Many insurers — especially regional players with deep ties to their local community — stress that customer service is a key differentiator for their business. Novarica’s position has always been that customer service and technology are not tangential, but rather they are one and the same: having quick access to agent and policyholder data, quoting and binding in real-time, and generating recommended contact opportunities are examples of the kinds of technology-enabled capabilities that take customer service to the next level.
But key to providing great customer service is recognizing how customer expectations have changed in the last decade. Insurers must be ready to engage with consumers when and how they want across multiple channels for engagement. This has put considerable pressure on the insurance industry to figure out how to model themselves after other tech-driven industries in an affordable and scalable way. In the last year, chatbots have emerged as a viable option due to their ability to enable rapid customer service across a variety of low-touch applications 24/7. Moreover, chatbots are able to provide an added layer of support and consumer engagement without the need for additional staffing, freeing up human resources for higher-level tasks.
Insurance use cases for chatbots include first notice of loss (FNOL), claims self-service, customer policy applications, policy endorsements and support, and agent interaction. These are great opportunities, not to replace other modes of interaction, but to supplement them for off-hours or for consumers who prefer a chat over a phone call. But chatbots are only as useful as the existing back-end functionality that supports them, and insurers can’t slap a chatbot interaction into their website or mobile app if they don’t also enable their core systems to provide real-time status updates or quotes via a web service. Just because a chatbot understands a user’s question doesn’t mean it can respond if the information isn’t available via machine, and an unsatisfying chatbot interaction is worse than none at all. The quick evolution of chatbot technology is a great option for a new channel, but it doesn’t let insurers off the hook to modernize and service-enable their entire infrastructure.
Moreover, as discussed in a recent blog post on Progressive’s new chatbot, Flo, insurers need to understand appropriate use cases for chatbots: while some self-service functions are ripe for chatbot usage, others may require empathy that an algorithm can’t provide. The submission of a claim is often triggered by a traumatic life event for the consumer, such as a car crash or illness, instances calling for a human touch. For this reason, it is unlikely chatbots can completely replace human agents capable of offering empathy and reassurance to their customers during heightened emotional crises.
As with any emerging technology, insurers should have specific, targeted use cases in mind for their initial implementations. Even if the end goal is to have chatbots available across all modes of support and service, such strategic projects start best with tactical investments.
In May, I wrote about The Three Phases Insurers Need for Real Big Data Value, assessing how insurance companies progress through levels of maturity as they invest in and innovate around big data. It turns out that there’s a similar evolution around how insurers consume and use feeds from the Internet of Things, whether talking about sensor devices, wearables, drones or any other source of complex, unstructured data. The growth of IoT in the insurance space (especially with automotive telematics) is one of the major reasons insurers have needed to think beyond traditional databases. This is no surprise, as Novarica has explained previously how these emerging technologies are intertwined in their increasing adoption.
The reality on the ground is that the adoption of the Internet of Things in the insurance industry has outpaced the adoption of big data technologies like Hadoop and other NoSQL/unstructured databases. Just because an insurer hasn’t yet built up a robust internal skill set for dealing with big data doesn’t mean that those insurers won’t want to take advantage of the new information and insight available from big data sources. Despite the seeming contradiction in that statement, there are actually three different levels of IoT and big data consumption that allow insurers at various phases of technology adoption to work with these new sources.
For certain sources of IoT/sensor data, it’s possible for insurers to bypass the bulk of the data entirely. Rather than pulling the big data into their environment, the insurer can rely on a trusted third party to do the work for it, gathering the data and then using analytics and predictive models to reduce the data to a score. One example in use now is third-party companies that gather telematics data for drivers and generate a “driver score” that assesses a driver’s behavior and ability relative to others. On the insurer’s end, only this high-level score is stored and associated with a policyholder or a risk, much like how credit scores are used.
This kind of scored use of IoT data is good for top-level decision-making, executive review across the book of business or big-picture analysis of the data set. It requires having significant trust in the third-party vendor’s ability to calculate the score. Even when the insurer does trust that score, it’s never going to be as closely correlated to the insurer’s business because it’s built with general data rather than the insurer’s claims and loss history. In some cases, especially insurers with smaller books of business, this might actually be a plus, because a third party might be basing its scores on a wider set of contributory data sets. And even large insurers that have matured to later phases of IoT data consumption might still want to leverage these third-party scores as a way to validate and accentuate the kind of scoring they do internally.
One limitation is that a third party that aggregates and scores the kind of IoT data the insurer is interested in has to already exist. While this is the case for telematics, there may be other areas where that’s not the case, leaving the insurer to move to one of the next phases on its own.
Phase 2: Cleansed/Simplified IoT Data Ingestion
Just because an insurer has access to an IoT data source (whether through its own distribution of devices or by tapping into an existing sensor network) doesn’t mean the insurer has the big data capability to consume and process all of it. The good news is it’s still possible to get value out of these data sources even if that’s the case. In fact, in an earlier survey report by Novarica, while more than 60% of insurers stated that they were using some forms of big data, less than 40% of those insurers were using anything other than traditional SQL databases. How is that possible if traditional databases are not equipped to consume the flow of big data from IoT devices?
