Tag Archives: cx

Customer Experience Leaders Widen Edge

Insurers that earn jeers from their customers are falling further behind the ones that earn cheers.

That’s the key takeaway from Watermark Consulting’s 2018 Insurance Customer Experience ROI Study.

The study, which was last conducted two years ago, seeks to provide insurance executives with a macro understanding of the impact that customer experience has on a company’s fortunes. This is important information for an industry that publicly affirms the importance of customer experience, but privately struggles to quantify the benefits of such investments.

About the Study

Watermark’s analysis is based on data from what is arguably the best-regarded source of insurance carrier customer experience rankings—J.D. Power & Associates’ annual Insurance Satisfaction Studies.

The study’s approach was simple: We calculated the cumulative total stock returns for two model portfolios, composed of the Top 5 (“Leaders”) and Bottom 5 (“Laggards”) publicly traded companies in J.D. Power’s annual study. (A white paper about the study, referenced at the end of this article, includes a more detailed description of how the analysis was conducted.)

We went through the exercise twice—once for auto insurers (where J.D. Power rankings were available from 2010-2017), and once for home insurers (where rankings were available from 2009-2017).

In both cases, our model portfolios tracked the stock performance of the carriers for the year-earlier period of their designation as a Leader or Laggard (so, for example, J.D. Power’s 2017 Leaders were used, retroactively, to build our 2016 stock portfolio).

See also: Profiles in the Customer Experience  

This approach was consistent with our thesis that the market would already be rewarding/penalizing the Leaders/Laggards in the full-year period preceding the release of J.D. Power’s consumer survey (given the customer experience the carriers were already delivering). It also helped ensure that the model portfolios’ performance was not at all influenced by the publication of the J.D. Power study itself.

The Results

Yet again, the Insurance Customer Experience Leader portfolios far outperformed the Laggard portfolios—and the margin of victory widened considerably as compared to the 2016 study.

Watermark defines Auto Insurance Customer Experience Leaders and Laggards as publicly traded insurers falling in the Top 5 and Bottom 5 national ranking of J.D. Power’s 2010-2017 U.S. Auto Insurance Satisfaction Studies. Comparison is based on performance of equally weighted, annually readjusted stock portfolios of Customer Experience Leaders and Laggards.

As the accompanying graphic shows, over the eight-year period studied, the portfolio of Auto Insurance Customer Experience Leaders far outperformed the industry, generating a total return that was nearly double—171 points higher—that of the Dow Jones Property & Casualty Market Index.

While a few carriers made repeated appearances in the Leader category over the eight years examined, only one, Erie Insurance, earned that distinction for every year of the study.

What’s most striking is the growing chasm between the Auto Insurance Customer Experience Leaders and Laggards. The Laggard portfolio now trails the Leader portfolio by an astounding 242 points.

As with the Leaders, there was some year-to-year consistency in the Laggards list, with two firms— MAPFRE-Commerce Insurance and the Hanover—showing up in that category every year of the study.

The graph below, which shows the analysis for home insurers, exhibits a similar pecking order as seen with the auto insurers.

The Home Insurance Customer Experience Leader portfolio outperformed the industry, generating a total return that was nearly double (87 points higher) than that of the Dow Jones Property & Casualty Market Index.

While several home insurance carriers made it into the Leader category multiple times, Erie Insurance was again the only one that achieved that distinction for each of the years covered by the study.

The Home Insurance Laggards in this latest study fell even further behind the Leaders, with the cumulative performance gap between the two portfolios reaching 119 points. (In the prior study, the gap was 57 points.)

Interpreting the Results

This study should give pause to anyone who is skeptical of the value that customer experience differentiation accords to an insurer.

The Auto and Home Insurance Customer Experience Leader portfolios generated average annual returns that were more than double that of their Laggard counterparts. The results suggest that carriers that consistently excel in customer experience tend to be viewed by the market as more valuable entities than those that do not.

That enhanced value is a function of the Leaders seeing a rise in revenue, thanks to happy, loyal customers who spend more with them, stick around longer and refer others.

It’s also a function of a more competitive cost structure, as the Leaders can spend less on new business acquisition because of all the referrals they receive. In addition, because these firms’ happy customers complain less, there’s not as much stress on their operating infrastructure, which also helps keep expenses in check.

The Laggards, of course, are weighed down by just the opposite factors—depressed revenues, high customer churn and profit-sapping, strained infrastructures.

