The UK insurance industry is growing. In 2016 it had over 111,000 direct employees and in 2017 saw tax contributions reach over 72 billion British pounds, the largest contribution of any sector within the country. But with a growing industry comes fierce competition and an increasing number of pressures. In this blog, we cover some general challenges the insurance sector faces and talk specifically about how Customer Experience Management (CEM) strategies and associated technology can help insurers to remain competitive.
Challenges for the insurance sector.
Insurance companies are faced with growing their firms in a market of soft pricing. This is evident across the board but particularly in the commercial sector where according to one report1 there’s been no change since the early 2000s. This means that there’s a strain on premiums and commissions and agents are being forced to change tactics.
Interest rates are another area for concern, although changes in either direction may affect operations, an insurer's profitability typically rises and falls in line with interest rate increases or decreases. And considering we’re currently in an era of low rates, that, according to one of the Bank of England’s leading policymakers is “forecasted to last for at least another 20 years”2 this means firms are feeling the pressure.
Another worry is that consumer demands are changing and this is not just limited to the insurance sector. Customers everywhere expect more from their experiences with companies and have considerably less patience too. They expect to be able to communicate with businesses like they do with their friends, via social media and apps and if a company does not live up to their expectations, they are more likely to share their experience. This is particularly worrying for some insurers given that dissatisfied insurance customers are 40% more likely to tell others of a bad experience than in other sectors, with 26% switching3.
Regulatory compliance is yet another area that puts pressure on the sector, laws are becoming increasingly stringent and insurers must keep up to date in order to avoid the heavy-handed penalties regulators impose. Firms in the financial division of the sector are particularly affected with changes in the last few decades aiming to ‘tighten up’ controls, an example of this can be seen with obligations around call recording. While it’s not mandatory to record calls in every instance, the FCA requires insurers to have full and accurate records of all transactions and trades along with full audit trails so that businesses can prove that the best interests of clients are always maintained. In reality, the only way to accurately and efficiently document telephone-based transactions is to deploy voice recording technology which is what more and more firms are having to invest in as a result.
Some mid-size broking firms are growing for the first time in decades. However, this is due to mergers and acquisitions powering their economies of scale business models, combined with targeted offer strategies they cherry pick the best risks in an already saturated market, leaving smaller firms to scramble around and fight over what’s left. Generally speaking the industry has seen a slide in combined operating ratio with underwriting profitability being lower than usual due to all the above and other constraints.
What are insurers doing to combat these challenges?
Of course, the insurance companies are trying to combat these challenges, looking at ways to better identify risk and price their policies more effectively. One example of this can be seen in the life insurance sector where providers have become more stringent in their requests for medical information. It’s now common for an insurer to ask for official medical records and documents before deciding whether, or at what premium, to offer insurance.
Some look to their positioning strategies when responding to the environmental changes, working in a “non-traditional” way with third-party providers and aggregators to expose themselves to new opportunities. And while on the face of it this seems like a good tactic, some argue that this introduces a middle man to the mix meaning already low premiums become further saturated.
Other insurers are focused on branching out as their way of differentiating and maintaining a competitive edge. An opinion article written by Karen Wheeler, Vice President and Country Manager UK, Affinion explains how to do this in the most effective way. He describes how insurers should position themselves at the centre of an ‘ecosystem’; an interconnected network of services that includes non-insurance offerings.
“This expanded reach enables insurers to engage with their customers through more touchpoints and creates genuine and valuable opportunities to contact them and build an ongoing dialogue. Ultimately, this has the potential to make insurers a larger, and more valuable part of their lives – increasing the chances of customers staying loyal.”
While all the above are valid tactics to stay afloat, it seems that for the most part, the industry is missing a trick when it comes to setting themselves apart from the crowd – it appears firms still aren’t offering a superior level of customer service as their key differentiator.
The state of customer service in the insurance sector.
Insurance companies come second out of all sectors for the highest churn rates in the CallMiner Index UK4 – and according to the report, it’s getting worse. The report shows that, in the last 12 months alone, 24% of consumers said they had switched insurance companies, an increase from the previous year. Given that acquiring a new customer costs around 6X more than keeping an existing one, it’s surprising to see that customer service efforts are still falling short of what’s expected. Ian Hughes, CEO of market research firm, Consumer Intelligence believes it’s because the industry has historically been price-fixated and, as a result, it is not customer-fixated. A report by TheActuary agrees that customer satisfaction in the industry is in decline stating that ‘the industry is continuing to fall short in the way it handles complaints.’5 We look at some statistics and comments in this area from the Institute of Customer service (ICS)6, which help us to paint a picture of what’s going on:
• The UK insurance sector is scored 78.7 out of 100 for overall customer satisfaction – 0.7 points lower than in January 2017.
• In-person experiences remain below average, firms are being urged to ensure their customer service strategies are consistent across all channels.
