Insurance on the road to more satisfied customers through digital
Insurance has been moving slowly, in the face of constant and battering disruption, toward a digital reinvention of its operating model. Automated in-house systems and agent interfaces have rendered repetitive, labor-intensive tasks more efficient and accurate albeit at the expense of jobs. On the job front however, the greater threat has come from digital disruption of the industry’s time-honored “hands off” approach to customer relations. Now, with both insurtech start-ups and mega technology companies having clued in to consumers’ desire for round-the-clock interaction, flexible policies, and competitive pricing, incumbent insurers have no choice but to turn their attention and investment toward this type of innovation. That includes acquiring startups, forging collaborative partnerships with them or building their own in-house capabilities. It’s my belief that, difficult though they may be for large carriers to digest, weathering the next five to 10 years of these disruptions will help bring about at least three great benefits: more satisfied customers, lower costs, and higher growth.
1. More satisfied customers The real promise of digital customer interface is that customers will engage more closely and directly the insurance company itself. Digital presence of a more accessible nature will allow customers to check their accounts, the status of claims, or update their coordinates without having to spend hours on rerouted calls and interminable holds—certainly leading to that holy grail, greater customer satisfaction.
Through the learning tool of customers stating their preferences, as well as companies making use of the terabytes of consumer data that is now available, carriers will be able to determine what new products they should be offering. Indeed, as one example of these new policies, insurtechs have pointed the way toward the type of flexibility in contract lengths—or lack of them—customers have begun to demand. One new app boasts that it can insure “your apartment, your pets, or yourself” in seconds.
In another example of a customer satisfaction play, one U.K. startup has begun to disrupt the traditional insurance model of paying the same premium whether a claim is made or not—premiums that generally increase over time, regardless. Though they only offer bicycle insurance, the company operates a community-based model with a low, fixed monthly maximum that can be reduced depending on how many claims are filed by the wider community.
Digitization—in particular, automating processes—also stands to reduce customers’ waiting time by at least 95 percent, according to a recent BCG study. Less waiting will certainly mean lower frustration and more satisfaction. Through these specific levels of engagement, data and digital technology will allow insurers to better understand customers while improving revenue.
2. Lower Costs At the same time as making their customers happier, by digitizing their existing business, companies can remove significant cost across the value chain, further increasing customer lifetime value. Automation can reduce the cost of a claims journey by as much as 30 percent, for example. And just a few years ago it was estimated that 1 million jobs in insurance could be replaced by automation. Repetitive, task-oriented systems across the industry are ripe for transformation—indeed, many carriers have begun automating their internal operating and distribution systems. This opens the door to redeploying the workforce in higher value tasks as business processes evolve.
I’m going to go way out on a limb and suggest that automation and digitization may even change the status and function of the insurance agent. Whether it means he or she is no longer at the top of the customer-engagement pecking order, or the job description evolves into "educator" or "brand ambassador," or even, taking a more pessimistic view, recedes into the vanishing point of obsolescence, the notion that the carrier is a low-engagement, disintermediated player in which customer relationships exclusively belong to agents and brokers is increasingly out of date. With consumers doing much of their policy shopping and purchasing online and 24/7, the need for an intermediary to to be focused primarily on selling policies lowers dramatically. In itself, this shift could mean huge cost savings for insurers.
3. Higher growth In the short term, fulfilling the goal of automating and digitizing, offers the chance for insurers to improve profits in their core business. Higher customer satisfaction driven by the improved service and faster processing times that digitization delivers, is itself a driver of profit through increased customer retention.
There are revenue improvement opportunities, as well. Digital technology and the data and analysis it makes available give insurers the chance to know their customers better, which means they can price and underwrite more accurately, and better identify fraudulent claims. Insurers can also offer clients more tailored products—auto insurance that charges by the mile driven, for example. And they can offer them in a timelier manner.
Longer-term growth opportunities exist in innovative insurance products and protection services. In a nanosecond, more products fit for a sharing economy will surely emerge—for homeowners who suddenly become hoteliers when they take a guest through AirBnB, for example. And the customer base for these new products will explode as they become more affordable, more accessible, and more targeted to what the next generation of customers will be looking to insure.
Embracing the new hyper-connected, app-driven model is the only way carriers are going to remain relevant. While they may currently have the advantage of enjoying consumer trust even they appear to be as solid and secure as Fort Knox itself, the lure of convenience and lower prices can quickly attract away their customers.