The notion of paying out an annual stream of income can be traced back to the Romans. It’s a simple notion and one of the earliest forms of wealth management. Today, the simplicity of that notion has been replaced by the complexity of the annuity product. Rooted in a time way before the iPhone, the conventional annuity looks tired in the digital world. It’s an old world approach long overdue for a refresh and reinvention. To explore this further, Rick Huckstep spoke with Matt Carey, CEO and co-founder of Blueprint Income.
It’s a different world now
The baby boomers are retiring. When they made their plans for the future, the world was analog. Individual advice was based on human judgment, the personal touch and “trusted, expert” relationships. This was how the world of wealth management worked pre-internet.
The point is that the baby boomer generation, and Gen X for that matter, have shifted from creating retirement wealth through a lifetime of work to protecting what they have for now.
Which means that the wealth management target client has changed. It’s no longer a baby boomer market, or a Gen X market for that matter.
Now it’s the millennials who are the core client (target) base for wealth management. With 40% of the global adult population under the age of 35 years old, this is a generation who has only known a digital world in adult life.
Rise of the affluent millennial
But it is more than a digital divide that separates the generations. Millennials’ attitudes and behaviors to creating their own wealth are different, too. These differences are shaped by factors such as: debt-funded education, greater levels of social conscience and engagement, a broader world view and higher levels of self-employment.
Which is a challenge for the wealth management industry as it adapts to a different customer profile. Building a wealth management proposition for the millennial generation has to reflect the different demographics compared with baby boomers and Gen X.
There’s tons of research out there that reports how attitudes and behaviors have changed over the generations, even back to the silent generation. In this 2015 survey of more than 9,000 millennials across 10 countries by LinkedIn and IPSOS, they found;
millennials expect to be financially able to travel and see the world,
There is another dynamic that is important to consider when looking at how the wealth management industry serves the millennial generation. Financial literacy, or the lack of it!
The millennial generation may be more informed than their predecessors, but not necessarily in everything. They are more likely to know who Kim Kardashian is than to understand the impact of inflation on their savings over time.
In itself, there’s nothing new in this, but the fact is that the level of financial literacy in the U.S. has been dropping for years.
The FINRA survey also reported a massive gap between the level of financial understanding and the desire to have one. The survey found that 70% of adults aged between 18 and 39 years old “know they will need to be more financially secure, they just don’t know how to get there.”
What is clear from the survey is that this lack of financial literacy is causing stress and anxiety among millennials (who, remember, now account for 40% of the adult population).
Mobile has drastically changed the way we shop, travel, pay our bills and even pay each other. But there’s one area of our lives that it hasn’t changed enough: the way we manage our health.
Mobile-focused health represents one of the biggest challenges – and opportunities – facing the healthcare industry. As more consumers connect their homes and lives across devices, particularly their phones, healthcare professionals must harness mobile health technologies and move toward a complete, mobile-optimized user experience. While most insurers already offer mobile apps, they often fail to create an experience that is both functional and intuitive.
As our 2016 Digital Healthcare Survey revealed, digital health resources have been embraced by Americans of all ages, especially by younger Americans, with 82% of Gen Y and 67% of Gen X having accessed at least one digital health resource in the past 12 months. Of the digital resources offered by health insurers, mobile apps have the greatest potential to enhance Gen Y and Gen X member understanding and autonomy, but awareness of the apps and their functionality is low. Many Gen Y and Gen X members consider mobile access to their insurance a key resource, but only one-third (32%) are actually aware of whether their insurer even offers a mobile app.
This represents a significant missed opportunity, for insurers and consumers alike.
Fortunately for insurers, creating a mobile app doesn’t need to be overly complicated. The fundamental function of a health plan app is to provide members with access to the resources that are applicable to and useful for the mobile experience. However, many apps present far more than this – plan information, including balances, claims data and ID card information as well as coverage and benefits rates for health services, profile and account management options and customer service centers. For most customers, mobile apps don’t need all the resources and attributes of full sites – customers just want a mobile health experience that is intuitive, functional and fits in with their daily routine.
So, what functionalities should insurers be looking to include in their latest mobile app versions?
