The challenges drivers and insurance companies face in 2023 are multifaceted—ranging from rising premiums to delayed repairs. As the auto industry navigates these obstacles, it needs to identify potential ways to enhance customer satisfaction.

This article analyzes the current car insurance landscape, drawing from the recent MarketWatch Guides article.

Rising Car Insurance Rates

Insurance rates have been steadily climbing, posing a burden for drivers. Factors include external elements beyond the control of insurance providers.

Supply chain disruptions, chip shortages and labor shortages have sharply increased car repair costs. These challenges have resulted in extended repair durations due to limited parts availability. Repairs that once took days to complete now span weeks. The effects of the pandemic and global economic factors exacerbate these issues.

Insurers and repair facilities must collaborate more effectively to address the shortage of parts and labor. Anticipating potential supply chain disruptions and identifying alternative solutions could mitigate the impact on insurers and policyholders.

See also: Can Insurers Connect to the Connected Car?

Impact of Sluggish Claims Process on Customer Satisfaction

The J.D. Power study for 2022 on U.S. Auto Claims Satisfaction reports that the delay in processing claims has hurt customer satisfaction. Insurers must explore new options to enhance customer satisfaction, such as streamlining the approval process, to reverse this trend. Improved communication at every stage of the claims journey is also crucial.

Insurance company involvement in repair decisions has come under scrutiny. There are accusations of insurers pressuring repair facilities to use generic parts or cut corners to save on costs.

In response to these concerns, the state of Connecticut proposed House Bill 5366. It prohibits insurer influence over collision repair decisions at auto repair facilities. Though the bill did not pass, it highlights the debate surrounding insurance company interference in repairs.

How can insurance companies build trust with their customers in this context? To do so, insurers should maintain transparency in their dealings with repair facilities. Also, they should prioritize customer safety and satisfaction over cost-saving measures.

Insurance companies can strengthen customer relationships and enhance their reputation by fostering a culture of openness and accountability.

Customers Switching Car Insurance Providers

As frustrations mount, more customers shop for new insurance providers and switch coverage. This increase in insurance shopping and provider-switching rates has coincided with a decline in advertising by insurance companies.

Insurance companies should reconsider their advertising and retention strategies. With customers frustrated by rising rates and exploring new providers, insurers must enhance how they convey their services' value and retain current customers. Offering incentives for long-term customers could also boost loyalty.

Telematics Adoption: A Silver Lining?

There is a ray of optimism in the acceptance of telematics. Programs that offer usage-based insurance have become popular with drivers as they provide incentives for safe driving by monitoring driving behavior.

The availability of more driver data enables insurance providers to simplify coverage and expand customization choices. As a result, insurers can offer more personalized policies that better reflect individual driving habits, leading to fairer pricing and lower overall premiums.

Furthermore, telematics can reduce accidents by encouraging safer driving, benefiting drivers and insurance providers in the long run.

See also: Automakers Build New Insurance Future

Final Word

The car insurance industry is grappling with increasing costs and growing customer dissatisfaction this year. Insurance companies can better navigate their challenges and work toward a more customer-centric future by adopting strategies such as providing telematics, fostering transparency and streamlining claims processes.

The annual Global Priorities survey by the International Insurance Society found that industry executives are feeling more prepared than in the previous two years on a whole range of issues: cybersecurity, climate change, inflation, competition for talent, data security and expense management.

In addition, major concerns from prior years — how to cope with the pandemic and how to adapt to a hybrid workplace — have greatly diminished.

The major uncertainty among executives is geopolitics. What will happen in Ukraine? Will China invade Taiwan? Will the trend toward what the report called "backsliding democracies" continue? 

While I'm delighted by the upbeat responses to the survey, I'd add one uncertainty to the list, echoing what an executive said in a webinar that the IIS held to analyze the report. Worried about misplaced complacency, he said: "I'm surprised anyone can feel comfortable about the level of cybersecurity protection that insurers have in place."

To tick through the main numbers in the IIS summary: 

• Cybersecurity: "In 2021, 83% of executives who were prioritizing cyber security said they felt their company was prepared to do so. By 2023, that number increased to 94%."
• Climate change: "In 2021, 62% said their company was prepared to address the effects of climate change, and, by 2023, 78% said the same."
• Inflation: "89% prepared in 2021, to 93% in 2023."
• Competition for talent: "59% to 79%." (One executive said in response to the survey: “We are faced with numerous retiring subject matter experts without having new talent coming in behind them to continue moving the business forward from here. Huge legacy knowledge bases will be disrupted, shrunk, or lost altogether.”)
• Data security: "87% to 97%."
• Expense management: "94% to 97%."
• Hybrid workforce: "46% of executives were prioritizing a hybrid workforce in 2022, but that number dropped to 14% this year."
• COVID: "In 2021, the pandemic response was the top economic priority, with 63% of executives saying that the pandemic recovery was one of their top-three economic issues. In 2023, however, the pandemic is a top-three economic priority for only 11% of executives."

To put the report in perspective, IIS President Josh Landau conducted a webinar with two longtime stalwarts of the IIS: Andreas Berger, CEO, Swiss Re Corporate Solutions, and John Spence, retired regional head, M&A and strategy, Generali Asia. This is where Spence said he couldn't understand anyone feeling comfortable about the current level of cybersecurity. 

"I was surprised by the answers around cybersecurity and the sort of view that insurance executives felt they could cope with cybersecurity," he added. "I don't know where that strength of position comes from. Cybersecurity really has to be at the top of the agenda.... And I'd encourage significant caution and investment to deal with that issue." 

Berger added his own note of caution about inflation. "Inflation should remain a top concern for executives this year and beyond," he said. "Global inflation rates are easing more slowly than desired... [and] executives in service industries like ourselves in insurance, where labor is the key input, will have to really watch [wage] inflation [to see if it] is set to stay structurally higher over the longer period."

