Differentiation in the insurance sector is a constant challenge. Insurance products are by and large very similar. Meaningful brand differentiation is difficult, often clouded by mergers and acquisitions. Price comparisons are challenging due to product complexity.
But if there is one area that insurers can use to differentiate themselves, it is in the delivery of an outstanding customer experience. This is of course not new, nor is it limited to insurance. Back in the early 2000’s when I was consulting in customer relationship management and loyalty, all of our research across sectors suggested that the single most important factor in creating customer loyalty was delivering a consistent customer experience that met, and if possible exceeded, customer expectations. It is the quality of the customer experience that leads to higher levels of trust and satisfaction, and this translates into higher rates of retention, referral and advocacy.
Firstly, Insurance is typically a low touch product relationship. Customers are not interacting with their Insurer every day. In fact, for many customers the relationship is limited to their initial application/sign up, annual policy renewal and, at some unknown point in the future, a claim. What that means is that when a customer does interact with their Insurer, be that at a key moment of truth like a claim or simply a day-to-day policy enquiry, that customer experience really counts. Get it wrong and there are very few chances to redeem yourself.
Secondly, Insurance as a sector suffers from low levels of trust – which is somewhat ironic as it a sector built on trust. Surveys from markets around the globe confirm that trust is an issue, particularly in an environment where inflation fueled premiums are rising. The old saying is that trust is earned not given. One of the keyways to earn that trust is through delivering on the customer promise that is made and demonstrating that the customer is a real person with real needs, not just a policy number.
And the third reason that the Customer Experience is particularly important in the Insurance sector is that those charged with insurance regulation are also focusing in on it. In recent years regulators across markets like the UK, Australia and New Zealand have been actively promoting insurer practices designed to generate better and fairer customer outcomes and expecting insurers to have processes in place to support that. Focusing on the customer experience is not therefore just good business practice; it is an expected regulatory focus.
In my view the challenge that many insurers face in improving the customer experience lies in their legacy systems (and the plural is deliberate as for many it is not just a single system). Policy Administration Systems were in the main built to do what it says on the box – administer policies. The old language of referring to a customer as a “policyholder” is a legacy of that. Delivering an integrated, seamless customer experience relies however on having a person and customer centric perspective. It relies on being able to have a single view of that customer – across policies and product types, and across their multi-channel interactions. And at the most basic level, it relies on simply having an accurate view of the customer and their information. Addressing the customer by the wrong name or asking for information that has already been provided previously or not having access to the customer history; these are all basics which set any customer interaction off on the wrong foot.
There has been a lot of talk within the sector about the importance of having a customer centric culture within insurance businesses; but generally, I don’t believe that’s the problem. In my experience those cultures do absolutely exist and are well supported at executive and Board level. The problem is having the systems and processes to deliver on those cultural aspirations. To use a different sector as an example, it is no good being an airline that has the friendliest staff, the best coffee, the latest movies and the flashest lounges, if the booking system doesn’t recognise you when you check in.
Legacy systems also present a problem when it comes to responding to evolving customer needs – which is another dimension to delivering a great customer experience. We live in an agile and constantly changing environment. Being able to adapt quickly and innovate is therefore critical. In my experience, the insurance sector is not lacking in very smart, innovative people. What holds them back is the ability to execute those innovations due to legacy system limitations and development timeframes.
The answer then lies in having modern, agile, flexible policy and customer management systems which are: