Since 2nd April 1985 when Direct Line broke the UK insurance mould and introduced the telephone as a new channel for customers to buy direct from the insurer, insurance companies have had an increasing number of channels to reach their customers. Today, customers can engage with an insurer online, through email, traditional mail, telephone, fax, mobile and social networking sites.
The addition of new channels increases the complexity for insurers but it also opens up a number of opportunities which insurers must exploit in order to remain competitive. In this blog I look at four areas where insurers can gain a market advantage by paying attention to All Channel Experience, delivering effective integrated services allowing customers to move between channels seamlessly (see earlier blog Multi-channel is so 2012. 2013 is about the All Channel Experience for more information on All Channel Experience).
1) Customer Insight - Despite having more direct access to customers, conversations between customers and insurers are minimal, even for lifetime products such as pensions and long-term investments. There are big opportunities for insurers to harness the power of the new digital channels to start and maintain conversations with customers. These conversations can then be harvested for customer insight to provide insurers with specific information to help transform the customer experience, offer more relevant products and understand opportunities for up-selling and cross-selling.
2) Operations and Performance improvement - the business model for insurers is fairly straightforward: collect more in premiums and investment than you pay out in losses and a profit will be made. However, the margin for error is small. For example, UK Insurers have made an underwriting loss on private motor insurance for the last seventeen years, paying out more in customer claims and expenses than they received from customer premiums (UK Insurance Key Facts, ABI 2012) (Association of British Insurers, 2012). Insurers need to connect customer, finance and performance data across all channels and use analytics to gain a single view of data to price more accurately for the risk, improve fraud detection and reduce claims leakage. If customers can see the benefit of giving away more of their personal data, then they will do so willingly. Take the Drive Like a Girl insurance solution that launched following the European Court of Justice’s banning of gender as an insurance premium rating factor. The Drive Like a Girl solution involves installing a telematics device in your car to monitor your driving pattern to assess whether you are eligible for a reduced insurance premium – the customer is willing to provide data in return for a better premium.
3) The knowledge gap - Insurance products are complicated. There is the difficult vocabulary, pages and pages of terms and conditions and, generally, customers do not have sufficient information to evaluate which insurers provide the best cover for the best price. The UK Treasury are trying to tackle this by the introduction of four simple savings and insurance products (BBC News, 2013). However, there is a massive opportunity for insurers to utilise digital channels to engage customers in conversations and guide them through the insurance quandary. This may even help with conversion and plug some of the gaping holes in the pension (The Future of Retirement UK, HSBC 2013) and protection gaps (Which?, 2011).
4) Competition – The insurance industry is highly competitive. There are over 1,000 companies competing in the general insurance (motor/ property and the like) business and a further 300 authorised to write long-term savings, pensions and protection products in the UK (UK Insurance Key Facts, ABI 2012). The insurance product is essentially a digital one with little room for differentiation. Insurers must use insight to provide more relevant product offers and leverage digital channels to provide better customer service and differentiate themselves from the competition.
Insurers need to act now to take advantage of the opportunities afforded by the proliferation of channels to improve customer experience dramatically and regain the trust of their customers!
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