Tag Archives: Amazon Prime

How Basis for Buying Decisions Is Changing

Building a business around speed and convenience is nothing new. Fast food drive-thrus, cell phones and FedEx overnight delivery services were just some of the predecessors to today’s Ubers, apps and same-day Amazon orders. But in most of these cases, purchase decisions were based upon simple factors — “I’m hungry,” or “We need delivery of a legal document,” or “Of course it would be nice to be able to make a call from my car.”

There were other services for which people understood that immediacy wasn’t an option. Many financial decisions took time. If you wanted to earn a little extra interest by using a certificate of deposit instead of savings, you would have to wait months or years for maturity. Securing life insurance was a multi-week (sometimes multi-month) underwriting process. Applying for a home loan with multiple credit and background checks took time. For the most part, people accepted these elongated processes and delays with resigned and good-natured patience. This was life. Important decisions required time, not only in the preparation, but also in the education and execution. Two hours with a life insurance agent would allow you to learn about all of the products available and understand their complexity, and it would help the agent to fit products to your needs. You valued the time spent learning, understanding and choosing based on the trusted relationship with your agent.

The convergence of generational shifts and technological advancement created a new mindset that rewrote expectations and priorities for many. Patience is no longer always considered a virtue. Insurance relationships are no longer always valued. Time-crunched people seek time-saving services. Value is seen in immediacy, uniqueness and ease.

See also: Innovation: a Need for ‘Patient Urgency’  

Enter the new generation of insurance companies redefining the insurance engagement. Lemonade, TROV, Slice, Haven Life and others who are redefining speed and value to a new generation of buyers … are placing traditional, existing insurers on notice.  From purchasing a policy in less than 10 minutes to paying a claim in less than three seconds … speed and simplicity are the new competitive levers.

Out of necessity, this has changed an insurer’s view of competition. Insurers used to know their competitors. They understood their distinctive value propositions. They debated on what were the real product differentiators. Insurers understood the reach of their agents, their geographic limitations and the customer and agent loyalty they could count on because of their excellent service.

While all of these factors still guide insurance operations, the competitive landscape has shifted to different factors critical to acquiring and retaining customers. Insurers are feebly groping for just a tiny bit of space in consumer minds —enough to plant the seed of need and just a little more to water the plant into engagement and completing a transaction — because today’s consumer isn’t going to listen well enough to grasp distinctive details. He or she is looking for an easy and quick fit.

A 2015 study of Canadian consumers estimated that the average attention span had dropped to 8 seconds from 12 seconds in 2000, driven at least in part by consumers’ constant connections through digital devices.

Need. Purchase. Done. Happy.

A 2012 Pew survey of technology experts predicted what is now coming true, “the impact of networked living on today’s young will drive them to thirst for instant gratification, settle for quick choices and lack patience….trends are leading to a future in which most people are shallow consumers of information.”

Only five years later, insurers are feeling the impact.

A key reason many of the new, innovative companies are appealing to consumers and small and medium-sized businesses (SMBs) is because they simplify and remove some of the cognitive effort required to make decisions about insurance. In his book, Thinking, Fast and Slow, the Nobel Prize-winning behavioral economist Daniel Kahneman described human decision making and thinking as a two-part system. Greatly simplified, System 1 thinking produces quick (i.e. instantaneous and sub-conscious) reflexive, automatic decisions based on instinct and past experiences. These are “gut” reactions. System 2 thinking is slow, deliberate, reason-based and requires cognitive effort.

In general, most of the decisions we make each day are through System 1, which can be both good and bad; good because it increases the speed and efficiency of decision making, and because in most instances the outcomes are acceptable. However, not all outcomes are good, and many could have been improved had System 2 thinking been engaged. The problem with System 2 is that it takes effort, and humans naturally try to minimize effort.