What’s happening is that these insurers are pulling the key metrics from an IoT data stream and loading it into a traditional relational database. This isn’t a new approach; insurers have been doing this for a long time with many types of data sets. For example, when we talk about weather data we’re typically not actually pulling all temperatures and condition data throughout the day in every single area, but rather simplifying it to condition and temperature high and low at a zip code (or even county) on a per-day basis. Similarly, an insurer can install telematics devices in vehicles and only capture a slice of the data (e.g. top speed, number of hard breaks, number of hard accelerations—rather than every minor movement), or filter only a few key metrics from a wearable device (e.g. number of steps per day rather than full GPS data).
This kind of reduced data set limits the full set of analysis possible, but it does provide some benefits, too. It allows human querying and visualization without special tools, as well as a simpler overlay onto existing normalized records in a traditional data warehouse. Plus, and perhaps more importantly, it doesn’t require an insurer to have big data expertise inside its organization to start getting some value from the Internet of Things. In fact, in some cases the client may feel more comfortable knowing that only a subset of the personal data is being stored.
Phase 3: Full IoT Data Ingestion
Once an insurer has a robust big data technology expertise in house, or has brought in a consultant to provide this expertise, it’s possible to capture the entire range of data being generated by IoT sensors. This means gathering the full set of sensor data, loading it into Hadoop or another unstructured database and layering it with existing loss history and policy data. This data is then available for machine-driven correlation and analysis, identifying insights that would not have been available or expected with the more limited data sets of the previous phases. In addition, this kind of data is now available for future insight as more and more data sets are layered into the big data environment. For the most part, this kind of complete sensor data set is too deep for humans to use directly, and it will require tools to do initial analysis and visualization such that what the insurer ends up working with makes sense.
As insurers embrace artificial intelligence solutions, having a lot of data to underpin machine learning and deep learning systems will be key to their success. An AI approach will be a particularly good way of getting value out of IoT data. Insurers working only in Phase 1 or Phase 2 of the IoT maturity scale will not be building the history of data in this fashion. Consuming the full set of IoT data in a big data environment now will establish a future basis for AI insight, even if there is a limited insight capability to start.
These three IoT phases are not necessarily linear. Many insurers will choose to work with IoT data using all three approaches simultaneously, due to the different values they bring. An insurer that is fully leveraging Hadoop might still want to overlay some cleansed/simplified IoT data into its existing data warehouse, and may also want to take advantage of third-party scores as a way of validating its own complete scoring. Insurers need to not only develop the skill set to deal with IoT data, but also the use cases for how they want it to affect their business. As is the case with all data projects, if it doesn’t affect concrete decision-making and business direction, then the value will not be clear to the stakeholders.
Amid promising growth, companies in the insurance industry are being pressured to evolve their business models because of rising consumer expectations, new technologies and a widening skills gap in the workforce. These changes, in turn, threaten current workforce models and require changes in six jobs.
There’s economic promise in the insurance industry: A recent survey of property and casualty, life and health insurance companies found that 62% of respondents are planning to add staff in 2014. The U.S. insurance industry projects the addition of 200,000 employees between 2012 and 2022, and in March 2014 its unemployment rate (3.3%) was half of the national average (6.7%).
While the industry growth is a boon, insurers must overcome employment challenges before seeing its benefits. Attracting talented people is a particular stumbling block for insurers: Just 5% of students in the millennial generation are very interested in working in the insurance industry. As the insurance workforce continues to age — more than half of the current insurance workforce is over age 45 — insurance companies will have an ever-widening gap to fill.
Moreover, as with many other industries, the insurance industry is plagued by a skills gap that prompts industry representatives to cite difficulty filling open positions with qualified candidates. Graduates and entry-level workers lack the industry experience and knowledge of those who are retiring. Career insurance employees are often missing the technology skills and savvy that are increasingly required to handle new systems being adopted by insurance companies.
Incumbents are pressured to evolve or dissolve
Ezekiel Emmanuel — one of the architects of the Affordable Care Act — writes in his new book that “because of health care reform, new actors will force insurance companies to evolve or become extinct. The accountable care organizations (ACOs)…and hospital systems will begin competing directly in the [health care] exchanges and for exclusive contracts with employers.” The healthcare exchanges are becoming a game changer for the way consumers purchase their coverage. Now providers will be competing on “the best quality, service and price.”
Robert Pearl, M.D. — a contributor to Forbes — contends that these healthcare exchanges “will create more transparency and make the coverage-selection experience resemble purchasing airline tickets on Expedia or Orbitz.” Consumers will be empowered with technology, information and choice in a process that traditionally has been out of their control.
This expectation of the “consumerization” of insurance is not limited to healthcare. A 2013 survey of more than 6,000 insurance customers in 11 countries reveals that they desire:
More personalized services from their providers
Engagement through continuing conversations
Access to information via online, in-person, mobile and other channels
Information that is consistent across all of those channels.
