The average person sends 15 texts per day, and 90% report that they read incoming texts within three minutes. Text is the channel many people — especially younger consumers — use most often to communicate with friends and family. And text can be a great way for insurers to communicate with customers and build relationships.
But, because the channel is so central to personal communication, it’s critically important for insurers to get customers’ permission and understand their communication preferences before reaching out via text. Managing consent has been a major focus for the past few years because it’s a privacy issue. Customers appreciate the chance to opt in and want to understand how you plan to use their number.
Managing permission is critical, but it’s just the first step. The text platform has specific qualities and limitations that don’t apply to other channels like social media or email. Texting has enormous potential if you understand the context and expectations people have around the messages they receive.
Here are three tips insurers can use to build meaningful relationships with customers via text:
1. Change up your messaging. If you look at recent text messages received from a friend, you’ll probably see questions, statements, tips, links, photos, etc., all in one thread and all in a single voice. A text communication strategy from an insurance brand should look like that, too: The content should vary. It shouldn’t be a series of cross-sell pitches (though pitches have their place).
Customers don’t want to feel like a number when they’re dealing with any type of business, especially an insurer. You collect a lot of data on customers. Consider using it in a non-intrusive way to build relationships. If your customer has boat insurance, consider sending boat care tips. Above all, curate your text feed so that it’s interesting and valuable.
2. Limit the use of five-digit codes. If you receive texts from organizations, you probably don’t know who it is until you click because it arrives on your phone under a five-digit code instead of a name. Some businesses use multiple codes to send out different types of texts: one code for sales, another for customer service, a third for claims, a fourth for renewals, etc.
Try to limit the use of five-digit codes to two or three at maximum, and, if you can, use only one five-digit code for all text communication. Your subscribers may add you to their contact list under your brand name; if you use multiple codes, you will dilute the impact of being in the contact list. Remember that customers expect to be able to reach you by responding to any of the codes you use to send texts.
3. Use centralized message control and analytics. This is a basic tip, but too many insurers who are savvy about marketing and sophisticated about communication on other platforms make the mistake of not analyzing incoming text messages to see what customers are saying, and some fail to respond appropriately when customers text back.
Text analytics can be incredibly revelatory and serve as a valuable snapshot of customer sentiment. For example, if you send customers a notice about a new safe driver discount program and a customer responds with a question, you gain valuable insight about your message and an opportunity to respond quickly and consistently on the same channel — text.
Insurance is about being there for customers when they need you the most. Text messaging is a great way to meet customers where they are, using the same channel they use to communicate with their friends and family. It’s important to get customers’ consent for text communication and understand their expectations. Once you have permission, the success of your text campaign is up to you.
Insurers will continue to look for ways to strengthen their bond with customers and relate to them on an individual level. Texting can be an excellent channel for personalization. When you know what kinds of messages resonate on text and understand what customers expect in return, you’ll be texting your way to stronger customer relationships.
In a rapidly changing industry, some P&C insurers are pulling ahead of their competitors by focusing on customer satisfaction and retention.
“The insurance industry as we know it is at the edge of a new business environment,” says Michael Costonis , head of Accenture’s global insurance practice. “Breaking away from the pack and capturing new revenue opportunities requires a shift in business mindset – a shift from product-focused to customer-focused.”
Customers want extra benefits, and one way to provide them is to offer value-added services. Travel companies and other insurance branches are already exploring the benefits of value-added services for retaining customers, as Jamie Biesiada at Travel Weekly points out. Because P&C insurers have been slower to adopt this strategy, however, many opportunities for capitalizing on this strategy remain.
Here, we look at some of the most popular value-added services in P&C insurance, which of these services focus on building loyalty and how to create the right service offerings or packages to encourage your customers to stay with your company in the long term.
Value-Added Services: The State of the Industry
For many years, P&C insurers have struggled with the challenge of selling a product that is substantially similar to their competitors’ products. “Because customers don’t discern much difference between insurers, companies end up competing largely on price,” write Bain & Co. partners Henrik Naujoks, Harshveer Singh and Darci Darnell . A downward spiral occurs, in which costs and profits are cut and customers jump ship the moment they see the same coverage for a few dollars less.