Concerning geopolitical uncertainties, he said he sees them leading to three profound changes that will play out over many years in how the world economy operates — and, thus, in where the opportunities for insurers will lie:

"Number one, it's a reorientation of global supply chains to insulate economies against future trade disruptions. That's what we see. Number two, added impetus to the green transition, given worries of energy security that Russia's invasion of Ukraine has sparked, and number three, potential risk of global food security."

Spence emphasized the need to focus on acquiring AI talent. "Insurers need to be thinking very carefully about the people they have on their teams that are equipped to understand the transformation or issues associated with AI, ... [who are developing the use cases] that are improving customer service, that are personalizing products, that are optimizing the pricing and detecting fraud and reducing costs.... It's a significant challenge, and insurers who in many ways have been very slow to adopt new technologies will need to move rapidly in this new area or be left behind," 

That's a lot for you to sort through, I know, and I encourage you to dig into the report and watch the webinar. But here's my summary:

Insurers have been working hard for years to tackle a whole array of problems and can feel good about being better prepared but still need to stay on alert, especially about cybersecurity and inflation, in addition to the scary possibilities of today's geopolitics.

Cheers,

Paul

It is an exciting time for the life and health insurance industry. Traditional and new entrants are introducing novel coverages and opening distribution channels to build market share, expand coverage availability, manage risk, save costs and improve the health and wellbeing of the people they serve. Ultimately, the real winner is the consumer, who is benefitting from creative propositions offering enhanced financial protection. 

Three new business trends are particularly worth noting. The first centers on ecosystem partnerships. The second is the convergence of group and individual offerings, and the third is the emergence of new opportunities for critical illness (CI) cover. 

Trend 1: Ecosystem Partnerships

Insurers are developing ecosystem partnerships with non-traditional insurance market participants to create and distribute new products and services, reach new markets and ultimately improve engagement with their policyholders. Some examples: 

• One company supplies a single point of contact to collect data using a contactless video-based software solution. The company deploys machine learning to capture micro changes in facial skin color to measure stress, heart rate, blood pressure and other metrics. 
• Another business addresses the challenge of collecting data from multiple sources. After securing customer permission to collect personal healthcare data, the company provides insurers with a complete and unified view of a consumer’s health, medical and wellness information. 
• A clinical stage healthcare company is applying artificial intelligence and deep learning with dermoscopic imaging to detect within seconds skin lesions with a high risk of being cancerous lesions. Besides saving lives, the approach improves outcomes and reduces health claim costs. 
• One vendor offers eight online mental health treatment programs, each confirmed effective by at least one randomized controlled trial, to improve mental health while managing claim costs. Given the increase in depression since the onset of COVID-19, successful and cost-effective mental health programs are more necessary than ever. 

These new digital entities come from outside the insurance industry. They are joining the insurance ecosystem and working with insurers to create consumer propositions that enhance the customer experience, improve consumer health outcomes and ultimately strengthen the insurance value chain in areas such as underwriting and claims. 

Trend 2: Converging Group and Individual Coverage 

Propositions are emerging that blur the lines between group and individual cover, allowing the consumer to enjoy the best of both worlds. This convergence is occurring against the backdrop of a changing workforce and the explosion in freelance or “gig” workers. Broadly, group and individual insurance are converging in two different ways:

• Strategic archetype 1: Insurers sell individual products through the employer channel, thus tapping into the employee base as another conduit for alternative distribution.
• Strategic archetype 2: Insurers define criteria to combine disparate individuals into a group of their own and offer group products to them (as key decision makers) or voluntary-style products that provide individual choice with elements of group underwriting.  

An example of strategic archetype 1 is a group-focused startup offering employee benefits and rewards for working to improve physical and mental health. A proprietary gamified interface with a unique digital currency engages employees with a suite of health services, including employee assistance programs, mental health support, access to virtual physicians and more. The platform also offers the opportunity to “top up” traditional group benefits and add more individually selected products, effectively opening a new channel to make incremental insurance sales. 

An example of strategic archetype 2 is a digital insurance broker and robo adviser that offers income continuation to independent contractors and freelancers in case of illness, sick leave, disability or death. The platform gathers a disparate community of individuals (freelancers) and effectively recreates the employee benefits those individuals would have enjoyed were they employed in a more traditional arrangement.  

See also: Selling Where Life Happens

Trend 3: Expanding Critical Illness Coverage

CI provides a great canvas for innovation because insurers can experiment with a wide array of benefit designs, payment types and segment-specific strategies. The possibilities for consumer propositions are almost limitless.  

Medical innovation plays a significant role in CI product development. A greater understanding of illness and disease creates possibilities for insurance coverage, and insurers around the world are taking advantage. Four emerging areas of innovation include dementia benefits, defined disability benefits, precision medicine benefits and pre-early benefits.

Dementia benefits are evolving and taking various forms. For example, riders are expanding cover to include in-home care facility admission and caregiver support. Insurers are also offering benefits that cover services for preventing and detecting milder or earlier cognitive impairment and help senior citizens age in place to reduce the need for expensive nursing home care.

Defined disability benefits, also known as functional impairment benefits, are a hybrid of CI and disability coverage. For example, one company pays a lump sum for a specific defined medical event, based on the diagnosis and its severity, for those who otherwise would not qualify for traditional occupational disability. The tiered benefit covers a range of CI categories, from upper limbs to cardiac and respiratory events. 

Precision medicine benefits provide incremental coverage for higher-cost or specialized medical services for a particular disease. The approach enables insurers to create a comprehensive value proposition around a critical illness in highly competitive markets. As an example, one insurer offers an array of support services to help cancer patients financially, emotionally and physically. 

Finally, pre-early benefits expand traditional CI benefits to less critical but still important early-stage diseases. The expectation is that diagnosing diseases sooner will help the consumer secure treatment earlier to reduce the risk of disease progression to later stages.  

As medical innovation continues to advance, CI innovation must likewise advance to keep pace. 

Conclusion

Thanks to product and distribution expansion, life and health insurers are finding new ways to differentiate their brands. Fueled by innovation in technology, medicine and financial services, these advances will help shape life and health insurance in the years to come.