Take a page from financial apps, such as PayPal and Venmo, and offer a way for consumers to pay with ease. Incorporating payment features for claims and premiums, as well as push notifications alerting members to coming bills, would likely lead to more timely payments. UnitedHealthcare is one of the few providers that allow members to pay for a claim on its app directly by entering bank account information and then pre-filling most other important information, such as amount and payment recipient.
Create visual representations, such as charts, graphs and progress meters, to help consumers better understand aspects of their plans like deductibles and coinsurance. Presenting plan balances and claims data not only improves the aesthetics of a page, but also provides members with a summary of data that may be easier to process. For example, rather than displaying how much of the plan’s deductible and out-of-pocket maximum the member has met, has remaining and has in total within a list format, use an interactive chart or graph to provide expedient summaries of data without sacrificing any detail – a particularly important feature on a mobile app given the limited space.
Integrate health data from wearables to mobile apps (and vice versa) to encourage consumers to exercise regularly or eat healthy. Health assessments and connecting fitness apps to track movement are the most commonly rewarded activities, currently recognized by a majority of insurance platforms. Some insurers, such as UnitedHealthcare and Humana, are ahead of the curve, offering separate health and wellness reward program apps that employ push notifications to remind members to keep up with goals, such as “remember to get between seven and eight hours of sleep tonight” and “you have 2,000 more steps until you reach your goal for today.”
While the healthcare industry overall still has a long way to go, digital health companies and startups have leveraged advancements in technology to enhance the mobile health experience for consumers. As functionality continues to improve and usage increases among younger members, the need for effective member support will become critical. Insurers should take note and make mobile health a priority – including functionalities and resources to help members better manage their health. We’ll all be better off as a result.
In the U.S., the life insurance participation rate is in a steady decline, reaching new lows each year. This, coupled with insufficient savings, creates financial instability for millions. An early or unexpected death of a loved one creates a vacuum of loss, bills, debt and reduced income that is both devastating and unnecessary. Preventable poverty due to lack of savings and insurance is on the rise, even among the employed and financially thriving.
Analysts and industry leaders have tried to understand the motivations and aspirations of millennials who “believe they will live forever” or haven’t grown up and “live in their parents’ basements.” While psychological and lifestyle factors certainly contribute to empty savings accounts and a dearth of insurance policies, the truth is a far more mundane structural issue: no one is selling insurance to the younger generation.
The industry adage that life insurance is “sold, not bought,” is proving true through its decline. The historical insurance sales approach – an army of captive and independent insurance agents providing a consultative sale to customers—is becoming more and more ineffective over time. Today, only 26% of Americans own their own life policies. Why is that?
The average age of a life insurance agent in the U.S. is 59, and agents tend to sell within five years of their own age. This leaves the bulk of millennials and even Gen X potential customers without the advice, education and handholding that their insured predecessors have had. This gap leaves young families, who most desperately need the protection, underinsured and in a state of potential poverty if tragedy strikes.
This endemic crisis is evident on the memorial pages of GoFundMe, where one can scroll through page after page of “my brother-in-law suddenly passed away and the family needs help to pay for the funeral and provide for the family.” Successful campaigns raise as much as $50,000 – an amount woefully low for the future liabilities of family and future.
Younger customers have different needs and priorities than previous generations. They prefer to use technology to find the information they need about insurance and to buy a policy. Many younger customers are not sold on the need for life insurance; however, once educated on the benefits are likely to purchase a policy. In fact, 86% of Americans overestimate the cost of life insurance, some by as much as 300%. And among the insured in America, many are grossly underinsured, including the 32% who have less than $100,000 in coverage.
In the last 50 years, the way insurance companies do business has changed very slowly. Even in recent years, where other industries such as banking, payments and retail have had to shift their distribution models in major ways, insurance is still only dipping its toes in new sales models, even as their workforce careens toward retirement.
That said, there have been incredible leaps forward in making it easier for consumers to BUY insurance. Insurance companies are investing hundreds of millions in expanding products and services to make it easier for the interested buyer to make an informed purchase quickly, less intrusively and for the best price, all while retaining the financial viability that customers require.
Key investments in data and analysis gave birth to no-exam life insurance policies known as simplified issue insurance. These policies require no medical exam or blood test and are beginning to be offered at greater and greater face values.