When insurers compete on price, customers do what Brandon Carter at Access calls the services shuffle: quitting or threatening to quit their insurance providers to access the same price-lean deals that new customers receive. “My goal is to pay less in a system that actually punishes people for being loyal customers,” Carter explains. Focusing on cost decimates loyalty. Focusing on value can boost it.
Yet insurance companies aren’t making value-added services their first choice when it comes to customer retention Tom Super, director of the P&C insurance practice at J.D. Power, adds that many P&C insurers are turning to digital tools to court customers, particularly in the auto insurance business.
But digital technology is only a tool. The insurers that will stay ahead of their competitors in the race for customer retention and loyalty are the ones that best leverage that tool to provide the value customers want, says Mikaela Parrick at Brown & Joseph.
Which Value-Added Services Boost Customer Loyalty?
Value-added services provide an extra benefit that enhances the core product or service. This additional service may be offered at little or no cost for the customer, yet it may make both the customer’s and the insurer’s work easier.
Connecting experience-based services to the product and brand can be a powerful way to encourage loyalty, adds Roman Martynenko , the founder and global executive vice president at Astound Commerce. While this approach is most commonly seen in retail, P&C insurers can adapt it to their needs. A top-of-the-line mobile app or a personalized starter kit featuring smart tools for each customer’s home can make customers feel like they’re part of a family.
Unique, innovative or specially tailored value-added services can also help encourage loyalty and boost customer interest by becoming a cornerstone of an insurance company’s brand.
Value-added services don’t have to be expensive or complex, suggests Mike McGee of Investment Insurance Consultants. For instance, a disaster preparation email sent at the start of tornado or hurricane season can help customers take loss-prevention steps, address safety and feel supported by their insurer, at very little cost to the insurance company.
Partnering with other companies can boost loyalty for both organizations while providing value-added services that attract customers, digital transformation executive Fuad Butt says on the IBM insurance industry blog. For instance, working with telecommunications providers to offer reduced-rate packages can help both companies succeed.
A highly specific partnership that uses existing technology to add value for both customers and companies is the recently announced alliance between Hyundai Motor America and data analytics firm Verisk.
“Hyundai customers will have access to their portable Verisk driving score, which can lead to discount offers on UBI programs and support driver feedback that helps improve their driving,” says Manish Mehrotra , director of digital business planning and connected operations for Hyundai Motor America. A similar arrangement through an auto insurer can help both insurers and drivers have access to more information to improve safety and make better choices.
Choosing and Implementing Value-Added Services in P&C Insurance
The changing landscape of insurance offers one significant advantage to companies seeking to improve their value-added services: access to data about why customers remain loyal.
“The connections that enable excellent customer experiences aren’t always easy to make,” says Chris Hall of Pitney-Bowes. Siloing fragments customer information, leaving staff without a complete picture of each customer. This fragmentation makes it difficult to determine which value-added services will actually pique customers’ interest.
If data access is an issue, start by de-siloing information to get a better sense of each customer. Then, find the services that best support your organization’s key differences from your competitors.
Kirk Ford , compliance and T&C manager at RWA Business, suggests first considering how you’d like your clients and customers to perceive your brand in relation to competitors. Balance your differences against your similarities so that customers see they’ll receive all the services they need, but with the value-added extras that make their relationship with this particular insurance company meaningful.
However your insurance organization chooses to add value, resist the urge to announce it to customers merely as being higher-quality. “It doesn’t matter whether or not a company can pull off quality or exceptional service because quality and customer service rarely are differentiating strategies,” adds Mac McIntire , president of the Innovative Management Group.
Instead, Ryan Hanley formerly of Agency Nation, now at Bold Penguin, recommends finding ways your value-added services can improve customer lives. When customers feel a sense of shared values, they’re more likely to stick with their insurance company, rather than risk their luck with a company that may not share those values—even if the prices are lower.