The post-pandemic years have not been kind to U.S. personal auto insurance underwriters. Drivers' return to the road, high inflation and several catastrophic events compounded by an auto parts shortage contributed to higher-than-expected claim costs. 

In 2022, the 10 largest publicly traded U.S. personal auto insurers with the exception of Progressive all reported combined ratios ranging from 103.8% to 119%. That means for every $100 in premiums, these insurers had to pay out between $103.80 and $119 in claims and expenses. Mutually owned State Farm also reported an auto-underwriting loss of $13.5 billion against $45.7 billion in premiums in 2022.  

To improve auto-insurance underwriting profitability, insurance leaders are turning to tried-and-true methods: raising rates, stricter underwriting requirements and expense management. 

However, auto insurance is a highly elastic good. When prices rise, consumers will start switching in an effort to save. Allstate expects only 85% of its annualized written premium increases to be realized as customers modify policy terms or don't renew. Some auto insurers are also starting to lose market share. In a recent SEC filing, Berkshire Hathaway shared that GEICO's market share has declined from 14.4% in 2021 to 13.9% in 2022. 

Simon-Kucher expects customer churn and switching behaviors in auto insurance to increase sharply in 2023. In a recent Simon-Kucher project, 74% of personal P&C insurance customers said they are comparison shopping more frequently in response to inflation. More than half of these customers said they are likely to switch providers, and nearly 60% of customers said their policies included features they did not need or value.

As auto insurers hunker down to address their profitability challenges, some more aggressive players smell opportunity. These insurers are leveraging advanced customer segmentation, pricing accuracy and opportunistic marketing to grow market share. For example, Progressive is finding ways "to grow as fast as possible while delivering a calendar year 96 combined ratio." 

Underwriting discipline and expense management are important, but insurers must not neglect retention, opportunities to cross-sell and upsell to existing customers and ways to improve conversion. This is the time to play defense and focused offense using precision marketing techniques to protect market share and uncover untapped avenues of growth. 

Advanced segmentation and personalization

Instead of a broad-strokes approach to segmentation, auto insurers' segmentation efforts must be more granular, precise and strategic. Auto insurers must be able to position the right product to the right customer segment at the right time as part of a wider retention, cross-selling and up-selling strategy. 

For example, price-conscious customers can be offered telematics or usage-based insurance, while customers who are buying a home can be offered options to bundle policies in exchange for discounts or rewards. Data-driven approaches coupled with advanced segmentation techniques can uncover unmet customer needs, behaviors patterns and customer lifetime value for product development and new experiences. 

See also: Nonstandard Auto Insurance's Key Role

Feature bloat

Precision marketing techniques can also be used to address feature bloat, a phenomenon where executives include product features or attributes that they assume are valuable to their customers, but that in reality lead to overloaded products. Instead of adding value, these extra 'bells and whistles' cost too much, overdeliver, confuse and overwhelm customers. 

Insurers need to take a closer look at their products and their features to ensure they are aligned to customers' needs. Packing too much or too little into a product means the insurer is either not meeting clients' needs or hitting the appropriate price point. 

To capture customers in the current environment where insurers are increasing rates at a time of sharpening pricing sensitivities, optimized products are critical. Insurers products must have the right market fit, be compelling when compared with competitors' offers and communicate clear value to the target customer segment. This is the key to differentiating what increasingly seems like commoditized products to the consumer.  

Marketing efficiency

Auto insurance has one of the highest customer acquisition costs of any industry. P&C insurance analyst Adam Klauber estimates U.S. auto and home insurance providers spend more than $53 billion annually on commissions, customer-facing expenses and advertising to attract customers.  

To stay on the path to profitability and sustainable growth, auto insurers must improve marketing efficiency. There are customer segments in P&C insurance willing to pay for high-value insurance products, secure more coverage and upgrade to more comprehensive products and services. If insurance providers can identify these customers and find ways to engage them, these can become opportunities for growth. 

Using data-driven and advanced segmentation, auto insurers can also find ways to optimize the customer journey for conversions. For example, some customer segments might appreciate more personalized or human-assisted interactions. At certain junctures of their buying journey, these customers can be directed to an agent or representative.  

The current environment should be viewed as an opportunity for carriers to secure their book, retain their customers and capture new customers who are looking to switch.

While the insurance industry as a whole has made some strides in deploying technology to achieve efficiencies, the area of employee benefits is underserved. Generally, employee benefits remain mired in traditional low- or legacy-tech ways of administering these all-important amenities, hindering the industry’s ability to create much-desired modern solutions and elevate experiences to levels we are all accustomed to across banking, ecommerce, entertainment and more. 

Employee-sponsored benefits such as health insurance and retirement plans  play an essential role in American life, yet they are hard to access and use. Just 9% of employees understand benefits terms like coinsurance; meanwhile, choosing the wrong health plan can be a $2,000 mistake. 

A recent Harris Poll consumer survey of 2,000 employed adults with employer-sponsored insurance benefits reported that nearly half the respondents cited frustration when using their insurance benefits because they are hard to understand. Meanwhile, two in five indicated they have received inaccurate bills, been unable to access care or been harmed to delays because of errors in their insurance coverage.

In an era when consumers expect a seamless experience across the board, insurance carriers must focus on elevating the customer experience to keep pace. This shift is forcing stakeholders to apply more “hands and heartbeats” to achieve that experience – when much of that work should be automated and streamlined, and personal touches could be better applied to functions that truly require and benefit from human intervention and care.

Sources of Resistance

Why is benefits lagging? In a single word: acquiescence.

The status quo is often the sector's biggest hurdle; accommodating a lack of technology and services with workarounds hinders the industry's ability to innovate. Paper-based systems and manual data entry dominate industry workflows, making it very challenging for benefits software, insurance carriers, brokers and employers to keep key employee information in sync.