See also: Insurtech: Unstoppable Momentum  

So, a traditionally complex industry is intersecting with a cognitive culture that is mentally trying to simplify, reduce effort and be more intuitive. This has consequences for decisions throughout the customer’s journey with an insurance company. Good decisions about complex issues like insurance should be based on System 2 thinking. However, during the research and buying processes, the cognitive effort to do so can lead many people to choose other paths like seeking shortcuts to in-depth research and analysis or delaying a decision altogether.

In a recent report, Future Trends 2017: The Shift Gains Momentum, Majesco examined how impatience is driving a shift in behavior that is causing insurers to look at the anatomy of decisions. What behaviors are relevant to purchase? To renewals? To service? How can insurers still provide risk protection to individuals who won’t take the time to learn about complex products? We’ve drawn some of these insights out of the report for consideration here.

For one thing, insurers clearly recognize that the trends affecting them are far broader and bigger than the insurance industry. Businesses and startups across all industries are capitalizing on the lucrative opportunity afforded by meeting the ever-increasing demands for speed and simplicity made possible by technology and re-imagined business processes. Amazon Prime, Netflix, Spotify, Uber/Lyft, ApplePay/Samsung Pay, Rocket Mortgage (Quicken Loans), Twitter, Instagram and other technology-based businesses represent contemporary offerings that have simplified the customer journey.

Retailers such as Walmart, Best Buy, Staples, Amazon and even eBay are testing same-day delivery for items ordered online. Simplifying a customer’s entire journey with a company by making it “easy to do business with” is more critical than ever for insurers.

What is the good news in the world of impatience? Insurers are quickly finding ways to counter the disparity between the need for speed and the need for good decisions. They are also using a bit of psychology to positively influence decisions, and they are buying back some brain space with techniques that both inform and engage.

In Part 2 of this series, we will look at these techniques as well as product adaptation, framework preparation and planning for transformation that will meet the demand for quick decisions. For more in-depth information on behavioral insurance impact, download the Future Trends 2017 report today.

On-Demand Economy Is Just Starting

Fifteen years ago, the idea of having access to any bit of information you could possibly want at your fingertips was outrageous. In 2001, you could get access to the Internet from your phone, but the experience would be slooooow, and it might cost you hundreds of dollars. Dial-up Internet from desktop computers – remember them? – was still very much a thing. Now, people carry smartphones that give them instant access to just about anyone, to every bit of news and to almost all the knowledge in recorded history.

People use those devices mostly to watch videos of singing goats and people failing at dunking a basketball, but that’s a different story.

The point is that technology, such as smartphones and smart watches, has created an on-demand world where gratification needs to be instant. When someone decides he wants something, he doesn’t want it in two hours. He doesn’t want it in 20 minutes. He wants it now. And, he wants it at the push of a button.

As the trajectory of the last 15 years shows, the trend toward on-demand will only continue, perhaps even accelerate.

The main driver, as usual, is good, old Moore’s Law, which has seen the computing power of a chip double every year and a half to two years since the 1960s at no increase in cost. Moore’s Law is why a gigabyte of memory, which cost $300,000 in the mid-1980s, today costs less than a penny, and why, despite some technology headwinds for Moore’s Law, we’ll have devices hundreds of times as powerful as today’s before kids born this year enter high school.

Other “laws,” such as Metcalfe’s, continue to drive the value of networks at an exponential rate. So-called “network effects” are why millennials rarely have their phones more than a foot away and why there is so much effort to make devices even more accessible – in front of your eyes, a la the failed-but-not-forever-dead Google Glass, or on your wrist as a “watch.” Nicholas Negroponte, the founder of the MIT Media Lab, has argued for years that we’ll eventually wind up with cellphones surgically implanted behind our jaws, where they will have easy access to our vocal cords and our ears.

But Moore’s Law and Metcalfe’s and the others that have driven the unbelievable progress in computing are just the start. Now, three more factors are kicking in, increasing the pace toward the on-demand world. First, sensors and cameras are wiring more and more of the world every day. Second, people are coming up with new business models that build on these new capabilities in surprising and powerful ways. Third, the effects will spread to what is sometimes referred to as “the next billion” (and the billion after that). Those of us in the developed world won’t have all the fun; the rest of the world will join in.