This innovation is made possible through a massive data-sharing initiative between healthcare providers, insurers and governments. The data-sharing allows insurers to gather information to assess various risk factors for potential policyholders, even in the absence of the medical exams and blood tests that were once necessary.
Many insurance carriers have also pivoted their direct marketing focus to online sales and digital purchase and enabled a new generation of price comparison engines to ensure those in the market for a policy can easily buy it. Some of these shifts have created channel conflict with the declining direct salesforce, and that conflict often results in hamstrung marketing initiatives that attempt to satisfice amid this dialectic and strategic conflict.
These one-sided investments on the buy side of insurance primarily serve the needs of those who have already opted into the marketplace. But that leaves the question: Where is the real innovation that will close the insurance sales gap?
Closing the sales gap?
In a world where three in four Americans do not own life insurance and 50% of millennials would have an immediate financial need if something were to happen to the primary wage earner in their household, it is now a societal need to close this gap.
The insurance industry needs to look beyond its own agents. Consumers depend on many advisers for financial services, and the industry needs to engage those providers. Paving the way for broader licensing and reducing barriers erected to protect carriers (not the ones for protecting consumers) will help bring more educators and salespeople to the industry.
Insurance digital investments must do more than digitize the past. While making it possible to buy insurance online is an advance, it still resides in the Web 1.0 world of price-comparison and lead generation.
Break down barriers between insurance and adjacent industries. While it has always been true that the person who designs your estate plan is not the person who sells you the appropriate amount or insurance or defines your future investment needs, the consumer doesn’t want to find multiple vendors and convince them to work together. In a modern world, these artificially siloed industries should simply work together.
It was through these observations with fellow World Economic Forum attendees that I saw the need to create the Tomorrow app. Using Tomorrow, families can set up a trust fund for free, including a free will and revocable living trust. In fact, it’s a social experience one does with family and friends who will take on roles such as guardian, executor and trustee. Then, with an understanding of one’s family and finances, Tomorrow educates its customers about their insurance gap, prices the policies that close that gap and brings customers to a policy application. Because Tomorrow leverages all of the data entered to create their trust funds, customers complete the application in three to five minutes, and the policy is added to their trust. For simplified issue policies, that is often the end of the customer’s work, and policies are issued in a matter of days.
Sales innovation is the way forward
McKinsey estimated in 2015 that 20% of insurance agents in the U.S. would retire by 2018, leaving a talent gap in an industry that already has a worker shortage. This is significant on its own, but, considering that current insurance agents fail to reach the under-40 set, more than ever the industry desperately needs disruptive changes.
The only way forward is innovation in insurance sales through breaking down barriers, investing in modern digital approaches and looking beyond the insurance industry.
Despite a generally soft market for traditional P&C products, the fact that so many industries and the businesses within them are being reshaped by technology is creating opportunities (and more challenges). Consider insurers with personal and commercial auto. Pundits are predicting a rapid decline in personal auto premiums and questioning the viability of both personal and commercial auto due to the emergence of autonomous technologies and driverless vehicles, as well as the increasing use of alternative options (ride-sharing, public transportation, etc.).
Finding alternative growth strategies is “top of mind” for CEOs. Opportunities can be captured from the change within commercial and specialty insurance. New risks, new markets, new customers and the demand for new products and services may fill the gaps for those who are prepared.
New technologies, demographics, behaviors and more will fuel the growth of new businesses and industries over the next 10 years. Commercial and specialty insurance provides a critical role to these businesses and the economy — protecting them from failure by assuming the risks inherent in their transformation.
Industry statistics for the “traditional” commercial marketplace don’t yet reflect the potential growth from these new markets. The Insurance Information Institute expects overall personal and commercial exposures to increase between 4% and 4.5% in 2017 but cautioned that continued soft rates in commercial lines could cause overall P&C premium growth to lag behind economic growth.
But a diverse group of customers will increasingly create narrow segments that will demand niche, personalized products and services. Many do not fit neatly within pre-defined categories of risk and products for insurance, creating opportunities for new products and services.
Small and medium businesses are at the forefront of this change and at the center of business creation, business transformation and growth in the economy.
By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen Xers — two groups that prefer to do as much as possible digitally. Furthermore, their views, behaviors and expectations are different than those of previous generations and will be influenced by their personal digital experiences.
