Some people argue that insurance is a commodity. They say that although the rates and terms may vary slightly, coverage from one insurer to the next is very similar. Those who work in the industry know better, but does it matter if the buying public does not perceive product differences? Insurers must find new ways to differentiate themselves from their competitors. If their products aren’t discernably different, their services should be. This ideal can be achieved through customer centricity.
Businesses exist to sell products and services, and they can’t succeed without customers. A customer-centric approach recognizes the important role customers play in a company’s overall strategy.
According to Gartner1, customer centricity means the people in an organization understand customers and their situations, perceptions and expectations. The customer is the focal point of all decisions involving the delivery of products, services and experiences.
Customer-centric brands anticipate customer needs, personalize offerings and remove any potential friction. By adopting a customer-centric approach, insurers can better differentiate, compete and grow. This may involve:
Many consumer brands already use customer-centric service models. Think about your experiences with Amazon, Wayfair and Netflix. They anticipate, suggest and hyper-personalize. Stitch Fix, Uber and HelloFresh are brands that present products and services in new ways to reduce friction in customers’ lives.
In the insurance industry, customer centricity will require more than a mobile app with digital document access. Insurers will have to deliver insurance in surprising new ways that haven’t been tried in the past.
At the Connected Claims USA conference session entitled: ‘Curate the Perfect First Time Experience’ Brooke Bass, SVP & Manager - US Property Claims at Liberty Mutual explained that customer centricity many times involves resourcefulness and a focus on building relationships and delivering value. She gave an example of a tree claim that wasn’t eligible for coverage. Knowing it would still cost the policyholder $4-5k for tree removal, the claim adjuster leveraged his community knowledge to provide information about a furniture company he knew of who would come out and take the tree away at no expense. Even though the claim wasn’t covered, he still found a way to help the customer.2
Insurers can’t succeed without policyholders. However, if policyholders are dissatisfied with their insurance experience, they can easily switch to a different carrier, and they do.
Accenture3 found that 30% of policyholders who were dissatisfied with their claims experience had switched carriers and another 47% were thinking about switching. These unhappy policyholders could cost insurance carriers $34 billion in premiums annually. That’s $170 billion in lost premiums over the next five years.
Most insurers would agree that it costs less to retain an existing policyholder than it does to acquire a new one. With a customer-centric approach, insurers can develop strategies that increase customer satisfaction and engagement, while reducing churn.
The advantages don’t end there: a customer-centric approach can also help insurers sell more policies. A big part of customer centricity is personalization, which can include personalized coverage recommendations. By developing a cross-selling strategy that focuses on anticipating the needs of individual policyholders and making personalized suggestions, carriers may increase the lifetime value of every customer while also delivering more value to every customer. This, in turn, can also increase retention because policyholders may be less likely to switch if they have multiple policies with an insurer.
According to Salesforce4, 56% of consumers expect all offers to be personalized. In 2022, 88% of consumers said they consider the experience a company provides to be as important as its products or services, up from 80% in 20205. Technology has changed consumer expectations; carriers need to adjust to these new demands.
A customer-centric approach requires the right perspective, technology, and partnerships.
Perspective is key. Insurers must look at every interaction from the point of view of their customers. Think about each step in the process. Does the policyholder have to jump through hoops to receive quotes, apply for coverage, access documentation, get help, file claims, or receive claim payments?
Also consider what value you’re adding. Customers want convenience as well as tools that help them manage their risks and make their lives easier. All of this requires the right technology. According to EY6, forward-thinking insurers are already embracing hyper-personalization to better serve their customers by investing in data, analytics, and AI-powered systems. A customer-centric approach would minimally require a strong mobile platform, comprehensive digital payment system, and robust communication tools.
Customers want seamless experiences, but behind seamless experiences are many moving parts. It takes strategic partnerships and a strong ecosystem for insurers to be able to provide a truly personalized digital customer experience. Per McKinsey7, embracing ecosystems is of “paramount importance to address the customer in the moment of need.”
The upcoming year promises to be both busy and challenging. It will be important for insurers to not only build upon momentum achieved but continue to innovate and grow. The road ahead has obstacles to navigate and If you don’t have strong digital payments capabilities, you’re not ready for 2023. At One Inc we understand the power of partnerships and the value of a strong ecosystem. And as the leading digital payments network for the insurance industry, we’re here to help. Get in touch.