Sensors and Cameras

Fitbit et al. track every step you take and every calorie you burn, and they’re just the beginning. People have begun talking about the “Internet in Me.” The idea is that you might ingest some small sensor that will report from inside your blood stream about blood pressure, blood sugar, etc. A wireless signal – powered by the abundant electricity inside us – would send the information to your phone or watch, which would relay any necessary information to a doctor or some sort of healthcare provider.

Drones are everywhere. They can check crops, monitor disasters or do whatever. In fact, woe to the next generation of teenagers – parents can now just keep a drone in the home and have it fly around from time to time to see if Junior is having a party while they’re away.

Our mobile phones constantly provide information on traffic flow, based simply on how fast they’re moving in our cars. (When is the last time you saw a traffic copter, let alone a thin rubber hose across a road that tripped a counter every time a car ran over it?) Waze has layered crowdsourcing on top of the data from mobile phones, encouraging people to report accidents and other delays, to fine-tune maps and so forth. Nauto, a start-up, is trying to add another layer by getting fleet operators—and, eventually, individual drivers—to put cameras in vehicles (one looking at the road, one looking at the driver) with the initial goal to improve safety. If enough of Nauto’s cameras are on the road, they will provide a real-time look at the world. Want a parking spot right now? Nauto can tell you about the one that opened up 30 seconds ago a block away.

Google is gathering information in real time about diseases like the flu – it can report when and where a lot of people start searching for information about certain symptoms. Even our thoughts and emotions are getting wired. Historically, in presidential elections, people conducted the occasional opinion poll, so you’d have a sense of the result of the debate a week or so later. Now, people monitor Twitter streams and Google searches in real time to assess who won and who lost. Those feelings then get aggregated in prediction markets that are far more accurate than political observers ever were. Of course, a lot of effort gets put into figuring out presidential elections because of the stakes involved, but this kind of wiring and immediate response will spread into other areas, as well.

The physical world is being folded into the digital one through hacks such as QR codes, which let magazine readers scan them to figure out where they can purchase an outfit or whatever else is in an image. Amazon’s voice-activated Alexa sits in the middle of a room and allows people to buy something through Amazon right when they think of it, even if they don’t have their phone near them.

Our lives divide into two parts these days: Those that are wired and those that will be wired. 

New Business Models

Just Google “the Uber of,” and you’ll see how much a single inventive business model can change things. You’ll be prompted with companies offering the Uber of trucking, dog walking, laundry, snowplows, tennis partners dentistry and much more. There is a powerful example in the insurance industry: WeGoLook, which is being called the “Uber of claims handling.” If a carrier needs a picture of a car, it can send someone out from the office, or it can draw on the tens of thousands of freelancers affiliated with WeGoLook and have one of them take the necessary pictures and gather the information. Especially in rural areas, it can be a lot cheaper to have a local person gather the information than to send someone out from a regional office. And, through the wonders of information technology, WeGoLook can be so thoroughly integrated into a carrier’s system that the person asking for the photos, etc. doesn’t need to even think about whether the request is being fed to an internal person or to WeGoLook.

Even without totally new business models, tweaks are accelerating the pace of the economy. Seamless, the on-demand food delivery service, has shaken things up by making it much easier for customers to order food for takeout or delivery. Venmo has become popular among millennials by greatly simplifying the process of sharing costs and, in general, making small payments to each other.

Amazon went from “delivery some time” to mostly two-day delivery, via Prime. Now it is working hard to get to same-day delivery and is even experimenting with drones that could deliver within perhaps 20 minutes.

These business model changes will keep unfolding, too, in many cases like a slow-motion train wreck. You can already see some of the ways that 3D printing will step up the pace – you just click on the image of a hairbrush you want and have it start printing in your office immediately. Or look at the news business. Remember weekly news magazines like Time, Newsweek and BusinessWeek? Not only have they gone away but even daily publications like the Wall Street Journal have had to switch to instantaneous publication online – no more holding the big stories for the print edition the next morning. Those of us of a certain age remember what a big deal it was when Monday Night Football showed highlights from the day before. Now, we don’t even have to wait for Sports Center at the end of a game. We can just call up a highlight on our phones. If you look at the changes going on at CNN, you can see that its mission has changed, because there is a new form of 24-hour news network: It’s called the Internet, and it’s “on-demand” — no need to keep Wolf Blitzer droning on in the background.