The sharing/gig/on-demand economy is an example of the significant digitally enabled changes in people’s behaviors and expectations that are redefining the nature of work, business models and risk profiles.
The rapid emergence of technologies and the explosion of data are combining to create a magnified impact. Technology and data are making it easier and more profitable to reach, underwrite and service commercial and specialty market segments. In particular, insurers can narrow and specialize various segments into new niches. In addition, the combination of technology and data is disrupting other industries, changing existing business models and creating businesses and risks that need new types of insurance.
New products can be deployed on demand, and industry boundaries are blurring. Traditional insurance or new forms of insurance may be embedded in the purchase of products and services.
Insurtech is re-shaping this new digital world and disrupting the traditional insurance value chain for commercial and specialty insurance, leading to specialty protection for a new era of business. Consider insurtech startups like Embroker, Next Insurance, Ask Kodiak, CoverWallet, Splice and others. Not being left behind, traditional insurers are creating innovative business models for commercial and specialty insurance, like Berkshire Hathaway with biBERK for direct to small business owners; Hiscox, which offers small business insurance (SBI) products directly from its website; or American Family, which invested in AssureStart, now part of Homesite, a direct writer of SBI.
The Domino Effect
We all likely played with dominoes in our childhood, setting them up in a row and seeing how we could orchestrate a chain reaction. Now, as adults, we are seeing and playing with dominoes at a much higher level. Every business has been or likely will be affected by a domino effect.
What is different in today’s business era, as opposed to even a decade ago, is that disruption in one industry has a much broader ripple effect that disrupts the risk landscape of multiple other industries and creates additional risks. We are compelled to watch the chains created from inside and outside of insurance. Recognizing that this domino effect occurs is critical to developing appropriate new product plans that align to these shifts.
Just consider the following disrupted industries and then think about the disrupters and their casualties: taxis and ridesharing (Lyft, Uber), movie rentals (Blockbuster) and streaming video (NetFlix), traditional retail (Sears and Macy’s) and online retail, enterprise systems (Siebel, Oracle) and cloud platforms (Salesforce and Workday), and book stores (Borders) and Amazon. Consider the continuing impact of Amazon, with the announcement about acquiring Whole Foods and the significant drop in stock prices for traditional grocers. Many analysts noted that this is a game changer with massive innovative opportunities.
The transportation industry is at the front end of a massive domino-toppling event. A report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, says that by 2030 (within 10 years of regulatory approval of autonomous vehicles (AVs)), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model called “transportation-as-a-service” (TaaS). The TaaS disruption will have enormous implications across the automotive industry, but also many other industries, including public transportation, oil, auto repair shops and gas stations. The result is that not just one industry could be disrupted … many could be affected by just one domino … autonomous vehicles. Auto insurance is in this chain of disruption.
And commercial insurance, because it is used by all businesses to provide risk protection, is also in the chain of all those businesses affected – a decline in number of businesses, decline in risk products needed and decline in revenue. The domino effect will decimate traditional business, product and revenue models, while creating growth opportunities for those bold enough to begin preparing for it today with different risk products.
Transformation + Creativity = Opportunity
Opportunity in insurance starts with transformation. New technologies will be enablers on the path to innovative ideas. As the new age of insurance unfolds, insurers must recommit to their business transformation journey and avoid falling into an operational trap or resorting to traditional thinking. In this changing insurance market, new competitors don’t play by the rules of the past. Insurers need to be a part of rewriting the rules for the future, because there is less risk when you write the new rules. One of those rules is diversification. Diversification is about building new products, exploring new markets and taking new risks. The cost of ignoring this can be brutal. Insurers that can see the change and opportunity for commercial and specialty lines will set themselves apart from those that do not.
New platforms are emerging that change how consumers seek service and engage with brands. In doing so, these platforms are disrupting the traditional call center model. Today’s call centers range from the ancient and decrepit to the ultra-modern and technologically streamlined. Despite the differences in capability, though, they still rely on the telephone to call and connect with customers. As we shift into the messaging era, this is going to change.
The maturing millennial generation is sparking a mobile messaging revolution across all age groups. Text-based communication is fast becoming the most-preferred communication method. And to attract, engage, acquire and retain customers in the text-based era, businesses need a customer communication strategy that incorporates mobile messaging.
