Why move the establishment? Why not?
Jan 01, 1970
The business of insurance has undergone drastic changes globally. In my recent article The Vote Against The Establishment, I noted that new entrants like Lemonade paid a claim in 3 seconds. The growth of chatbots and claimbots are another attestation of the smart digital age, which is growing in the use of sophisticated technologies including Natural Language Processing, Machine Learning and Augmented Reality for all types of insurance from workplace safety to the general insurance lifecycle.
A recent interesting Bloomberg1 post indicated how WeChat influenced spikes in insurance sales in Hong Kong and the reaction by regulators. Yes, one can argue that the US in general has strict regulations and gobs of historical insurance policies on siloed legacy systems. With globalization, consumer expectations worldwide have become very similar – no matter the age, geography or industry. Consumers care little about the technologies and processes an insurer or an agent uses to provide the information – all they care about is getting it immediately and via a device of their choice.
Thankfully, there are metrics that insurers can use to measure how successful they are at doing this. The Net Promoter Score (NPR) is an age-old indicator of growth, and the Net Easy Score (NES) aka Customer Experience Index, is a metric for the Contact Center or Service Center. Simply put, a successful customer experience requires an understanding of the customer at a personal level and triangulating technology, information and human touch points, at the right time, in the right context and via the right device.
The customer’s expectations are not the only trigger that is changing the insurance landscape. Insurers are leveraging technology advances to not only reach a wider market at a lower operating cost, and to improve their loss ratios, but also for economies of scale. Insurers will still need to balance technology with workforce behaviors and business priorities to allow for sustainable growth.
It’s not the millennial age group that positively disrupts – it’s the millennial mindset!
The customer is the common denominator across all industries. They demand immediacy, transparency, and personalization of service at any time and on any device. They also demand to be able to connect with a human when they feel it is necessary, and to be left alone otherwise. Customers of all age groups and walks of life are usually heads down on their mobile devices during downtime, researching and comparing products, catching up on social sites, news, tech trends and more. While millennials like the convenience of shopping and researching online, they also crave for unique experiences and instant gratification.
The brand experience delivered to a customer is the sum total of personalized experiences across all the touch points – through advisors, service representatives, claims representatives, and online channels. The retail industry offers an example in integrating offline and online channels. Yelp and Groupon, for instance, allow local businesses to reach potential customers with online location-based technology.
Millennial or otherwise, customers of every generation are familiar with the newest tech products. The Boomers are aging gracefully and have picked up on digital trends to make life simpler. Gen X’s on the other hand were always walking the fence and could adapt either way. Whether the consumer is 25 or 65, everyone is looking for hassle-free, seamless self-service and proactive customer care.
Take a simple example in insurance where, real-time alerts, offers and notifications, and certain transactional capabilities on any device and at any time, can avoid redundant or low value calls into the service center or the agent’s office. This in turn improves the productivity of the agents and service representatives and allows them to focus on more complex tasks for business success. This is just one of many reasons, mobile-first approach to insurance products should be given top priority, even over the desktop experience.
The tripod of customers, service representatives and agents
According to Marketing Metrics, the probability of selling to a new prospect is 5–20% whereas the probability of selling to an existing customer is 60-70%. Service excellence is one of the drivers to customer retention and increased referral business. Insurers have undertaken initiatives to better understand their customer’s insurance journeys (digital, emotional, physical) in alignment with those of the Service Representatives and Agents. In addition, insurers are mining their historical customer data to assess the Life Time Value (LTV) of the Customer and the reasons for drop rates and spikes in purchase patterns. This not only provides upsell insights, but additional insights into the product uptake, and service level impact on business economics. Insurers are beginning to analyze information from social sites and literally billions of connected devices that consumers engage with every day to provide targeted, personalized and proactive service. Mobile Future2 projected that by 2020 there will be 5.5 billion mobile users globally. They also projected that by 2020 there would be 947 million mobile-connected devices and 163.2 million wearable devices in the United States alone.
The service representatives and agents themselves need simplification of process and technology and require their daily journeys to be better understood by insurer management. As the ‘face of the company’, they provide the critical touch points that can make or break a relationship. More clients are becoming tech savvy and will require a mix of digital empowerment and human engagement. Service representatives and agents/advisors need to have the ability to adapt to newer technologies thus catering to customers in ways they choose to do business. Face-to-face guidance by advisors will still exist for those individuals planning for and nearing retirement, high net worth clientele, and more sophisticated financial products. According to the US census3, there are almost 80 million Baby Boomers living in the United States. Another article by CNBC4 indicated that only 27% of Baby Boomers were confident they had enough for retirement.
Moving the titanic from the Neolithic age to the fintech age
Taking a specific example, the average life insurance application process takes 30 days or more with extensive and intrusive underwriting processes. Given the amount of information available through IoT, social sites, paid and unpaid data sources, plus historical insurer data, the underwriting processes can be minimized and personalized. Newer medical technologies that are FDA-approved exist wherein less intrusive and more immediate results can be obtained to drastically reduce underwriting and policy issue cycles.
Simpler products with lower face values are already being issued online within minutes, including processing of the initial premium payment in the same session. Newer technologies provide powerful insights into personal and commercial risk information allowing various sales and service personnel the insights for pre-qualifying leads, providing targeted products and ensuring the highest quality of engagement.
Another area is field service and productivity technologies that include augmented reality to drive productivity and reduce loss ratios. For instance, field staff and adjusters can use smart glasses to augment their inspections with additional safety and construction code information to help accelerate the underwriting process and in the assessment of claims losses. Furthermore, the vast expanse of information available today, and the AI capabilities to triangulate the information contextually have been proven to reduce loss ratios and proactively identify high-risk entities. A handful of insurers and reinsurers are dabbling in advanced technologies, deriving contextual risk information from IoT, social sites and augmented reality, and mining sentiments and financial trends for predictive and preventative claims analytics.
Minimizing recruitment problems while maximizing productivity through technology
Insurers are well aware of the recruitment issues they will face should they decide to not advance technologically in their business. This pertains more to the fact that a service representative’s turnover rate is very high and the average age of the agent is 56 (according to LIMRA). Attracting and retaining the younger generations (millennial, Gen Z and beyond), will require a realignment of the insurer business models, change in compensation models (especially for service representatives), and behavioral changes in the mindset of the workforce to realize the business metrics they need to stay relevant and gain competitive traction in the marketplace.
In summary, I see four major changes occurring in the industry: one where insurers are beginning to realize the benefits of their digital transformation efforts; second where the role of the agents, service representatives and underwriters is becoming more specialized; third where consumers are becoming more educated and empowered; and lastly risk assessments are shifting from historical models to individualized and predictive projections.