The Next Billion

As more and more people from countries such as China and India and places in Africa enter the middle class, they will get access to all the technologies that drive the on-demand economy in the rest of the world. In some cases, they will even leapfrog us. In Kenya, for instance, growth in the traditional sort of banking is stunted even as the economy grows, because people use their mobile phones to exchange money. Who wants to go to a bank and wait for a teller?

And these changes in technology, business models and demographics are just the things we know about. You can be quite sure that lots of clever people are already at work on other ways that will speed the move toward the high-speed economy.

Think of the shift in the economy as the move from the demand curve to the on-demand curve.

Will Insurers Ever Learn From Amazon?

You may (or may not) remember that when Amazon.com began in the late 1990s, the single focus of the company was selling books online. One product category, one type of manufacturer, one market focus — people who buy books. At the time, virtually everyone in the publishing industry scoffed at the idea that anyone would want to buy a book they couldn’t first touch. Today, Amazon.com sells all types of products from all types of manufacturers to all types of individuals and businesses every day of the year. No one is scoffing any more — except perhaps the insurance industry.

Just like the publishing industry two decades ago, the insurance industry in facing a once-in-a-generation digital disruption and transformation, and I’m not sure the industry knows it. Let’s look at the distribution of insurance through the lens of an Amazon.com-like buying experience.

Most insurers and distributors automatically start with the typical objections: “Insurance is complex,” they say; or, “What about the regulatory restrictions?”; or, “My agents have to explain the product benefits to the customer.” The knee-jerk reactions make sense in an industry that is mostly agent-centric and that seemingly treats customers with at least some contempt.

We have, after all, built rules around every aspect of insurance: who can buy, what they can buy, when and how they can buy, who they are, where they are located, what they want to insure, how much insurance they need, how much it costs. There are licensing and appointment rules, compliance and regulatory issues, insurance company underwriting requirements, rating rules, policy issue guidelines, premium remittance standards and distributor channel conflict rules, and these may all be different depending on the kind of product – life, accident and health, property and casualty, individual, group, association, employer and so forth. While many of these rules make sense, many others are simply vestiges of “the way things have always been done.” That is a problem for our industry.

The reality is that a consumer doesn’t care about most of the nitty-gritty, inside baseball, that affects all of the above. The consumer cares about being in control of the insurance purchase experience like he is in control of every other shopping experience. That’s not to say the consumer wants to go it alone without an agent necessarily. But it does mean the consumer wants to be able to make that choice — and, today, she can’t. Increasingly, consumers are being schooled on how to buy everything through the convenience of a digital market; why not all of their insurance?

It won’t be long before insurance consumers will expect to access products from multiple carriers, shop, compare, buy their policy with the credit card they pull from their wallet and have their policies, ID cards, welcome letters, privacy notices, etc. instantly delivered to their own online account (not through a carrier). How about the convenience of going to a digital marketplace that remembers each consumer for subsequent transactions? Maybe like Amazon Prime?

I’ve always wondered what the executives at Barnes & Noble, Borders, Simon & Schuster, HarperCollins and Penguin (not to mention Circuit City and J.C. Penney and Sears) were thinking back in the 1990s as Amazon.com started to gain traction. I wonder the same thing now about some insurance executives.

Savvy insurers and distributors will meet consumers where they want to be met and transact business in the digital marketplace. Or they won’t. But if the industry doesn’t go there quickly, someone else will – of that, I’m sure.

Keen Insights on Customer Experience

The need to improve customers’ experiences in interacting with insurers strikes me as so acute that I’m going to take a shot at the issue here, even though we’ve been hitting it hard in a series of articles from Capgemini and Salesforce over the past month. (The articles are here, here, here and here, and a related white paper is here.)