Executives are facing three key challenges:
Offering a mobile-native, text-based customer service solution to keep up with changing communication preferences of consumers.
Satisfying the demand for always-on, 24-7 responsive service.
Maintaining cost-efficiency in the call center.
A solution comes in the form of new technology: chatbots and intelligent automation.
Chatbots allow businesses to automate the 80% of general inquiries that are repetitive. This leads to a smaller volume of inquiries requiring live assistance from agents and reduces operational costs while maintaining — or even improving — customer satisfaction ratings. It’s this combination of chatbots and human agents that can usher businesses into the messaging era while reinventing the call center model.
The Current State of Customer Service
Every business strives to provide exceptional experiences that increase customer satisfaction and raise their Net Promoter Scores (NPS). The reality, however, is that executing an effective customer communication strategy is challenging. Often, exceptional customer service is limited by the capabilities of traditional service channels: email, social media and call centers.
By 2020, customer experience will have a such a significant impact on business success that it’s expected to play a bigger role in competitive differentiation than price and even product quality. Customer experience and NPS are fast becoming the new business battlegrounds. Providing experiences that meet or exceed the ever-increasing demands of customers could be the difference between success and failure.
Call center performance has a significant impact on a company’s NPS and customer satisfaction ratings. Given the direct and personal connection a call center enables between a business and its customers, the overall experience of the interaction can have a major influence on how that person perceives a brand on the 1-10 Net Promoter Score scale.
And while call centers work positively by enabling direct connections between businesses and consumers, there are endemic problems for both sides. Businesses are faced with high operating costs and are vulnerable to changing communication trends. Meanwhile, consumers often have to deal with long hold times, outdated Interactive Voice Response (IVR) systems, inter-departmental transfers and inefficient service.
As new technology such as chatbots and intelligent automation emerges, any business that relies on strong customer service can benefit from innovation.
There is a significant opportunity to gain competitive advantage and lead the market by developing call centers that are not only technologically advanced, but also resolve issues with far greater customer satisfaction.
The ideal result is customer service that improves the relationship with customers while maintaining cost efficiency for the business.
What follows is an outline of the current state of customer service in today’s fast-moving, on-demand and customer-driven world. We also detail how the call center can be reinvented through mobile messaging and intelligent automation to deliver a win-win solution for both businesses and customers.
Connected and Demanding: Generation Z, Millennials, Gen X and Baby Boomers
There is a reason why there is so much buzz around millennials: Their generation is one of the largest in U.S. history, and they are maturing into their prime spending years.
Starting in 2017, they will have the purchasing power of more than $200 billion annually. The opportunity for businesses to drive revenue and gain market share with this generation is unprecedented.
The driving force for new technology and communication trends
Millennials are driving mobile and instant messaging adoption. Because they have grown up with technology and information at their fingertips, millennials are highly connected and expect 24/7, on-demand access to the businesses and brands in their lives.
Gen X, baby boomers
In addition, the millennial obsession with mobile messaging is influencing older age groups, with text-based customer service now an increasingly popular choice for generation X and baby boomers.
Millennials have also set the precedent for generation Z. Mobile messaging use is even higher among the first true digital natives; they place even more emphasis on personalization and relevance when interacting with companies.
The Challenge of Delivering What People Want
The adoption of mobile messaging as the preferred communication channel is forcing companies to change how they approach customer service. Today’s call centers no longer meet customer expectations. From long wait times to frequent departmental transfers and ineffective IVR systems, customer service can be a frustrating experience for consumers.
Now, in 2016, with the proliferation of new technology and 24-7, on-demand services, the shortcomings of customer-contact centers are even more apparent.
The competition is fierce, and customers have no forgiveness for poor service. A sub-par experience can destroy a consumer’s relationship with a business.
Key Business Challenges Affecting Call Centers and Customer Loyalty
The shortcomings of the current call center model and its inability to effectively meet the needs of today’s customer also represent a significant opportunity for businesses. There has never been a more appropriate time to dissect the call center and explore new ways to increase its effectiveness.