Other barriers to digital transformation in the benefits industry include:

• Slowness in developing a connected industry mindset; data is typically thought of in silos
• A lack of a single group or person being accountable for improving outcomes
• General lack of awareness that technology serves data but that people should serve customers

Factor in the inherent difficulty of adapting older systems to receive a high volume of data while ensuring the integrity and cleanliness of that data, as well as managing security and privacy concerns, and you’ve got a significant amount of industry inertia to overcome.

See also: Digital Insurance 2.0: Benefits

Embracing a Tech-First Approach in Benefits

The opportunity lies in adopting  a tech-first approach to benefits design and delivery. Legacy manual approaches need to be contrasted with everyday processes like opening a bank account, applying for a mortgage online or moving money to/from a 401(k). There is a need to boost efficiency, replace antiquated processes and upgrade to more modern systems. In 2023, carriers continue to rely on paper, web portal entry, email, phone and electronic data interchange (EDI) for data exchange to support important functions of enrollment and member changes. This is unacceptable. 

Everyone across the industry is being asked to do more with less — while advancing the business. Sometimes, this means using fewer employees or deploying new technology to realize efficiencies. However, technology can be costly, as well. The ideal balance is to identify those areas where technology can be effectively implemented, such as handling the synchronization and validation of data. Doing so frees up “human hands” to focus on activities that create the experiences that drive net promoter scores, boost customer satisfaction and instill brand loyalty. 

Taking a tech-first approach that prioritizes modern data management will boost efficiency and help create enhanced, frictionless benefits experiences. These will include customized benefits options, a streamlined buying process and the deployment of people to the “human side” of the business. With a tech upgrade, the industry can do more with less and ultimately create better outcomes for all.

Customers expect great experiences, yet they’re often getting the opposite. According to Broadridge’s 2023 CX and Communications Consumer Insights report, only 11% of policyholders think their insurer is among the best in providing a good experience when compared with other companies they do business with.

Customer dissatisfaction can directly affect the bottom line. In fact, the majority of surveyed consumers (65%) have cut spending with companies that don’t meet their customer service expectations. What’s even more alarming is that the dissatisfaction trend continues: 69% of consumers indicated that most of the companies they do business with need to improve their customer experience (CX). That’s up from only 35% in 2019. 

There are steps you can take to improve your CX while controlling costs. But before doing so, it’s critical to understand two vital components to enhancing the customer experience: communicating with policyholders how they want, and then leveraging technology to deliver communications how and where they want them.

First and foremost: Keep things clear

Communications play a central role in overall customer experience. For instance, policy documents, premium invoices, claim notifications, policy updates and renewal reminders may collectively represent a policyholder’s most frequent points of interaction with an insurer.

Perhaps most importantly, communication affects a consumer’s perception of a company: About three in five consumers (61%) judge a company’s level of innovation based on the communications they send. Consumer feedback on the clarity of communications across industries indicated that insurers rated poorly, with more than a quarter of policyholders confused by communications from their carriers. 

Considering that more than two-thirds (69%) of consumers look elsewhere for similar products or services after just two to three poor experiences, you must ensure that policyholder communications are clear and have a modern design.

See also: Payoff From Great Customer Experience?

The role that digital can play for policyholders and insurers

Consumer appetite for digital communications has grown, but so have consumer standards. 

Only 41% of policyholders reported receiving paperless insurance communications, but a further 11% would prefer to. Many insurers would prefer that their paperless adoption rates get even higher than that. While some policyholders will always prefer to hold on to paper, we found that 82% of consumers would go paperless if they found the digital experience more engaging.

How can insurance companies provide more value to their policyholders? Eighty percent of consumers want companies to customize their experience based on what the company knows about them. Nearly a quarter would like an interactive summary of important billing or statement information directly within the emails sent to them, instead of being prompted to log in to company websites. 

These are just a few ways you can do more to harness the power of customer data. And, by leveraging technology to provide this level of customization, you can provide policyholders with the value they seek.

Customers want simple interactions

There’s work to be done in making insurance communications more useful. Ninety-two percent of consumers said it was important to have a simple way to interact with companies across all channels – with 57% considering it very important. Yet only 35% of consumers believe the companies they do business with are actually providing a simple way for them to engage across channels.

When asked to indicate what was most important in the print and digital communications they receive from companies, respondents had three simple requests:

• Use plain language
• Summarize important information
• Let customers choose how to receive communications

With these findings in mind, insurers may want to consider: 

• Using simplified language — a sixth-grade reading level is recommended
• Taking a policyholder-first approach to how communications are organized and presented
• Offering a good preference management tool for policyholders to set their communications preferences

In the words of one survey respondent, “Keep it simple, be honest, be informative and tell me the most important things first.”

Keep customer data a secret (but don't hide your security efforts)

Enhanced digital experiences and trust go hand in hand. Privacy and data security are top of mind with consumers, especially when they’re deciding whether they can trust a company. In fact, 42% said they stopped doing business with a company because of a hack that exposed consumer data. 

It’s not surprising that 62% of consumers agree that the use of digital identity security measures — like Face ID and PIN codes sent via email or text — would make them more likely to engage digitally with a company. Another survey respondent said companies should “provide more electronic security” to improve the experience. 

It’s vital for insurers to not only provide adequate data security, but to communicate about those measures to reassure customers. Almost a third of respondents said the most important feedback they’d give to companies is to be more open about how they protect consumer data and privacy. The more you can tout the steps you take to keep customer information safe, the likelier they are to hear you.

Look to the leaders

To get better at communications and CX, look at who’s doing it well. Insurers looking to elevate their CX may want to consider what banks and credit card companies are doing. Specifically, survey respondents said that these industries: 

• Make it easy to navigate account details online (43%)
• Communicate clearly (43%)
• Make it easy to talk to a real person (41%)
• Send notifications when there’s something important to look at (34%)
• Allow customers to select how they want to receive communications (25%)

You don’t have to reinvent how you communicate with your policyholders. Instead, consider how these best practices would fit within your organization. Much, if not all, of the top-scoring traits are replicable across industries. Mutualized solutions can help here: They allow you to free time and resources while providing you with market-leading tools to make your communications ecosystem run more efficiently, leading to the ability to create better experiences.