One way to connect with customer values is to change your company’s language surrounding insurance. “If you can sell insurance and not talk about insurance, it’s a win-win,” says Rusty Sproat , founder of Figo Pet Insurance. He notes that many customers find insurance language obscure and frustrating. That’s why Sproat’s company focuses on providing quality information on pet care and health, switching the conversation to insurance only when necessary to complete a transaction.
Finally, don’t shy away from technology—but use it as a tool rather than a cure-all. Smart home sensors, telemetrics for vehicles and other tech tools are increasingly common in U.S. households, plus they can greatly improve the customer experience, says Ramaswamy Tanjore at Mindtree. Consider the best ways to manage telemetric or other data, as well as how to position these tools to best showcase their value to loyal customers.
Always the same story: 11 months after a costly customer acquisition, crafty price comparison players and other intermediaries helpfully knock on the customer’s door, show a smorgasbord of supposedly better value options and outline how easy it is to switch.
For example, 16% of Americans shop around for car insurance every year, saving up to 47% of the previous year’s insurance cost. This represents an impact of up to $40 billion on the $500 billion car insurance market.
What’s great for the consumer is a major headache for the insurance provider, which often has to join in the dreaded price war to keep a customer.
In many other industries, having a good brand is a bulwark against a price race to the bottom. But for immaterial and low-involvement products such as insurance, this is easier said than done. It’s hard to stand out in the customer’s mind and become a provider of choice.
But there are a few things insurance providers can do to survive the first-year itch and give the customer an experience that will greatly increase the odds that they’ll stick around for another year.
Before we get into the specifics, it’s important to understand one key principle of loyalty, which is best illustrated by Maya Angelou’s famous quote:
“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
That’s why discounts don’t lead to loyalty. Sure, it’s sweet to get a $150 bonus for staying with your current life insurance provider, but once the money hits the bank account it just dissolves into the family budget, never to be seen again. It’s not memorable, and it sure as heck doesn’t make the recipient feel much of anything.
Contrast that with what you could actually DO with $150:
What if you gave your customers an experience such as a kayaking tour or a candle light dinner for two? The cost would still be some $150, which is close to what a bonus or discount would amount to — but the effect is far stronger.
Because the customer associates the experience with you. In the back of their minds, they know, as they’re tucking into their entree or dipping their oar into the turquoise waters, that this experience comes courtesy of Insurance Co. And that association works on a subconscious basis and lasts far longer than any discount could.
You may argue: Why wouldn’t customers be able to do it themselves with the $150 check they received from you? After all, they just received a discount of $150, so you might as well encourage them to spend it on that kayak tour, right? All without going through the hassle of organizing it on your end.
Not really. Most people don’t operate that rationally, and hardly anyone would take a windfall gain and spend it on something specific. It’s more restrictive to give them $150 in kayak or dinner vouchers, but that restriction means that they are far more likely to use it. And you WANT them to use it.
The effect is obviously not limited to dinner experiences, although that one is quite the front runner when it comes to a memorable experience at an affordable price.
Other perks that suit an insurance company’s first-year-itch-avoidance budget would be:
A luxury case of wine
Two tickets to a rock concert or musical of the customer’s choice
An afternoon at the local spa
A cooking class
VIP cinema tickets for the entire family (customize it by asking them how many tickets they want and providing any number of them — within reason)
It’s important that the item or experience you provide be non-utilitarian. A new vacuum cleaner or blender won’t do the job as well as a cheese and wine tasting night out. To be a memorable experience, it needs to be non-quotidian and give a hint of luxury or, dare I say, décadence. Yes. French spelling.
So how much can it cost?
Well, that depends on how much you can afford. If you, with a heavy heart, normally provide a discount of $150 to keep a customer with itchy feet, providing an experience worth $150 is the starting point.
