Digital access has increased customer expectations, thereby impacting insurer’s retention rates.
In today’s increasingly digital market, consumers want to control their destiny when purchasing insurance policies. In 1995, less than 1% of the world had access to an internet connection. However, the International Telecommunication Union reported that this number has skyrocketed to 40% (3 billion users) by the end of 2014 and is projected to increase in upcoming years as well. In combination with the advent of companies such as Google and Amazon, which consolidate and organize the available information on the internet, consumers have become accustomed to researching and comparing prices as they make their financial decisions. Customers now expect this degree of price transparency, ease of comparison, and control in their online interactions with a variety of industries from whom they purchase products, including insurers. Therefore, meeting these expectations factors in significantly into how a consumer views the quality of their experience and, in turn, whether or not they choose to keep their policies.
The insurance industry, relative to others, has lagged in their efforts to emphasize customer engagement, use analytics, and adopt social and mobile media channels. The effects of these decisions over the years are highlighted in survey results from Forrester and the Temkin Group, who identify that customers are significantly less satisfied with their interactions with insurers (P&C and healthcare, both) than retailers, hotels, delivery providers, banks, and fast food chains. In this comparison, it is interesting to note that the latter group is primarily business-to-consumer facing, and that their business model requires a greater degree of customer service to remain competitive. However, the fact that organizations such as Forrester and the Temkin Group are comparing insurers to these groups is indication that insurers are now being measured by similar standards to those used for business-to-consumer industries. Evidence of the industries becoming more similar is that digital trends are now pushing insurers to interact directly with customers and allowing customers to use online insurance exchanges.
Even though the insurance industry shows signs of becoming more existing-customer focused, insurers continue to invest their time into acquiring new customers rather than pleasing old ones. This is reflected in EY’s Insurance in a Digital World survey that notes that 47% of insurers have no single cohesive digital strategy business case and that 87% do not consider past interactions when recommending products or services to online consumers. Furthermore, EY’s Voice of the Customer survey noted that 73% of consumers indicate little or no contact prior to a policy renewal process from insurers, with two-thirds of this group indicating that they would have renewed if they had been contacted. This is a significant finding because it has been noted that acquiring new customers in the insurance industry is more costly than maintaining existing ones.
Therefore, given changing customer expectations, the current lack of communication channels to meet these needs, and the effect it can have on customer retention and the bottom-line, insurers will need to expand their digital strategy in the coming years. In innovating to do so, insurers must be prudent in making sure that they do the following:
- Create seamlessly integrated communication channels for customers. With this, customers can begin processes in one channel and continue them in another, without having to repeat steps
- Ensure that channels are available whenever, and wherever, in order to give more control to the customer as to when and through what means they choose to act
Inevitably, firms will face challenges such as legacy technology constraints and agent resistance, but the insurers who manage to navigate these challenges and refocus to give customers more control will reap the greatest long-term benefits.