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September 18, 2015

Are We Listening to Our Customers?

Summary:

No, we aren't. And the lack of listening by insurers creates two particular problems with pricing and two issues with service.

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There seems to be a growing mismatch between what consumers want from their insurers and how insurers are attempting to satisfy them. Is it intentional, or is the lack of alignment between insurers and their customers because of some unforeseen technology hurdles that require too much work to correct?

Key relationship indicators are all pointing toward growing communication issues. To build long-lasting relationships, insurers need to address their external communication issues, but only after they have determined that they are truly interested in listening to what the customer has to say.

In April 2015, Majesco commissioned a survey of 1,000 insurance customers in the UK. The respondents came from a broad cross section of occupations, ages and incomes. The survey pointed out some insurance industry issues, with implications for all geographic markets, and also uncovered some details that may be worth further exploration.

In a two-part blog, I am going to focus on the findings and what we should do about them.

The first of our findings was striking. What insurers seem to think is important to consumers isn’t always what consumers say is a priority when it comes to choosing an insurer. Insurers and consumers agree on the importance of pricing — insurers say they want to provide a competitive price, and consumers say they want a reasonable and understandable price — but then the two sides differ.

Insurers want to build loyalty and referrals through branding. Customers want relevant products, a high level of service from a wide array of options, clarity about products and a simple process.

Here is where we begin to find some problems.

Pricing Problem #1 – Majesco’s study found that many consumers are focused on price — but not all. Companies that focus on price and not a) service levels, b) relevant products or c) ease of access may alienate 30-40% of insureds. The policyholders least focused on price are naturally those who are more affluent – those who can afford more products and higher premiums to cover greater assets – so insurance companies are putting their best customers at risk.

Pricing Problem #2 – Clients are more likely to find pricing information on aggregator sites than on their own insurer’s website. While some insurers were digitally sleeping, aggregators cropped up and stole their territory. Aggregators may be a source of fuel for new business, but they are most certainly also poised to be a major contributor to client attrition.

Technology improvements and marketing efforts aimed at price messaging within the client base can help stem the flow of lost policyholders.

Besides pricing problems, there are two service problems that cropped up in Majesco’s survey, as well.

Service Problem #1 – One in three survey respondents felt that insurers were failing on minimum service levels. The Majesco survey found that between 47% and 60% of respondents are contacted by their insurance company only once per year! The irony here is that insurers are traditionally risk-averse, doing anything to avoid incurring an additional 1% to 2% of risk. Yet disruptive technologies have brought to market a new breed of competitor that could grab 33% of their business because of inattention. That is a tremendous risk!

Improving service through more digital and mobile communication (and even through more phone calls and mailings) will lower insurer risk.

Service Problem #2 – Insurers don’t seem to realize that what consumers are asking for, such as improved self-service through improved technology, will actually save on administrative costs. While some insurers seem to be waiting for a better scenario, there is no time better than now to build a labor-saving business case that improves customer communications. In this case, listening to the customer will do more than improve relationships; it will improve the bottom line.

The Majesco survey uncovered additional surprising data, as well, related to desired products vs. product offerings. Younger insurance customers (under 35) were surprisingly less influenced by price than older customers; price, while always important, may become even less important than service, brand trust and product types in the coming years.

It is clear that often insurer perceptions are no match for consumer realities. To clear away these notions, insurers need to listen to their customers, listen to trends and embrace the idea that giving the customer what she wants can be a key to success.

In my next blog, we will look at the practical aspects of developing a listening organization. What actions can insurers take to hear their customers, act upon their needs and anticipate the development of products that will take them into the next generation? How can technology assist insurers as they rebuild a relevant relationship? I hope you’ll join me as we discuss several options that insurance companies can use to stay effective and remain competitive.

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About the Author

Vidyesh Khanolkar has more than 20 years of experience in information technology on the service provider and customer side. He has large program delivery experience and profitability and P&L management experience across North America, the UK and Asia Pacific in the insurance technology sector.

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