More bang for your buck through breakage and volume discounts
But that $150 can go a much longer way and you’ll be able to magically turn it into $200 or more in the following way:
First of all, if you do this at scale, you’ll be able to secure discount rates from the vendors. A restaurant chain will gladly give you a discount if you buy 100 candlelight dinners from them.
Second, there’s breakage. We’ve written extensively about the concept — in short, breakage is the rate of unredeemed dinner experiences (if we can stay with the dinner example). Some people will end up not redeeming their gifts. How should you deal with this, though?
On the one hand, if you want to focus on short-term profit, this is good for you, because the user has accepted to stay with you for another year without creating any cost — because they haven’t redeemed, you can now use their voucher for someone else.
On the other hand, if you are focusing on brand building and are willing to forgo the short-term profit for long-term customer loyalty, nudge customers toward redeeming, so that they can indeed build that positive association of their experience with you.
Whichever route you choose to take, industrywide breakage rates are around 30% and, even if you nudge people toward redeeming, are unlikely to drop below 5%, so make sure you are including this in your calculations.
Coming from the Insurance Executive Conference earlier this month in New York, I am extremely excited by what I heard regarding where the industry is heading.
I attended both the life insurance and P&C tracks, picking up the following insights about how the industry is disrupting itself before others can:
Insurance carriers are embracing change. Anwar Haneef, partner at IBM Watson, said, “We have not seen much disruption in the insurance industry in the last 100 to 200 years” and acknowledged that new technologies have the potential of changing that. Jeffrey Killian, vice president of in-force service and operations at New York Life, stated, “We could become Blockbuster (Video) if we don’t go through the change.”
Insurance carriers are focusing on their customers in a new way. For example, Gerald Patterson, senior vice president of retirement and investor services at Principal Financial group, spoke of Principal’s move away from thinking about customer service to focus instead on the customer experience. Principal tries to provide value to the customer and understand that young consumers expect the same technology from insurance carriers that they experience with other service providers. He also stressed the importance of embedding experimentation in your customer experience on a regular basis.
Insurance carriers are embracing technology and planning for a different future. At the highest level, for example, Jane Chwick, former partner in charge of global technology at Goldman Sachs, provides technology expertise as a board member of the relatively young company Voya Financial. Patterson mentioned that he has recently spent time visiting Silicon Valley and attending Fintech conferences.
Killian acknowledged that realizing a company’s vision of customer experience requires investment and pointed out that Principal is committed to making the right investments to accomplish this. He remarked “We have invested a lot in Lean Six Sigma. It’s amazing how much energy you can unlock through these processes.”
Joe Beneducci, chairman, president and CEO of Prosight Specialty Insurance, said, “Technology is a catalyst that affords us options.” Life insurance executives discussed their expectation that the analytics movement will affect carriers’ entire value chain. They also saw predictive analytics enable insurance carriers to be learning organizations.
West Hunt, vice president and chief data officer at Nationwide, discussed the capability of scaling human expertise through cognitive computing. At the same time, the rise of robo-advisers and their potential threat to the business was mentioned. Finally, the recent trend toward digital and what it means to the industry was raised. Technology was discussed all over the conference.
Further opportunities to leverage technology were identified. Colleen Risk, senior analyst at Celent, mentioned the opportunity insurance carriers have of enhancing their websites to provide transaction capabilities for consumers, such as changing beneficiaries. Recent research by Celent showed that less than 25% of life insurance carriers are doing e-delivery of contracts. Other opportunities include: making data available throughout the company, producing strategies to sustain customer loyalty, developing a compelling message for life insurance and educating Millennial consumers.
I was happy to participate in the conference and felt energized by the discussion of new topics that position the industry to continue to thrive into the future.
This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.”To download it, click here.
Part 1 of this series explained why retention is so much harder these days. This article explains how insurers can solve the problem.
Know Your Customers
Understand values and behaviors of your customers. Start with available data sources. Augment structured data from traditional back-end systems with unstructured data like those collected through call centers and written correspondence. With these data, you can deduce meaningful patterns and behavior-based customer segments.