See also: 'It’s the Customer Experience, Stupid'

Takeaways for insurers looking to elevate their CX

Taking these steps can be a win/win for insurers and policyholders alike. For instance, leveraging technology to streamline processes through automated solutions can make an insurer more efficient, while improving the policyholder’s CX. And the Broadridge survey indicated that insurers don’t have to shoulder the financial burden alone. In fact, 44% of consumers indicated their willingness to spend more to receive a better customer experience and service. 

Carriers can also turn to outside vendors to help create the solutions that both insurers and policyholders need. Outsourcing this function can help them gain economies of scale, workflow efficiencies and cost reductions — while leveraging the latest technologies to enhance CX.

Insurers that take the right steps today to provide a better customer experience will benefit from enhanced policyholder loyalty — and the resultant higher persistency rates, which are key in today’s challenging economic climate.

Deloitte's just-released, annual survey on corporate travel included a startling statistic: Although major companies worldwide expect workers to continue to return to the office, they aren't expecting anything like the old normal. The survey of 334 travel managers and other executives with control over travel budgets predicts that work-from-home will decline sharply from the 3.9 days a week during the pandemic to 2.2 -- but that would still be more than three times the pre-pandemic work-from-home pace of 0.7 day per week.

That number gets to a question we've all been wrestling with since the start of the pandemic: What will the new normal look like at work? 

Much has been written about how the pandemic forced every industry, including insurance, to radically accelerate digitization, and I don't think there's any turning back. Customers appreciate the access to self-service at all hours of the day or night, on weekends as well as weekdays, and they appreciate the efficiency and speed that digital processes can provide. 

But what does that mean for how insurance will be sold? Agents and brokers have turned back all the talk of disintermediation and firmly established their role in the process, but will we now head back to all the face-to-face meetings that were de rigueur in the "pre world," before COVID? 

Snejina Zacharia, founder and CEO of Insurify, thinks not. 

In this month's interview, she argues that agent-customer interactions will increasingly migrate to the phone, supported by a thoroughly digital back end, and that face-to-face is done. She certainly has a bias here: Digitization has been the Insurify playbook since it opened for business in 2016, and its agents all work remotely. But the world will keep moving in Insurify's direction as we all become more digital, not less, so I suggest that it's worth hearing her out.

P.S. Here are the six articles I'd like to highlight this month for agents and brokers:

DON'T SETTLE FOR BEING A TRUSTED ADVISER

You're better offer being a decision coach, helping clients make better choices themselves rather than following a plan you, the adviser, lays out. 

DIGITIZATION AND ENABLEMENT OF AGENTS

Disintermediation didn't happen. Agents won. Still, agents who fail to adapt will have their lunch eaten by agents who do.

THE VALUE OF INDEPENDENT AGENTS

Savvy insurtechs are recognizing that agents and brokers are a dynamic part of the market ecosystem--but there's still considerable room to improve.

HOW TO PREVENT AGENT GAMING

Despite the severity of the problem, agent gaming has been difficult to detect and mitigate. Fortunately, insurers have new technology that can help them.

IS MY ORGANIZATION ACTUALLY INNOVATIVE?

The best place to look for innovation is in the quality of decisions being made. Here are three ways you should evaluate your performance.

INSURTECH: NOT DEAD BUT DIFFERENT

Some insurtechs will struggle, and there will struggle, and there will even be some fatalities, but most are making the necessary adjustments and operating successfully.

ITL:

I’d ultimately like to get your thinking on how digital insurance sales can become and how much face-to-face interaction customers will want. I’m also curious about your thoughts on the role of comparison sites, given your recent acquisition of Compare.com. But I’ll ask you to start us off by telling us a bit about the Insurify journey.

Snejina Zacharia:

Insurify started in 2016, with the mission to demystify insurance in the U.S. and make it super easy for anyone to search, compare and buy insurance in one place. We built the platform with all the intelligence and technology in place to provide the best matching of consumers with carriers based on their risk profiles and appetite and to let customers do online, digitally, what they would do with an agent on the phone.

We are set up as a full-service insurance agency, and our mission is to be the preeminent and most trusted virtual insurance agent in the industry. I really hope that, at some point, we drop the “virtual” part because I believe we are building the future of insurance agencies in America. We are very much an agency at our core. We just happen to be exceptionally data-driven and technology-driven.

ITL:

While lots of people talked about disintermediation in the early days of insurtech, that talk has gone away. How has your thinking evolved about the need for human agents?

Zacharia:

We don't force people into experiences. We enable the types of experience that they prefer. If a customer is interested in doing everything fully digitally, then it's our job to make that experience as quick and easy and intuitive and data-driven as we possibly can. However, I also believe in the power of human agents and of building relationships.  There is a segment of users that will always prefer to have that personal touch with a human agent, so we have a full-service agency. They all work from home, which lets us grow at the fastest rate and look for the best agents with the greatest expertise without the limitations of a specific location.

So, if you ask how I think about the future of agencies, I think that, number one, they're all going to be very digitally savvy. They will all provide tools that allow for users to do a certain level of self-service to the extent that they're comfortable digitally.

Then there will be the hybrid model, where people can do part of the work online, then continue with a personal experience. Or they can just do it all on their phone.

The one piece I am skeptical about concerns face-to-face interaction. Video, yes, but maybe not face-to-face. I think people are very, very busy. They value their time. So, the more we can automate that agent experience, the better for the agent and the better for the user.

What we have focused on is making sure the work of the agents is not order-taking but value creation. We want, whether by using prefilled data or other methods, to make buying a policy take minutes, not a half-hour or an hour on the phone.

ITL:

What is your geographic footprint, and where do you see yourself going from here?

Zacharia:

We are about 150 people. About 40% of us are in Boston. We have a large concentration in Richmond. We have some concentration in Seattle. And we have the Bulgarian hub, as well.