What was notable in this year’s study was that the disparity in performance between the Leaders and the Laggards wasn’t just striking—it was also growing by double digits.

This suggests that the competitive edge enjoyed by Insurance Customer Experience Leaders is both real and strengthening. That should certainly concern any carrier that frequently finds itself in the Laggard category, because these results do not bode well for firms that struggle to endear themselves to customers.

See also: Why Customer Experience Is Key 

Those angling to break into the Leader category should be forewarned: There is no “silver bullet” for achieving customer experience excellence. Latching on to some buzzword– big data, insurtech, AI, etc.—won’t get you there. Neither will advertising how great your customer experience is. The reality will always overshadow the marketing.

Companies that do customer experience well—inside and outside the insurance industry—recognize that there are no shortcuts. Customer experience isn’t some “initiative du jour” for them. It’s not just part of their business. It is their business.

Those leading firms often rely on a handful of time-tested experience design principles. (See the white paper referenced below for examples). However, at their core, what makes the Leaders different is their unwavering commitment to always start with the customer—understanding their needs and wants, their frustrations and aspirations—and then working backward to craft a distinctive, impressive, end-to-end experience.

Fundamentally, it is this outside-in philosophy that gives these companies their competitive edge. And, as this study so clearly illustrates, the strength of that advantage should not be underestimated.

Note: A white paper describing Watermark Consulting’s 2018 Customer Experience ROI Study (Insurance Industry Edition) is available for complimentary download at http://bit.ly/CX-ROI-INSURE.

You can find the original published here on Carrier Management.

Global Trend Map No. 10: Claims

In our previous post, on distribution, we pointed out that claims represents perhaps the most important customer touchpoint in the entire insurance journey.

Nothing affects carriers’ bottom lines like claims; too many are not just capable of wiping out company margins but can jeopardize company survival. Full stop. And it’s not as if customers like claims, either. If insurers could magically prevent the underlying events from happening, customers – fraudsters aside! – would always be happier.

There are, in principle, two key thrusts – claims prevention and mitigation and customer experience – which we shall now explore. The stats and perspectives below are taken from our Global Trend Map; a full breakdown of our survey respondents, and details of our methodology, are included as part of the full report, which you can download for free at any time.

In theory, the scope for claims prevention and mitigation has been radically widened thanks to the Internet of Things, which does not just allow for better underwriting (by netting more data and feeding predictive models) but can also empower insurers – or other ecosystem players, too, for that matter – to intervene when things point toward an impending claim event. Claims, in the sense of claims prevention, is fast coming under the strategic spotlight as a means to shelter exposed policyholders, rescue broken policy portfolios and shore up insurers stricken by low interest rates and bad risk.

Another benefit of sensor data is realtime insight into what has actually gone on with a claim event, which can be lifesaving in an accidentandemergency context, keeps a lid on damages at the point where they are liable to spiral the most and helps to identify cases of fraud.

“Claims is a significant part of the insurance value chain and, in our view, offers the largest potential for innovation. Many insurers are struggling with the dynamic of reducing costs while providing a positive customer experience. Recently in the U.S. and the U.K., many of the large insurers have experienced significant underwriting losses, for core products like motor, due to poor claims experience, deteriorating driving behavior, and rising repair/medical costs.” – Sam Evans, managing director at Eos Venture Partners

While prevention does continue to get better, accidents and unforeseen incidents are always going to occur, so claims certainly aren’t going away anytime soon. When a claim does occur, insurers have the opportunity to impress their customers at that precise moment when those customers need, and appreciate, their insurance the most.

We have noted throughout this content series (for instance in our earlier post on insurer priorities) the growing importance of customer-centricity to insurers. And claims – as the key, and in some cases only, consumer touchpoint – has become a key avenue of engagement. If insurers can provide excellent customer service throughout the claims experience, removing friction from the process wherever possible, then they are more likely to retain their policyholders and even open crossselling opportunities.

1. Customer Experience in Claims

Is customer experience (CX) a core focus for claims departments?

We asked carriers whether customer experience (CX) was a key factor within their claims departments; 69% replied “yes” and 26% “somewhat.” The trend toward the growing importance of customercentricity within every insurance function is therefore borne out handsomely by the statistics.

Looking across our lines, we see a consistently high focus on CX in claims, except for in life, which trails somewhat. This probably reflects a historic lack of touchpoints (often just policy renewals and death) and, as an extension of this, the more limited opportunities for new business and crossselling. We encountered a similar lag with this line in our earlier installment on marketing and customer-centricity.