• 60.4% of insurance customers are not prepared to compromise service in pursuit of the cheapest deal.
Additionally, statistics show that 27.2% of customers are willing to pay a premium for a better service, so it’s clear to see that there’s an opportunity here. The ICS estimates that improvements in customer service could potentially be worth £81.5bn to UK GDP - a staggering amount!
Introducing Customer Experience Management – the insurers’ route to tapping into CX opportunities.
Customer experience management (CEM or CXM) is the collection of processes a company uses to track, oversee and organise every interaction between a customer and the organisation throughout the customer lifecycle. Going back to the statistics outlined by ICS and the suggestion that firms should ensure their strategies are consistent across all channels; producing a CEM strategy is an ideal place to start as it addresses the entire experience and not just the customer service element which is just one part of the wider experience.
How to create a good CEM strategy.
Understanding the Customer - Understanding customers is the key to giving them good service. Insurers should try to truly understand customers and their expectations as the starting point when creating their CEM strategy.
Focus on goals. - The CEM strategy like any other needs to focus on a goal so it’s important to think about what the customer journey should look like and then use that vision as a benchmark, objectives can then be set accordingly. Appropriate CEM goals for the insurance sector might revolve around the % of customers that renew their policies, the % of policyholders that would recommend the insurer to a friend or more generally on something like the desired satisfaction rating.
Understand the smaller metrics - There’s also a number of smaller metrics that can be used as an indicator to gauge how much progress is being made towards the wider objectives. See our blog: ‘communicating the metrics that matter’ for more information on how to choose appropriate goals and metrics.
Make sure that progress can be measured - Progress needs to be measurable so it’s advisable to look towards the communication environment to see if it can support the collection of customer experience related analytics.
Have a 360-degree view of the customer - A 360-degree view of the customer is a single, end-to-end picture of the customer’s journey and experience with a company, and how they felt at steps along the way. The communications environment should be set up so that it supports this all-encompassing view.
A communications environment to support CEM and combat challenges.
We’ve outlined that there’s an opportunity in the insurance sector for those that are willing to take a look at their customer experience management strategy (or create one from scratch!) and suggested some areas that need to be considered for such a strategy to be successful. But, there’s a direct correlation between strategy and environment that needs to be addressed, the communication environment needs to be robust enough to support objectives. With this in mind, we take a look at some technology that’s available.
Omnichannel Customer Interaction Platforms.
The ‘omnichannel approach’ means having a cross-channel strategy based on the simultaneous use of all available communication channels. Each channel is linked to another in such a way as to provide the greatest possible customer experience. In this situation, the user has the freedom to use all channels the insurer offers and importantly, can easily switch between them while all information and data is sent to a central platform. This is arguably one of the best types of platforms to use if business goals are focused on delivering a consistent experience as it provides a 360-degree view of the customer and their interactions. For more information on this topic, we created a blog called: 'How to make customer experience consistent across every channel'.
CRM and Call Centre Integration
Integrating the CRM system with the contact centre can be a really good way for insurers to improve their service levels. To understand why let’s take a look at some of the features:
Screen-Pop is a useful feature which automatically displays caller and account information on screen during a call. It works by collecting information like the caller’s phone number and or details acquired by the IVR and connected it with the CRM system. It can match this information to a record and provides the agent or broker with full customer context without them needing to search a database for the information. This is particularly useful in the insurance sector where masses of data are stored, and it might be otherwise tricky or time-consuming to find records.
What’s more, comments can be added to the CRM record and read back easily so that the agent is up to speed quickly with every new call. This boosts the satisfaction of not only the customer who receives a more streamlined, personalised service but also of the agent or broker who feels more comfortable having full information readily available.
Probably one of the most attractive features of CRM/contact centre integration within the insurance sector is it’s call recording and storing capabilities which help to comply with the industry regulations mentioned earlier in the section on regulatory challenges. All calls can be recorded with the option to pause when sensitive data is disclosed like card details and then the record is attached to the CRM and properly archived so it can be retrieved during an audit.
Leading-edge insurers in the market are looking towards digitalisation on a larger scale, thinking outside of just the communication sphere, they integrate communications with their internal claim processes. Usually achieved by providing an online portal, the claims process can be automated in a self-service fashion. Customers log on and are able to file and check the status of their claims, manage their policies and make decisions about files easily, they can choose to receive personalised information and increase/decrease coverage as needed. Existing technology can be leveraged using systems integration that can sync these types of back-end systems with the customer orchestration platform or other apps for the ultimate in customer experience.
The insurance sector is becoming increasingly saturated and challenging; however, a massive opportunity exists in improving the customer experience. Technology like; Omnichannel communications, CRM and Computer Telephony Integration and Business Process Systems Integration are key areas for investment which will help towards overcoming the challenges of the modern environment and customer demands allowing insurers to tap into new opportunities and remain competitive.