ITL:

I find it interesting that you think face-to-face is maybe never going to be necessary. That certainly is my preference. The more I can do on my own, the better. More generally, what would you describe as your vision for agencies, say, five years out?

Zacharia:

I believe the industry will continue to grow organically, but there will also be a lot of consolidation. Compare is the first company we've acquired, but we are definitely looking at making more acquisitions in the next few years.

For us, our goal is to have all types of insurance policies in the U.S. that could be served and purchased through Insurify. Today, we are mostly P&C. We also have a life insurance comparison product, which is doing great, but our vision is really to be in all personal lines and including some small business commercial in five years.

We will be looking also to potentially evaluate internationalization opportunities. We are super excited to bring on the Compare team, which is a pioneer in comparison shopping, and also Admiral as a board member. Admiral has extensive experience building out international businesses like Insurify across different countries.

With optimization of AI and generative AI, I think there will be more tools available to companies like Insurify that are a little bit more technologically advanced, to optimize the user experience for purchasing across a plethora of different insurance products.

ITL:

Thanks, Snejina.

About Snejina Zacharia

Founder and CEO of Insurify Snejina Zacharia has over 18 years of experience in entrepreneurship with consumer internet and enterprise software companies. Previously, Snejina was at Gartner where she established and grew three lines of business, each with millions of dollars of annual revenue across the USA and Europe, the Middle East, and Africa. Before that, Snejina led Sales and Marketing at different technology start ups from mobile web messaging to CRM systems in the financial industry. Snejina holds an MBA from MIT Sloan School of Management.

Introduction: Transforming insurance sales

Transformation of sales in this digital era has come slower in the insurance industry than in other industries. Significant financial benefits brought by digital transformation remains to be seen. Online to Offline (“O2O”) distribution strategy enables insurance companies to transform traditional agency, and massively improves the agent’s productivity.

O2O here means leads generated online are assigned to insurance agents, who in turn close the sales over offline meetings. This distribution method combines the best of both world - data analytics in the online world and human touch in the offline world to build the trust which is most needed for life insurance products.

The success of the O2O distribution strategy has 4 key factors:

• A diversified lead partner ecosystem which is a source of quality leads.
• A lead management platform which funnels the leads to the insurance agents.
• Data insights for better customer experience and maximize conversions.
• A specialised O2O agency to nurture and close the leads.

There are many use cases of this model especially with different lead sourcing partner. One interesting use case is with virtual bank/digital bank. There are more virtual banks/digital banks around the world which have no physical presence, and only present in the digital world. The O2O model fits well and is a transformed way of bancassurance. Another use case is with insurtech and insurance companies can benefit from their capability to penetrate specific segment and to innovate on the customer journey, servicing and products. I believe the O2O distribution strategy will become another mainstream distribution channel in the near future.

O2O Four Major Pillars

1. O2O sourcing ecosystem for effective lead generation

Lead sourcing can come from many different sources: social media platform, different loyalty platform, online shops, forum, inforce customers from other lines of business (e.g. corporate business, general insurance business), companies from other industry. The best way is to develop a lead partner ecosystem, where it includes companies from different industries (not just those related to the financial industry, but also some retail brands). It can be win-win as the insurance offer can either be drawing more traffic to the company or the gift is product / voucher from that company. Especially as an insurance company, we have both life and general insurance to offer, and general insurance can be more easily be embedded into customer journey of our partner, while life insurance has more budget to support the campaign. On this lead partner ecosystem, we can analyze different customer footprints not just on financial aspects, but also lifestyles, family, personal traits, etc. All these information is valuable inputs into the lead generation platform which can ultimately improve the conversion ratio.

Next, the lead quantity and lead quality are almost like an art. How to strike a balance between lead quantity and lead quality can only be achieved through multiple tests. End-to-end conversion tracking and reasons of success and failure are important to evaluate for each campaign. All such analysis can drive to improvements in lead generation. For different customer segments and different types of insurance products, we have to do a lot of A/B testings to see which one works better. What is A/B testing? For example, we test two different advertisement messages on the same customer segment, or we test same advertisement message on different customer segments. Different customer segments can react very differently to different messages. We have a savings product, and our key message is breakeven as early as Year 6, and your policy value doubles every 10 years. We found the advertisement is not very effective, so we did one A/B testing, one message is on the product key edge on breakeven year and its return, and the other message is plan your retirement, with a visual with one man eating burger and one man drinking wines. The new advertisement on retirement message works much better. Of course, it is not true for every customer segment.

2. O2O lead management platform from lead to sales

Golden rule in contacting your customers is to contact him/her within the first few minutes he/she shows the interests. As a result, a lead management platform is almost essential for the O2O model. Leads with clear identification of the lead source, campaign details, customer digital footprint and customer contact information are instantly feed to different agents to follow up. Each agent is equipped with an app so they are instantly notified upon assignment. Any follow up action or notes by the agents can also be registered for each lead. Call reminders will automatically setup in case the agent has not called the customer.

One point to note on the platform design is to have the least manual tracking as possible by the agent. Otherwise, you will face the problems of either not enough data points, or fake data points. Try to automate the tracking as much as possible. In our case, our lead management system is connected to sales quotation system, premium payment gateway, and core administration system, hence, when the agents act on other platform, the activity will trigger lead status changes on the lead management system. Apart from the objective indicator to estimate the actual pipleines, we are also working on adding subjective indicator for the agents to rate each lead. All the high potential leads will then be closely followed up by the sales manager

With all the different agent activities collected on the platform, dashboard of conversions by campaigns, by agents, by customer segments, by products, by lead source, etc can be prepared.