“Will claims call centers evolve from the current model of large numbers of people predominantly performing standard operations and having scripted conversations to a much smaller number of ‘problem solvers’ being available to support customers when something out of the ordinary creates an exception in the automated processes?” – Ian Thompson, EMEA chief claims officer at Zurich

See also: Using Catastrophes to Rethink Claims (Part 3)  

Does automation play a role in the claims-handling process?

Customers want frictionless experiences when making a claim. Certainly most young claimants (digital natives) would prefer to do everything through an app or portal rather than filling out paper forms, and this has seen some insurers embrace nontraditional channels such as WhatsApp for submitting claims materials. In addition to slickness, customers want speed or, where speed is not possible, clarity as to their claim’s status.

This level of service can only be provided effectively through recourse to automation in some degree – so that a large portion of uncomplicated claims can be processed straightthrough and the customer either notified of the outcome or given a resolution date, all at the click of a button. 46% of carriers indicated that they have an automated claims-handling process, a figure we expect to become a majority soon. This stat does not necessarily imply that the majority of claims will soon be automated, merely that automation will soon be in the mix for the majority of carriers.

“There is no doubt that insurance, in general, and claims, in particular, will see significant changes through the automation of knowledge work. Customer choice and the importance to the customer of the claims service will mean that human involvement in the process will always be necessary. However, as claims leaders, we will need to rethink our operating models in the light of emerging technology.” – Ian Thompson

There are many different workflows for claims management (depending on the type and complexity of the claim, as well as its value), and claims automation generally only means automating some of these. Although automation has connotations of costcutting (and this is definitely a factor), it can also be argued that less staff time spent on routine claims allows more staff time for highstakes claims, meaning claims management can become customerdriven rather than processdriven.

2. Claims Prevention and Mitigation

How much focus do (re)insurers have on claims loss mitigation?

We asked carriers about their level of focus on claims loss mitigation; 57% replied that they had “a lot” and 39% “some” focus. North America leads our other regions in terms of having “a lot” of focus. We further explore the specificity of the North American insurance market in our forthcoming regional profile on the continent, which you can, of course, access immediately by downloading the full Trend Map.

Will IoT affect the claims department?

IoT fundamentally allows carriers (and other ecosystem players, in cooperation but also in competition with insurers!) to move from risk management to risk prevention by providing insights to bring down policyholder risk. In this sense, the overriding impact of IoT on claims is the reduction – or even outright elimination – of claims.

This goal is perfectly aligned with customer wishes, and there are many more ways IoT can boost customercentricity in claims. If event data can be captured automatically, this doesn’t just help eliminate fraudulent claims (which ultimately cost lawabiding customers), it also removes a lot of friction from the process of filing claims and means that businessasusual can be resumed as early as possible.

An example of this would be a temperaturesensitive cargo insured against temperature rises above a certain point, whereby a temperature sensor – in conjunction with blockchain and smart contracts – could trigger claims automatically if the limit were exceeded. This way, mitigation could begin straightaway with minimal head-scratching; in this example, that might involve immediately reordering the compromised cargo.

In our earlier section on Internet of Things, 60% of respondents selected claims as one of the departments that would benefit the most from IoT, and this is largely borne out in the responses of carriers here: 53% of insurers and reinsurers believe that IoT will affect their claims department.

Among our lines, IoT’s impact on claims trails in life, unsurprising given that IoTenabled life programs – if they exist at all – generally sit behind connected health initiatives (which get the plaudits). As the cost of sensors and connected devices continues to fall, we expect to see further growth in the connectedclaims universe to the benefit of customers and carriers alike, across all lines.

While the potential of sensorled approaches to manage down risk remains hypothetical for many use cases (there are simply not enough longterm studies yet) and while there are inevitably other wellpositioned ecosystem players with a shot at the prize, a more immediately tangible IoTenabled saving is in relation to fraud, which we examine in our next installment. Telematics providers may not, in the end, make you a better driver – but the Gforces can tell them exactly what has gone on with your car. And with your insurer as it were in the passenger seat, you will feel rather less able to lie to the company.


Why Do We Still Use So Much Paper?