Enter into active dialogues to establish meaningful relationships. Use social media analytics and conversations via social networks to increase customer touch points. Use the knowledge gained about their wants and needs to sustain intermittent conversation about things that are helpful to the customer.
Build an environment where sharing data creates mutual benefits for customer and insurer. Transparency is key. Create and publicize a “customer data policy” that specifies how and when you will use data shared directly or generated through means such as “big data gathering,” and how customers will benefit. Use shared data to create extra customer value, as detailed in the next section.
Offer customer value
It is no surprise that customer value – that is, the value that a customer derives from the relationship with his or her insurer – drives customer loyalty. In a previous study, we defined customer value as the adequate response to customers’ changing needs. How can insurers translate this to understand which value drivers influence retention?
The fairness zone: The first component of customer value we will discuss is – again – price. For most of our respondents, the absolute level of premiums mattered less than individual perception of price fairness – a too-low price has the same negative effect on loyalty as one that is too high (see Figure 5). This means that a customer to whom the price seems right is two to three times less likely to switch in a given year. The fairness of premiums is also an emotional component that insurers need to get right (and tools like social media analytics can support this).
What is the power of brand? The second value factor we examine is brand. What is the retention value of a good brand? According to our data, it’s less than expected. Only 21% of our respondents name “reputation” as one of the factors that cause them to stay with their chosen insurers. Could brand still be an implicit value driver?
Our recent consumer products industry study, “Brand enthusiasm: More than loyalty,” showed that brand consciousness and brand loyalty are changing, and our data echoes those findings. Only 12% of respondents have a high brand consciousness, and that is the only bracket where it has a strong effect on loyalty in the insurance world (see Figure 6).
This suggests that an extra investment in brand creates limited loyalty returns; a great brand only matters if your customers belong to the few who are brand conscious to begin with. Moving customers to the “high” consciousness bracket might prove difficult to achieve.
So how can insurers, many of whom already have a strong brand, make this work to their advantage? We propose adopting the concept of “brand enthusiasm.” Brand enthusiasm is influenced by the level of customer engagement, which we will explore in the next section, and again leads to the increased emotional involvement with the insurer that we call “heart share.”
Transparency, not complexity
Last but not least, we examined other product-related value drivers. We suspected that the often high complexity of insurance products has a negative effect on loyalty, but our data proved this hypothesis wrong. Although product complexity might be a deterrent to purchase (which was outside the scope of the survey), even those who perceived the product they bought to be highly complex did not show a higher propensity to switch.
In contrast, transparency about the product strongly influences loyalty in a positive way. Transparency leads the customer to understand and be more comfortable with the product (and the insurer) even when it is complex. Seventy percent of respondents who reported that their product understanding was high expressed high loyalty – almost three times as many as those with low product understanding. High transparency leads to rational involvement: the “mind share” in our study title.
What current technology can help insurers promote customer value? To give customers an emotional connection and involvement with a fair price and a transparent product, telematics is ideal. Regarding fairness, customers can see that the rate is based on their personal risk and influenced by their personal actions. Examples include a “pay-how-you drive” auto product or the use of exercise tracking devices in health insurance. Transparency of this sort of auto product is high, and for many telematics offerings, there is an additional fun factor by seeing how well you drove, thus competing against yourself for better driving scores.
Recommendations: Offer value
Support your customers in areas they personally value, even if they are not directly related to your core business. Offer information to your customers in useful areas that are widely related to their coverage: for example, traffic or weather information for auto insurers. Create communities of interest – in social networks or directly hosted by you – to share news, tips and enhance exchange among like-minded individuals and your organization.
Add risk mitigation or prevention into your products and services. Commercial insurers have been doing this for years. Start offering these at the outset of the contract relationship. Later, add tracking via telematics, plus assistance services.
Personalize offerings and provide pick-and-choose product options. Product flexibility starts in the back end. Your application architecture must enable a modular approach to products and services. Build a roadmap for flexibility using industry standards such as IAA. From the front end, add in-depth analytics to flexibly balance the offered options with market needs.