3. O2O data insights for best customer experience and maximize conversion

With a diversed lead partner ecosystem and a lead management platform, you can gather a lot of data. All such data, such as campaign, customer, agent, product can help us to further optimize the results. Testings in changes in the assignment rule is much harder to achieve as there are so many factors affecting the conversion. Especially this time, it involves two humans in the process – the customer and the agent. It is expected to observe a longer time to really understand what assignment rule can drive a higher conversion. It will be easier to start with a general industry rule engine with Artificial Intelligence, and throughout learning of different agent behavior, slowly fine tune the rule engine to test if that improves the conversion results. This engine helps on the agent assignment, appointment timeslot setting (the best time to connect based on the customer behavior), product that may be of interest to different customer segments, scipts that can more easily resonance with the customer, etc. With these insights, when the agent calls the customer, he/she will be more prepared and also with a script which is more tailored to the customer (this can be based on customer’s digital footprints or predicted persona based on the Artificial Intelligence model). From the customer perspective, there is less drop off during the customer journey as the script will make the customer feeling more understood and as a result, easier to build the trust. All these not just result in higher conversion ratio, but also improve the customer experience on the first contact with our agents.

4. O2O agency management to optimize lead nurturing and conversion

Our agency model is a specialized one to only work on O2O leads assigned by the Company to the agents. The compensation model includes fixed monthly salary with variable allowances. We also set high standards when recruiting agents. They must be experienced with good productivity in the past. We have to ensure our leads are passed to experienced agents who can convert them. Then these agents are trained on the O2O model starting with first phone call with a customer. So far, most of our insurance agents are earning much more than they were in their previous insurance companies due to increased productivity. Our average productivity by agent is also a lot higher than the average in the industry.

When a lead is passed to an agent, the objective of the first call is to build trust with the customer and fact-find to understand customer needs. Usually, this nurturing time will vary tremendously by lead source and the lead management platform is a tool to ensure discipline in agency to keep nurturing potential leads.

One should not just rely solely on the agent to nurture the leads. Usually the agent will be tempted to only focus on leads that are ready-buyer and can be closed within short period of time. Lower quality leads will easily be put away with low attention. It is not that easy to have a constant flow of ready-buyer leads. Hence, how to ensure agent is giving enough attention to those lower quality leads, which require them to constantly invest time for nurturing such leads, becomes essential. The lead management system needs to be equipped with management capability such that agent behaviour can be closely monitored. Apart from monitoring, the Company can also help the agents to nurture the leads by different ways, for example: insurance education email, product promotions offer, offline events to ensure the customers remain engaged. Since we have also gathered different customer insights on our data collection, different nurturing tactics should be targeted to different customer segments.

Next is to sell an insurance policy. With all the previous efforts, conversion rates can be improved, and the case size of the policy can be maximized. With proper fact finding, the agent may be able to close more than 1 policy – either different products to serve the customer different insurance needs, or products to serve not just the customer needs, but also his family members’ needs. Some other steps which are important in this phase is referral. With the trust built and a good product, customer will be willing to introduce to their friends. Word of mouth is crucial and the conversion rate on such referees are high.

Any drop off along the lead progressing will be analysed to understand the pain points and look for improvements. Drop off reasons should be clearly marked by the agents, and customer survey should be considered to get customer feedbacks at different touchpoints.

O2O Three Key Enablers

1. Consistency in message across all customer touchpoints

There must be consistent message when the lead customer is moved from online to offline. Otherwise, it has no difference from a cold call. That’s why customer digital footpints before the lead is assigned to an agent is crucial information, and suggested scripts from the lead management platform tailored to the specific scenario is also helpful for a smooth transition from online to offline. For example, the first call scripts to a lead coming from a product push message, or a more lifestyle message related to retirement, or purely a bargain offer can differ a lot. As mentioned before, there will also be lead nurturing by the Company. Again, the message, tone and style should be consistent. All these subsequent touchpoints will create a consistent impression and help the agents in closing the sales.

2. Personalised and timely customer offer

Offering the right product at the right time to the right customer can be done through data analysis. Sometimes, just hearing from our customers is not enough. No one customer will tell you they need an iPhone until iPhone is developed and sold well. We have to study customer behaviour to understand their motives behind and then we can start the prediction. Lead generation is the same, blasting to everyone without any targeting is not going to be effective. We have tested premium voucher as one of the customer offers. Initially, we use this as one of the hook for lead generation, however, conversion is close to zero. Later, we tried at touchpoints which are later at the lead progressing journey, and the conversion is significantly improved.

3. Embedded Insurance

Embedded insurance is an excellent way for lead generations. Through embedded simple general insurance products along different user journey of our lead partner, we naturally gather customers of similar attributes or with common topics. The seamless experience brought by the embedded insurance can also help to strengthen the brand image of the insurer. The general insurance products help insurer to increase the touchpoints with the customers, which in turn increase the opportunities of further upsell of higher revenue life insurance products by the insurance agents under the O2O model.

With the different data insights collected, this can drive product innovation in the company, and the embedded insurance is the best way to get non-financial industries to be interested in collaborations with an insurance company. The data insights collected by an insurance company can also be beneficial for product development in those non-financial companies too.

Case Study

1. Virtual Banks

One of the use cases for the O2O distribution model is bancassurance with virtual banks.

Normally, in traditional banks, they have physical branches, and many customers walk into these physical branches for different bank facilities and there are sales staff in the bank branches to sell investment and insurance products. As the bank sales staff has all the customers’ wealth information, banking habits, etc, introducing the right product to the customer during the bank branch visit is one of the key success factors. Besides, customer’s trust in banks is also key for the success in bancassurance. With all the customer data, banks can also have detailed customer segmentation and conduct outbound calls to high potential customers.