I want to share what I found to be some keen insights from a webinar I hosted last week with executives from the two companies and with Donna Peeples, a member of our advisory board who was the chief customer experience officer at AIG and who is currently the chief engagement officer at Motivated, a consultancy she founded to help improve experiences.

The basis argument goes like this: Customer ratings of their dealings with insurers are bad and getting worse, putting hundreds of billions of dollars of premiums at risk. Insurers need to solve the problems and even find ways to start delighting customers. Technology must play a huge role.

But a lot lies behind that straightforward argument, and a lot of art, as well as science, needs to be applied to the problem. Thus the insights from the webinar, whose panelists, in addition to Peeples, were Nigel Walsh, vice president, insurance, at CapGemini, and Jeffery To, senior director, insurance, at Salesforce.

The insights are too long to fit on bumper stickers but are still plenty pithy and deserve careful thought.

The Problem

Peeples:

“Let’s face facts. Who really gets excited about buying insurance? It’s just not that much fun.”

“We think of claims as our product, when in actuality peace of mind is really our product.”

To: 

“There’s $400 billion in premiums across P&C and life that is at stake. That’s because 70% of policyholders are making renewal decisions in the next 12 months.”

“You lose, not just the customer for that one policy, but you lose the lifetime value of that customer.… The second thing that insurers will suffer from when a customer leaves is brand erosion, because in this day and age, with social media and mobile and so forth, bad news travels fast.”

Walsh:

“Insurers get compared to every other retail product or retail approach that consumers make. More often than not, of course, those are retail purchases that you make. They’re joyful, they’re delightful, they’re exciting.”

What Customers Want

Walsh:

“GAFA — or Google, Amazon, Facebook, Apple: If I could describe the ideal experience every one of us wants, we almost want data like Google have it, supply chain like Amazon have it, a community like Facebook have and a brand like Apple….This whole concept of GAFA to me gives you the ideal framework for what a great experience would look like.”

The Key Words to Focus On 

Walsh:

Convenience: “Let me pick on Amazon and Amazon Prime, specifically. I’m still in awe that someone turns up on Sunday morning, first thing, with my package I ordered the day before, and it’s just there…. The speed at which they operate and are able to fulfill those things, we need to apply that to a claims scenario or a mid-term adjustment.”

Relevance: “We need to be relevant to customers time and time again, as opposed to approaches that we do once a year or at certain points in the year….Day in, day out. ADT and Nest is an example about how you become relevant to your customer by doing more than just insurance.”

To:

Seamlessness: “Customers are expecting the Apple-like experience….You want to provide that effortless experience to policyholders across all phases in their journey.”

Stickiness: “If you can provide agents and brokers with the latest product updates, support and expertise with the same ease as in a community like Facebook, you’re creating loyalty and stickiness.”

Integrated: “Insurers have grown through acquisitions….I’ve worked with insurers who’ve got hundreds of different legacy systems, back-office claims, policy billing systems that they have to deal with, and you can’t achieve a true single view of a customer without integrating all of these various pieces.”

The Solution 

Peeples:  

“Always start with the people. We have to stop thinking about sorting data, and we have to start thinking about beating hearts.”

“We all talk about busting silos, but silos are like cockroaches. They’re going to outlive us all.”

“How do you think about those verticals where we all take such good care of the customer and say we own them, when in fact we’re all just caregivers for a certain amount of time along that customer’s journey? The elegance, or lack thereof, of those hand-offs is where I would also focus.”

To:

“If I’m a service agent or a sales agent, regardless of what device I’m using, whether it’s a desktop or a mobile device, I want a single view of that policyholder that pulls together things like claims history, policy changes, interaction history, and add all of that in addition to policyholder profile information…. If I’m a life provider, it’s important for me to know who the spouse and the children are because they could be potential dependents or beneficiaries. Tying all these pieces together requires more than just a unified front-end user experience. You need to actually unify the underlying pieces.”