Customer experience (CX) has become the lifeblood of nearly every industry in the world. Carriers that once sidelined it in favor of other internal aspects of their business have come to realize that positive and expedient customer interaction is integral to maintaining customer relationships and building new ones. While there are a myriad of ways to accomplish this, a simple yet often underrated way to overhaul CX is to move from paper forms to electronic smart forms. Not simply a cosmetic improvement, it is extremely effective at both reducing internal inefficiencies and improving relationships with policyholders.

See also: Why Customer Experience Is Key  

Consumers — especially millennials — have become accustomed to real-time, above-and-beyond customer service from companies like Amazon and Apple. They prefer to do business with organizations that provide a comparable or superior experience, and insurance is no exception. New entrants like Lemonade attract a millennial consumer base because of their transparency and straightforward communication. A significant part of that is standardizing and digitizing forms so that they don’t become a burden on either the carrier or the consumer, especially with regard to claims.

What are the biggest benefits to moving from legacy forms to new templates or web-based smart forms? We break them down here:

Smart Forms Eliminate Costly Errors: Insurers face a major problem in that most mistakes are human errors. Handwriting can be hard to read from both colleagues and policyholders. This leads to misinformation that could have severe implications months, or even years, down the line if a claim happens. Another issue is missing information and supplemental forms that are required based on previous responses that never get filled out. Additionally, errors frequently occur on physical forms because consumers aren’t pointed to their mistakes until the forms are already submitted. Insurance forms are often complex and confusing and are difficult to fill out correctly without proper guidance. Oftentimes, there are certain non-obvious questions that only apply to specific applicants.

These errors can result in wasted time and resources for carriers who need to decipher illegible handwriting, correct errors or request missing information before submitting the form. One carrier we spoke with said that errors are so common that it takes two to three weeks to get through a process that requires 30 minutes once automated. This delay can be deadly when it comes to new business acquisition, as consumers do not want to wait that long. A digital form can alleviate the problem immediately by guiding the customer through the completion process, such as indicating where information needs to be entered, prompting for additional information based on previous responses or catching unsigned documents.

For example, GroupHEALTH Benefits Solutions, a health benefits solution provider, saw a significant improvement when it switched from paper to smart forms. Their original paper-based method was error-prone, and employees had to take considerable time to research and resolve missing or conflicting information. The provider realized it could improve enrollee experiences and save money by implementing digital transformation techniques such as automation and intelligence through smart forms. Once the implementation took place, there was a near-immediate ROI. The new online enrollment process ended up reducing errors, which in turn helped the company focus on providing excellent CX.

Confusing Forms Can Lead to Customer Drop-Off: While errors on paper forms can waste significant time and resources for a carrier, the forms can also leave customers angry, frustrated and willing to give their business to a competitor. According to Ernst & Young’s Global Insurance Consumer Survey of 24,000 people in 30 countries, 40% of customers left an insurer in the past 18 months. The most interesting finding was that respondents in North America placed “ease of doing business with an insurer” (60%) as more important even than “value for money” (53%) – especially in P&C insurance. Respondents said that, because there were often not many opportunities for carriers to interact with their customers, each touch point became critical to their view of the company.

Consider then, the importance of forms, which are the primary source of collecting data between carriers and policyholders. Smart forms create a system that allows only the correct information to display once a question is answered, whittling information down to only what that specific customer needs to know and fill out. At GroupHEALTH, as an example, enrollees would mistakenly assume their company plans included coverage not offered by their employers. This confusion led to customers filling out unnecessary forms and back-and-forth that ate up time and resources and increased frustration levels. After the switch to smart forms, however, the system would automatically prompt enrollees to supply missing information, noticed inconsistencies and flagged missing information. It was a runaway success, with GroupHEALTH estimating that, in just the first two months, it reduced the cost to manage enrollments by 20% to 25% — just from switching to an online-based method.

See also: Key to Digitizing Customer Experience  

Digital Forms Help Employees, Too: When there are fewer errors, customers are happier (of course), but so are employees. For every mistake on a manual form, an employee must take time to correct it, send it back and re-process it. This cuts time from providing an excellent customer experience, replacing it with tedious correction work. When an online-based forms procedure is implemented, employees are able to spend more time on sales and customer service, rather than dealing with the mundane tasks associated with keeping track of forms and fixing incorrect ones. Online forms offer real-time customer access to policy details, billing, claims and beneficiary information. All of these are as important to the employees as to the customers because they create an environment of efficiency and transparency.

Making changes at the ground level with digital documents may seem like a small step toward providing exceptional customer service in a sea of emerging technologies, but it’s also necessary to the health of a carrier’s bottom line.