By Pete Ballard, Foolproof
Customer insight is identifying a growing need for insurers to deliver differentiated and value-adding customer experiences through emerging technology – which offers newfound business efficiencies and the potential to determine the immediate future of insurance innovations.
The insurance industry is going through a period of change. Insurance customer satisfaction is continuing to fall, and the industry is now the fourth worst in the world for customer satisfaction.
Unfortunately for insurers, there are a number of contributing factors to this problem, and no ‘quick fix’.
Changing attitudes to consumerism means people own less so are insuring to lower levels on their contents, home, and car insurance — if at all. Additionally, subscription services are becoming more popular than owning certain items, with insurance often included in the fees.
For those who do still want to buy insurance, it’s not the easiest task. Though the industry has modernised, parts of it remain inaccessible and confusing, especially when it comes to technical wordings and policy statements. Our research with insurance customers reveals that — in an increasing number of cases — the wrong cover is often purchased. Additionally, most customers only uncover they have inadequate cover after a claim has been refused. As a result, the insurance field and its digital assets leave many customers dissatisfied with the lack of simplicity and transparency in the end-to-end insurance process.
To resolve this issue, insurers are implementing technology. By automating processes and decreasing running costs, insurers are lowering premiums to entice more customers to purchase insurance. However, this isn’t the case. Research by the Institute of Customer Service reveals that 60.4% of insurance customers are not prepared to compromise service in pursuit of the cheapest deal, and 27.2% are willing to pay a premium for better service.
We’ve worked with numerous insurance firms attempting to crack the issues facing the industry, working with both business leaders and customers to identify pain points and deliver a better experience. The resounding message is that insurers need to put their customers first when it comes to redesigning their offering, incorporating technology only where it adds value. Any considerations on price should be secondary to the customers’ needs.
Everyone wants cheaper premiums, until they have to claim
Our experience with insurance customers has shown us that attitudes to insurance fall into one of two groups. Customers who have never had to claim on their insurance may be enticed by a cheaper premium. However, those who have experienced the claims process value customer service foremost — regardless of cost. For example, customers who have had a claim refused as a result of a failure to fully understand complex policy wording, will especially know that cheapest is not always best.
When considering how insurers can improve their offerings, there’s no need to apply tech for tech’s sake. Though a cloud-based document option is a nice touch that allows customers to access their policies at any time, the solution could be much more simple in the form of clear and concise copy, coupled with visual design to aid understanding.
One of the biggest challenges faced by our insurance clients is a lack of ‘findability’. Despite advances in the e-commerce insurance marketplace, customers still face difficulty in finding the right insurance. Equally, a lack of a clear and concise breakdown of what your insurance covers — in an accessible and navigable format — is sadly common.
The ethos of US home insurance startup, Lemonade seems to be heading in the right direction. The company has clearly identified this problem and is committed to making insurance easier for its customers to digest:
“We’re here to pull back the curtain and explain in plain, transparent language the ins and outs of your standard homeowners insurance policy.”
Our most important piece of advice to insurers is: provide clear information within well designed (e.g. responsive and intuitive) forms which incorporate mechanics to avoid errors and ensure the process is seamless and pain free.
Preventing loss before it happens
Another way insurers are improving their offering is by getting active in the area of predictive and preventative measures. These seek to help consumers avoid loss and inconvenience rather than redress the loss after the event. This is a proactive, rather than reactive, approach.
For example, health insurance firm Vitality provides their customers with discounted gym memberships and reduced premiums for those who track their fitness activity. Implementing preventative measures in this way allows Vitality to limit payouts and maintain healthy customer relationships. Even though this is mutually beneficial, the customer is at least considered and placed at the forefront of their services/plans.
Personalisation for the better
One of the best ways insurers can increase customer satisfaction is by making users feel valued through a personalised service.
There’s plenty of evidence showing that customers prefer services tailored to them. Research by Segment found that 40% of consumers say they will likely become repeat customers after a personalised shopping experience. Salesforce found that a further 57% of customers are willing to share personal data in order to receive a more tailored experience.
Our recent project with Simplyhealth to create an innovative new product designed to provide advice and support to ageing people and their carers, gave some interesting insight to offering a differentiated customer experience.
Simplyhealth’s Care for Life service is tailored to provide the right advice to the right individual — at the right time — to meet healthcare needs. The system uses artificial intelligence to understand where an individual has been, where they are now, and what they need to know next. The service’s content, copy, and design adapts to the needs of the user. The system facilitates this by seamlessly transitioning between elements of the user’s journey with the product, offering exponential value to ageing people and their families when they need it most.
If a customer is making a claim on their insurance, it always means something has gone wrong. This can be a difficult time, with emotions running high. Insurers can ease this difficulty and improve customer satisfaction by using technology to make the claims process as painless as possible. Of course, this requires a sensitive approach: even the most advanced AI claims system cannot replicate real human compassion.
Other projects we have worked on with insurers address the stress and anxiety that accompanies recording details from those involved in a road traffic incident. The systems created to tackle this challenge should integrate image capture with the application’s claims procedure — automatically populating the form fields with information. We have found that putting the user in control removes friction and simplifies the claims process.
Another client, the UK’s leading pet insurance provider, invested in creating a relationship with veterinary professionals and extends this to integration with their backend systems. Claims no longer have to be made by customers, as data is sent automatically, and the exchange is made on behalf of them by the insurer. This helps alleviate some of the distress for pet owners by delivering a frictionless experience at what will already be a difficult time.
Emerging technologies can have a significant impact on insurance. When coupled with changing consumer attitudes towards ownership, providers need to respond fast to altered consumer expectations and improve customer satisfaction.
Insurers that will gain the most commercial real estate are those who start now by intelligently applying emerging technology to address customer experience issues. As such, you should work on forging stronger, more enriched, customer relationships which add long term value to your business.
Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19
Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.
“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.
According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.
The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.
Key findings from the Deloitte global report include:
- Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
- 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
- Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
- Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.
“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.
One in five insurance customers saw an improvement in customer service over lockdown, research shows
SAS research reveals that insurers improved their customer experience during lockdown
One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.
This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.
The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.
However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.
Paul Ridge, Head of Insurance at SAS UK & Ireland, said:
“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.
“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”
Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.
For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer?
The power of superstar firms amid the pandemic: should regulators intervene?
By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business
Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.
Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.
Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.
Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.
THE FORCES BEHIND THE SUPERSTAR PHENOMENON
The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else. Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.
Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.
In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University, we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers. For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.
Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.
THE POLICYMAKER’S DILEMMA
In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.
Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.
So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?
We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.
Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.
However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.
Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.
What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.
We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’
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