Walsh:

“[The three most important areas for focus are] connecting elegantly, engaging regularly and seeing completely.”

“Engaging regularly is actually a tough challenge for insurance organizations because ultimately, why would I want to talk to my insurance provider unless it’s a time of crisis? …There are some great examples, from the connected car, the connected home, the connected self, where we can actually regularly engage with each of our individuals that we want to market to and talk to. That’s really, really key.”

“Millennials want to connect the way that says, “We actually have no clue what we’ve bought. We’re worried about what we’ve bought. Therefore, can we speak to someone that’s going to give me the assurance and confidence and walk me through the process?”

Peeples:

“The call center folks generally, not always, are some of the lowest-compensated. Maybe some of the least-trained. But they still represent the brand every single day as surely as the senior executives when they’re speaking on analyst calls or to Wall Street. Those people are really where the rubber hits the road. If you haven’t gone out and stood in the retail locations and seen the interactions, if you haven’t sat at the caller processing centers… these are the warriors of your brand and of your company.”

“There was a study that was conducted around call centers that found that, in 2013, the average number of screens that a CSR would have to pull up to get to what you and I as a customer would think is a relatively simple answer, was five. That number jumped in 2014 to seven…. I would encourage just a very thoughtful process around connecting those systems.”

“We have to recognize that we no longer have the benefit and control of a monologue at the customers or stakeholders. It’s no longer ‘word of mouth’; it’s a ‘world of mouth’ out there.”

“We talk a lot about the customer’s journey, but there’s also equally as important an employee journey that creates this double helix that is the corporate DNA.”

Walsh:

“You can actually break the problem down into some quick hits. We’ve got some clients that launch products in 30 to 40 days. I say that to most people, and they almost fall of their chair because the usual time for these things is six, 12, 18 months….You need to tweak it, or it’s going to fail. But with modern technology at least you can try and prove it and move it into a full rollout or move on to a different thing.”

Peeples:

“We need to listen to our customers, get out of our focus group of one, out of our own head.”

To:

“It simply will not work to turn to the predefined business process maps that you’ve done in the past. Don’t turn to those. Think first about the customer and agent experience, what their goals are, and design the customer experience around those goals. Don’t pave the cow path.”

“Rationalize. Make those tough decisions about what systems that you have in your spaghetti factory of legacy systems, which ones of them are strategic and which ones are you going to sunset.”

“Unify. Before you can even take the first few steps toward actually deploying or designing, you need to get basic blocking and tackling stuff done, like governance. Like having a common data model in place so that everyone agrees on what the data is, how it’s defined and where it’s going to come from. Unify the visions across the various levels in the organization.”

“You want to be able to measure your results. At the end of the development and after we’ve let it run for a little while, have we met our objectives?”

“Before problems even arise, you want to be so in tune with where that policyholder is in their interactions with you or in their life events that you are able to actually provide value-adding services and information before it even has to be requested.”

Walsh:

“Think big, start small, act quickly.”

“The cross sale, up sale is a constant, constant challenge. Most companies that I work with right now have an average of 1 to 1.1 products per customer. Best in class will tell you that it’s probably 3 products per customer. What’s the route for 1 or 1.1 to 3?”

Final Words

Walsh:

“Believe me, it’s absolutely possible to do some crazy things out there.”

Peeples:

“Let’s be honest here, we talk about hearts and minds, but it’s really about hearts, minds and wallets.”

“By the numbers, 55% of our customers tell us that they would pay more for guaranteed better service, and 82% of our customers would buy more from us if we just made it easier for them. 89% of our customers said that they would quit doing business with us after a bad experience.”

“Stop thinking about transactions and start thinking about relationships. Whether they’re customers or they’re employees or they’re part of the bigger universe of stakeholders including the intermediaries and the legislators and the regulators, it’s about the people.”

“Always keep the people in mind. Be data-informed and technology-enabled, but always think about the people.”

To hear the full webinar, click here. To see the slides, click here. If you want the full transcript, email me at paul@insurancethoughtleadership.com.