The picture becomes very different when it comes to virtual banks. In Hong Kong, virtual banks cannot have physical branches, and as they are very new (the longest one has only passed its 2nd anniversary recently), they only have a small share of wallet for the deposits or loan products. Their customer view is not conclusive for the customer wealth or banking habits. Hence, bancassurance with virtual banks can no longer follow the traditional way. Either go fully digital and sell some simple insurance products or go O2O. When go O2O, customer analytics on the virtual bank customers become a combination of those under traditional banks, and social media platform. Financial data of the customer is not comprehensive enough to draw a conclusion, so it has to be combined with different behaviour statistics or to attract customers of different personas by different campaigns. For example, customer purchase behaviour, app browsing pattern, take-up of other bank products including loans or time deposits, etc. These customers can then be passed to the O2O funnel and be followed up by insurance agents. As both the virtual bank and insurance company are in the financial services industry, the digital engagement between the two companies can be even more integrated. The O2O process should not just end there when the online lead from a virtual bank is passed to an insurance agents. There should be constant re-engagement by the virtual bank at different stages of the lead progressing. For example, when the face-to-face meeting appointment is arranged, the appointment details and agent profile can be shown on the virtual bank app and appointment reminders can be pushed to customer. When the agent is not able to close the case despite multiple attempts, share of voice of relevant insurance advertisements / push notifications / relevant promotions can be increased for that particular customer, and a relevant customer offer can be pushed to him/her to create some urgency. The O2O model will be a more digitally integrated one.

The advantages of working with a virtual bank instead of other lead source partners are: 1. Inherit the trusts of clients on virtual bank to insurance sales; 2. Combine related bank products with similar insurance product (e.g. savings plan with time deposits, tax benefit annuity plans with tax loan).

There will also be new conflicts to manage. In traditional bancassurance, the sales staff are the bank employees and under direct control and management by the banks. So usually, the stress point is at the insurance product and product promotions. However, for the O2O model with virtual banks, the sales staff are the insurance agents in the insurance companies. The stress point is at the agent quality, agent conversion and agent management. Hence, a lead management platform with data analysis and pipeline & activity management capability is important. A long-term win-win strategic partnership with transparency between the two companies is key to make this work.

2. Insurtech

The other use case is partnership with Insurtech. By partnering with them, it helps insurance companies to excel in product innovations and customer experiences. We choose to start the journey in general insurance as the regulation is less heavy and there are more rooms to innovate. Each time, we identify a specific segment, create a community and then understand their concerned risks, and design a product to address that risk. For example, we identify runners as a group of customers and then we design a microinsurance for them that talk the same language, where the premium unit is per KM.

General insurance also has the benefits of increased touchpoints, especially at time of claims. Claims moment is one of the key moments that affect future life upsell. By partnering with Insurtech, we can also provide a more streamlined claim process. The whole experience starting from insurance purchase, activiating on-the-go insurance coverage with different gamifications, and claims experience give customers a fresh image of insurance.

The data that we collect through providing coverage for microinsurance (e.g. sports habits, health data) provides additional customer insights for any personalized insurance offering or simplified underwriting offer. We can then combine the right message at the right time to selected customers in the community. As customers in each community share common interests, it is easier for promotion message to talk the same language and pitch at the angles that suit these customers.

Conclusions

Traditionally, insurance sales have been dominated by agency, bancassurance and brokers. Digital channel has recently started but was still small in terms of market share. The Online to Offline distribution strategy has combined the edges of digital channel and agency and the use cases of this model are immense across retail shops, online forums, insurtechs and virtual banks. O2O model is an effective way that leverage the data insights to create new customer experience that results in high customer satisfaction and insurance sales.

This article was originally published by the International Insurance Society and RGA 

Diversity, equity and inclusion (DEI) has been a point of emphasis in the corporate world, including insurance, for years now, but we still have a very long way to go. As a for-instance: Just six of the CEOs of Fortune 500 companies in 2022 were Black. Only 53 were women -- and that's actually a record high, marking the first time women have occupied more than 10% of the top spots. To understand more about how far we've come and how far we have to go, ITL Editor-in-Chief Paul Carroll posed some questions to Amy Cole-Smith, Director of Diversity at The Institutes.

ITL: 

DEI, at least in my mind, traces its roots at least back to the 1960s but has been picking up steam over the past decade-plus in the business world as companies hold themselves more accountable and report on their progress. How are we doing? How much progress has been made? 

Amy Cole-Smith:

I believe that the early stages of DEI can be traced back a little bit further, to the 1940s, with President Roosevelt’s executive order that banned discrimination based on race, color and national origin within the federal government. With that being said, I do believe that a lot of progress has been made, but we could still be a bit further along than we currently are. In 2023, it is strange to me that we are still experiencing “firsts” such as the first woman to achieve a goal or the first African American to become a CEO of a company that has been around for 100 years.

ITL:

How much further do you think we have to go, and can we get there in the next decade or so? 

Cole-Smith:

We do have quite a ways to go, but I think that the situation can only get better in time. It's refreshing to see potential and current employees, as well as younger generations, hold a lot of these businesses accountable when they claim that DEI is a part of their core and current strategy. Hopefully, this accountability can bring about major change to current policies and practices within the next decade or so.

ITL:

How is the insurance world doing, in comparison with the rest of the corporate world? 

Cole-Smith:

I’ve only been in the insurance world for 1 1/2 years, but from what I have seen so far, the industry seems to really see the importance of DEI. The industry has acknowledged the huge talent gap, and to see the industry working to get more diverse talent into the seats is refreshing. While getting the talent in the seats is important, we must also remember the importance of representation at the top. It's always good to see someone who looks like you at the top, as I believe that aids in retention; specifically with diverse talent.

ITL:

As someone who's covered business for a long time and seen how slim a difference there can be between success and failure for a product or service, I've thought it obvious that there are great benefits to be had from introducing a wide variety of perspectives into decision making. But I wonder if you could offer a few examples from your experience that would illustrate the benefits. 

Cole-Smith:

I believe that having a diverse perspective has so many benefits. It allows one to think about matters from the eyes and experiences of someone else. One example that comes to mind was at a past position where my team and I were deciding on colors for a new logo. Once we finalized our decision, we were all set to go with our design, and our internal/external stakeholders were onboard. Then a colleague, who wasn’t on the design team, pulled me aside and suggested that we do a test run with a group who were colorblind. I honestly would have never thought of the idea had she not said anything. Due to her efforts, we ended up changing the color scheme for the logos so that it would be more colorblind-friendly.

ITL:

What a great example.

Thanks, Amy.