effort requires deciphering hundreds of thousands of lines of code written in Assembler or COBOL, along with stripping apart the legal contracts that have been issued to each policyholder and pairing up all of the derivatives and variations. Indiana Jones had it easier.
As if that wasn’t bad enough, what makes it really hard to provide world-class customer service is that none of these ecosystems were designed to provide great customer service. And they all have a major flaw: they look at the customers like they’re policies instead of as customers who reside in households. This has led to decades of suboptimal processes, which have left customers feeling ignored, unloved and just confused. The reason customers feel the pain is that, decades ago, almost all insurance companies built a set of parallel systems for each of their product lines without a set of centralized customer information files or customer relationship management technology, which can provide the glue to create an integrated, 360-degree view of the customer. That led to a mindset of “policyholder” instead of “customer,” and forever segmented the policies of customers into a bizarre parallel universe that has led to lower-quality customer service. No wonder customers feel unloved.
It’s only been made worse for insurers because their customers now are comparing their customer experience with what they get from companies such as Google, Zappos and Amazon.
It’s unfortunate that insurance companies did not pay attention to their banking and financial services competitors, which really started taking a look at their customers from a household perspective in the 70s and 80s, and began designing and tying together their systems into an integrated environment to provide real customer service. Companies such as Wells Fargo, Bank of America, Citibank and JP Morgan Chase built their worlds to maximize cross-sell opportunities and, as a result, have a healthy lead in products-per-household and in share-of-wallet.
So where are we today? In many cases there has been a historic lack of funding to renovate these administrative slums. And, when the decision has been made to replace a system, what often happens is the “paving of cow paths.” The “we’ve always done things that way” approach merely immortalizes poor processes and shortchanges the opportunity to start over, change the cost dynamics and fundamentally improve the customer experience, efficiency and effectiveness of the organization.
Many insurance companies, particularly smaller ones, are stuck in the 60s or 70s, and their only hope is to move their business to a third-party administrator (TPA) because they may not be able to justify the costs of conversion. But as you move up the food chain, into the medium and larger players, there usually is a compelling business case that can allow these organizations to significantly improve their customer service while reducing costs and enabling them to move faster.
Fortunately, today’s administration platforms are sleeker and better designed than the systems that preceded them. One of the keys is that they are designed to be easily configured as you build products and processes. And this changes everything in terms of reducing the cost to convert old policies onto new systems. To me, this is the key to improving customer service because what we have seen over the last 10 years is a trend where insurers were moving closed blocks of business to TPAs and building open blocks on their new platforms. This has exacerbated the customer service dilemma because it produced a disjointed mess that only made customers feel like they were unloved and unwanted.
Some insurance companies realized this years ago and have worked diligently to look at the total experience they were giving to their policyholders and raise the quality of that experience. USAA is definitively the leader in this domain. The company engineered a high-quality experience, building its systems so that any customer touch could be viewed on a real-time basis and across all products that the customer had purchased. The outcome is that when customers call in, customer service reps can help them with every product they own in one integrated, simple conversation that places the customer first.
To do this requires a pairing of the front office and back office visions. Distribution organizations and senior management need to understand that their customers just are not interested in the latest bell or whistle for a policy, but really do care about the experience that they are offered. To do that requires recognizing that they must replace their outdated systems, processes and products. And that requires investment. It’s one of the reasons why USAA invested hundreds of millions of dollars over the last two decades; and it’s the reason they have, on average, more than five products sold per household. Does your company have that kind of cross-sell penetration? If not, what are you going to do about it? Because, your future is waiting. Oh, and by the way, it will be full of Google and Amazon, and they came to play.
Mike Boyle is CEO at Perseus Technical Strategies LLC.
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