Customers will begin to flock to insurance companies that can provide the consumer-centric experience they’ve become accustomed to in other industries and businesses. A recent survey of 2,500 insurance customers by Accenture shows that more than 90% of respondents choose insurers based on:
Speed at which their problems are resolved
Availability of products and services that meet their specific needs
Competitive pricing for products and services
Transparency of prices and charges
A high level of information about proposed products and services
Knowledgeable and responsive phone support.
To attract and retain customers, insurers will need to move toward customer-centric models, which will require adoption of new technologies and employee skills.
Evolving business models spur changes in business systems and roles
Many larger insurance organizations have been relying on legacy computer systems that were built around regulatory requirements for paper-based documentation. With such regulations now lifted, insurers are free to modernize their systems and implement more automation, self-service features and access to real-time information to meet consumer expectations. They can also build into their insurance business systems new features that improve customer-centricity, such as:
Robust customer relationship management tools with integrated communications channels — such as email, online chat and click-to-call voice
Big data and predictive analytics
With these technologies and customer expectations, today’s frontline and operational insurance workers need to be more tech-savvy and have better communication skills and better problem-solving capabilities. There will be significant effects on six key frontline and operational positions, which collectively made up more than 35% of the industry’s workforce in 2012.
Table 1: Key frontline and operational positions in the insurance industry
Source: Bureau of Labor Statistics
Hiring and promoting in the new insurance landscape
These six key job roles span much of the career spectrum of the industry. For example, individuals who have not yet earned a post-secondary degree can perform well as customer service representatives and then continue their studies while on the job to advance their careers. Those with associate’s degrees may be able to begin as entry-level sales agents. As workers progress through their careers and gather additional education and experience, the insurance industry offers them myriad growth opportunities in sales, finance, human resources and technology.
While these positions differ in required education, responsibilities and technological complexity, they share a number of skills or detailed work activities (DWAs) — an occupational classification system of the Federal Government O*NET system. DWAs describe business work tasks that can be found across multiple occupations and remain constant over time. We’ve been able to identify nine skills or DWAs that largely cut across the positions examined in this report:
Table 2: Cross-cutting skills
Source: O*NET. For full DWA descriptions, go to onetonline.org.
DWAs are logical units of analysis for hiring and promoting employees, as well as curriculum and training program development, because they transcend frequently changing industry staffing patterns and company–specific job descriptions.
A closer look at key frontline and operational positions
Below is a snapshot — including employee profiles, typical education and career paths, responsibilities and impacts of technology — for customer service representatives. These insights are the result of the research performed by the workforce strategies team at College for America — a nonprofit, accredited college dedicated to providing more accessible, workplace-applicable degree programs to working adults. Its findings reflect labor market data, real-time job listings and feedback from insurers nationwide.
Snapshot: Customer service representative
Source: Bureau of Labor Statistics
Tony had worked throughout high school at a local retail store. After graduation, he wanted to enter a career path that would offer advancement and tuition reimbursement so he could pursue a college degree. With the people and listening skills he learned from working retail, he was offered a position as a customer service representative at a life insurance company.
Before working with clients at his new position, Tony participated in the company’s training program to learn about products and services, customer management, departmental responsibilities and where to find information. He also learned telephone techniques to better interact with clients.
As a customer service representative, Tony spends his day answering questions, providing information to clients and resolving complaints. He has become adept at dealing with conflict, as his clients often call under stressful circumstances. Tony is currently taking courses at a local college and hopes to make his way into a sales position in his company.
Customer service representative positions require a minimum of a high school diploma, though often employers are seeking people with an associate’s or bachelor’s degree. Representatives generally receive company-specific training before beginning work.
These positions provide an opportunity for individuals to learn the insurance business, and they serve as a stepping stone to other insurance careers.
A customer service representative may be expected to:
Work with policyholders and clients to answer questions, respond to requests for information and handle and resolve complaints
Play a critical role as the “face” of the insurance agency to clients
Respond to client needs and provide information about products and services
Take orders, determine charges and oversee billing and payment
Ensure client information is complete and accurate
Keep detailed records of customer interactions
Notify customers of claim investigation results and planned adjustments
Refer unresolved grievances to the appropriate department
Review insurance policies to determine if a loss is covered
Communicate with clients in-person via telephone, emails, and online chat
Manage angry or unhappy clients
Speak with clients who are dealing with stressful situations such as a car accident, illness of a loved one or a natural disaster.
Impact of technology
Customer service representatives are now engaging with customers in modalities other than on the phone, such as through email, online chat and social media. Soft skills in writing, communication and active listening are increasingly important as the connectedness of the Internet makes it easy to broadly share representative-to-client communications — whether good or bad.
Similarly, customer service representatives are being fed customer data from across the Internet and from within their business systems (known collectively as big data). These representatives must learn how to use the right information to inform interactions with customers and engage them in the selling cycle by providing information about products that would likely be of interest to them.
For the full report, including snapshots of the other five, key job types, click here.