Executives and business owners need to address the following three business challenges to ensure the future success of their contact centers:
Offering a mobile-native, text-based customer service solution to keep up with the changing communication preferences of consumers.
Satisfying the demand for always-on, 24-7 responsive service.
Maintaining cost-efficiency in call centers.
Each of these areas needs to be explored to maintain, or even improve, customer loyalty and Net Promoter Scores.
Challenge 1: Offering a mobile-native, text-based customer service solution
One of the drawbacks of telephonic customer service is the limit imposed by the phone on call center agents; they can only answer one customer inquiry per call. This limit drives costs up. In comparison, using mobile and web-based chat, agents can effectively manage as many as five inquiries simultaneously. This significantly reduces operational costs while providing a better experience for customers.
Fortunately, thanks to mobile messaging’s rapid rise in popularity, it’s now easier than ever to incorporate mobile chat into an existing customer communication strategy to better engage consumers. Mobile messaging is the modern vehicle for businesses to deliver great customer service at significantly lower costs. The result is a better customer experience that drives loyalty while improving the bottom line.
Using an intuitive interface familiar to more than two billion people, businesses can effectively engage with customers and fans using simple decision trees for fast and convenient issue resolution.
Benefits of mobile messaging solutions:
On-demand customer service that allows consumers to get the information they need, when they need it, without having to look for it.
Faster issue resolution thanks to an agent’s ability to manage more inquiries simultaneously.
Reduced, or potentially eliminated, hold times.
Real-time conversational connections with customers.
Improved customer experience with greater omni-channel service capability.
Secure identity authentication and user verification.
Challenge 2: Satisfying the demand for always-on, 24-7 responsive service
The role of automation, bots and artificial intelligence in customer communication has become an increasingly popular topic. And as the technology continues to develop, more businesses are starting to realize the benefits of automated customer service and how it can drive customer service ratings higher.
Chatbots are virtual agents that operate through natural language processing, meaning they are able to absorb, identify and react to a number of different queries. These sophisticated programs and targeted automated strategies provide an efficient solution to handle the high-volume, repetitive inquiries that overwhelm call centers. Businesses are then freed to devote more time and resources to customers who need one-to-one conversations. They can deliver a far better customer service experience at a far lower cost.
As with any emerging technologies, automation and chatbots need to be approached with tact. Currently, the best strategies use both human agents and chatbots. Businesses can test bot technology and assess what’s right for them without drastically affecting customer satisfaction.
A good starting point is a website’s frequently asked questions. Today, people are more inclined to seek information themselves than engage with a human agent. Using chatbots to automate FAQs is a cost-efficient test that can form the foundation for larger automation plans as the technology develops.
Chatbots can be used as the front-line customer service interface to answer the majority of repetitive inquiries. This combination helps businesses improve efficiencies without compromising customer satisfaction ratings.
Challenge 3: Maintaining call center cost efficiency
Businesses can improve customer communication and drive customer satisfaction ratings by following a simple five-step process to automation:
1. Opportunity Analysis
Review customer service data
Examine IVRs and CSR scripts
Conduct Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis
Identify all opportunities for automation
2. Chatbot Design
Sketch blueprints including flow designs for all areas
Identify integrations needed to enable bots
3. Engineering and Integrations
Receive blueprint approval
Develop bots for intuitive user experience.
4. User-Acceptance Testing
Demo bots in test environment
Adjust as necessary
5. Activation and Optimization
Conduct marketing efforts for Phase I onboarding
Track usage analytics and fine-tune
Benchmark performance against key performance indicators.
With this approach, businesses are able to automate as much as 80% of low-level, repetitive inquiries, saving call center agents for the complex and uncommon issues that require the nuanced knowledge of a live agent. This results in faster issue resolution and more efficient service.
Chatbots: An Emerging Technology
Other technologies may help improve call centers incrementally, but chatbots offer the best, most revolutionary opportunity to scale their capacity and ensure future success. If archaic call center models can’t innovate and keep up with changing consumer trends, they’ll fast become obsolete.
As with any emerging technology, chatbots are still experiencing growing pains. They’re not perfect; key development issues must be overcome to improve the flow of conversation. Increased investment in chatbots and NLP will help the technology mature fast. And as it does, chatbots will increase in capability and become more common, providing new opportunities for businesses across all industries.