Fully engage your customers across access points
Incumbents at risk
One characteristic of the Millennial customer is the desire for omni-channel shopping for their goods and services. For insurance shoppers, this extends well beyond using traditional insurers – many Millennials are open to using adjacent providers and new entrants into the market (see Figure 7).
In the short run, offerings like Google Compare mainly replace existing aggregators; insurers still cover the actual risk. In the long run, online service providers – given their good customer knowledge across many products and services – could start to accept risk themselves. In this case, customers’ already-stated willingness to switch would become a real threat to incumbents.
In addition, the reason respondents gave for considering those providers should be troubling to insurers: They describe non-traditional providers as faster, more transparent and easier to reach (see Figure 8). To counter this, carriers need to engage with their customers across a broader range of access points than ever before.
The age of mobility
One option is to be more accessible on the go. Ninety-six percent of our respondents own some form of mobile device, most often smartphones (owned by 82 percent of respondents) and tablets (owned by 49 percent); they have become commonplace modern accessories throughout the world. Still, only 13 percent of respondents who bought their insurance online, either directly or via an aggregator, used their mobile devices to buy. On the other hand, 29 percent of all respondents stated they would like their insurers to offer an option to buy through a mobile device, and that this would increase their loyalty.
Expanding mobile offerings outside of searching and buying is an instant accessibility increase with potential loyalty gains. The biggest effects would be in submitting claims (42 percent) and in simple communication (43 percent). Many insurers have already invested in apps for claim submission, but again, they seem to be either unknown or too hard to use.
The effect of expanded mobile offerings differs widely by country, with the more empowered customers in developing markets increasing their loyalty more (see Figure 9). Still, given the larger market sizes in mature markets, investment in mobile services are still expected to generate returns.
Connecting everything, everywhere
Looking toward the longer term, insurers will also need to consider investing in the Internet of Things (IoT) to enhance customer engagement. A growing number of consumers either own or can imagine owning an Internet-connected device like a refrigerator or a washing machine (56 percent of millennials, 36 percent of boomers).
Currently, only a small percentage of customers told us they would be comfortable with insurers using the data from these devices (21 percent of millennials, 15 percent of boomers.) Still, for those respondents, the greater accessibility and convenience of the IoT would lead to an increase in loyalty. Insurers can make use of the IoT if they sell it right: with high transparency regarding how the data is used (and not used).
Recommendations: Fully engage
Embrace mobile to enable constant access for your customers. For your main set of lines of business, envision “customer journey maps.” These maps document the typical steps a customer must take during the provider relationship, from needs discovery through information gathering and purchase, all the way through after-sales services and claims processes. For each step, identify interaction options to generate a complete picture of potential mobile touch points.
Support decision making throughout each step of the sales process at the convenience of your customers. Create one unified front end for the customer, whether they come in through an agent, call center, the Internet or mobile devices. Make customer data and product information equally available at all touch points.
Have information available anytime, anywhere to support instantaneous fulfillment of client requests. Equip tied agents, underwriters, claims adjusters and other fulfillment roles with mobile technology like tablets and other handheld devices. This allows you to abandon a fixed workplace in favor of greater fulfillment flexibility – for example, claims can be adjusted directly on-site.
Ready or not – are you capturing the hearts and minds of your customers?
How are you using your in-house sources of customer knowledge? In what ways are you gathering and adding external information, such as that from social networks? How are you combining internal and external information? How is it used to generate greater customer value and loyalty?
Where and how are you using needs-based or persona-based segmentation approaches? How will you deepen your level of understanding individual customers?
To what degree can your customers pick and choose options from your product portfolio? What is your plan to remove the barriers to further customization?
How do you communicate with your customers? What is your approach to staying abreast of the ways they prefer to communicate, now and in the future?
In what ways are you engaging millennials? And how will you stay updated to address the customers of the future, such as Generation Z and beyond?
This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.”To download it, click here.