Tag Archives: growth

NPS Scores Provide 3 Keys to Growth

This year has not been kind to the insurance industry. According to the 2020 Allianz Global Insurance Outlook Report, premium income is expected to shrink by 3.8% globally, mostly due to the global COVID-19 pandemic. So, it’s all hands on deck to find ways to stem the losses, and one of the highest priorities is customer retention. Winning new customers is critical to recovering from the economic shocks caused by the virus, but these new customers will only make a difference if carriers can hold on to the customers they already have. 

Happy customers generally remain customers, and one of the best measures of customer satisfaction is the Net Promoter Score (NPS). It’s a simple measure that’s calculated by subtracting the percentage of customers who would not recommend your product or service to friends from the percentage of those who would. But don’t be fooled by its simplicity. It’s a powerful metric. 

In the Harvard Business Review article that introduced NPS to the world, the authors found that, “remarkably, this one simple statistic seemed to explain the relative growth rates across the entire [airline] industry; that is, no airline has found a way to increase growth without improving its ratio of promoters to detractors.” Further research showed that this finding applied across most industries. The takeaway is this: If carriers increase their NPS scores, they will also accelerate growth.

Of course, improving customer satisfaction is no small feat. But with the right technology and the right partners, insurers will see their NPS scores rise. Here are a few of the technologies and strategies we’ve used at my company, HONK Technologies, to achieve a high NPS scores for our carrier clients.

Automation:

Customers appreciate it when they receive fast service, and nothing speeds service like automation. The insurance industry has made a lot of progress on this front. According to the 2019 J.D. Power U.S. Auto Claims Satisfaction Study, customer satisfaction with the auto insurance claims process hit a record, as the amount of time that passed between filing a claim and the return of a vehicle was 12.9 days, half a day less than it took the year before. 

But there’s still room for improvement, particularly on the claims intake side. For example, instead of sending an adjuster to inspect the vehicle or other property and make a report, the carrier can have the customer send photographs of the damage electronically, perhaps using the carrier’s mobile app. The claim can then be audited by a remote adjuster or even artificial intelligence.

See also: 10 Tips For Using Net Promoter Score

It’s a good idea to undertake a full audit of the claims process and then identify where emerging technologies can automate tasks. It’s not a simple project, but if it’s conducted at regular intervals and management acts on recommendations, the long-term benefits to customer satisfaction and cost efficiency can be substantial.

Analytics, AI and machine learning:

It’s not always obvious what changes could improve customer satisfaction and increase NPS scores, especially because many of the obvious measures, such as speeding up claims processing, are already underway at many carriers. Carriers will need insights into customer behavior that aren’t evident even to an experienced insurance professional. Advanced analytics, artificial intelligence (AI) and machine learning (ML) can help provide these insights. 

But these technologies require a lot of data, so insurers should collect as much information about the customer experience as is ethical and legal. No data point is too small to collect. Everything from demographic information and customers’ interactions with your website, to recordings of customer service calls and interactions with third-party service providers could be important. Just as the HBR author, Frederick Reichheld, was surprised to find that the simple NPS score correlated with business growth, you may be surprised to discover that something as mundane as the layout of the claims intake form could make an enormous difference to customer satisfaction.

The more information you gather, the more likely you are to uncover unexpected insights about your customers that can help you increase their satisfaction.

Partner evaluation:

These days, ecosystem services are just as important as claims for creating happy customers. According to a report from Bain, additional services beyond traditional insurance — such as assistance with buying or selling a vehicle, home security advice, healthy living consultations or roadside assistance — can make a big difference in customer loyalty. Bain found that carriers that offered three or more ecosystem services had an average NPS score that was more than 3.5 times higher than those that offered none.

After all, customers are likely to interact far more often with one of these services than they are to file a claim (unless they are very unlucky, indeed). These services are not nice-to-haves; they’re must-haves, and, if they’re poor quality, that will reflect on your brand. So as you work with ecosystem partners, require them to provide data on each customer interaction, and regularly evaluate their performance. Set up key performance indicators (KPIs) and, if they’re not being met, find a new partner. Your NPS score and future growth are at stake, after all.

See also: COVID, and How to Pivot to Innovation

It’s a difficult environment right now for insurance, but as anyone who has been in the business long enough knows, even the worst cycles eventually come to an end. Insurers that lay the groundwork now will be well-positioned to grow once the public health crisis finally passes and the economy recovers.

How to Take a Bold Approach to Growth

In today’s insurance environment, victory belongs to the bold. Margins are under pressure, and competition is heating up; insurers can no longer afford to sit on businesses that are under-performing or sub-scale.

By taking a portfolio approach to their businesses, insurers can start to assess the value and performance of their assets to make bold decisions on whether to grow or go (build or leave the business).

Time for bold decisions

Facing continued low interest rates, growing rate pressures in the property and casualty (P&C) sector and high levels of competition in both the P&C and life sectors, insurers will see margins under pressure for the near future.

Not surprisingly, most have already undertaken massive cost-reduction initiatives. Now, with little room left to cut, some are starting to take a more critical and strategic view of their business as a whole.

Our experience suggests that insurers need to take bold action and make difficult decisions now if they hope to create shareholder value and grow their business. The reality is that too many insurers are carrying businesses that are sub-scale, underperforming or simply distracting for management.

See Also: What is Your 2016 Playbook for Growth?

To help organizations assess their businesses and local operations, we have developed a diagnostic tool that segments businesses in the following way:

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Taking a portfolio view

We firmly believe that there are significant opportunities to help insurers enhance shareholder value by taking a portfolio view of their assets. And, in doing so, insurance organizations should be able to make clear decisions about whether to go (i.e., leave those markets and businesses that do not meet the strategic objectives of the organization) or grow (i.e., committing to targeted investment to drive transformational change and improvement initiatives
that will allow the business to compete effectively).

Indeed, by looking at non-core businesses as a portfolio of assets, insurance executives should be able to properly assess each businesses’ strategic fit, performance and synergies, which, in turn, will enable them to identify opportunities to improve the business through portfolio realignment.

Taking a portfolio view will also provide insurance executives with the insight needed to prepare a fix, close or sell strategy that drives a clear approach for non-core assets and then move through to a robust execution plan with appropriate governance.

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GO: A bespoke approach to divestment

In those cases where the assessment process leads to the decision to go, insurance executives will need to develop a smart divestment strategy for the business. Interestingly, our experience suggests that the divestment process has evolved considerably over the past decade.

Whereas in the past, the normal approach to selling a business involved rigid auction processes based on standard checklists and documents such as information memoranda and vendor due diligence reports, most now recognize that this approach may not maximize value.

Instead, insurers are now taking a more bespoke and focused approach to divestment that is largely influenced by four key factors:

— economic conditions
— sellers taking control
— wider buyer populations
— business model changes

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GROW: More than just scale

Insurers need to have sufficient optionality and diversification
to respond to a rapidly changing business environment. And while not all divisions and local operations need to be market-leading, they do need to demonstrate how they can make a contribution to the overall strategic ambitions of the organization.

For some, the answer will come in the form of inorganic growth within their sub-scale businesses. For others, targeted investments to support product growth initiatives or new distribution arrangements offer a lower-risk solution.

However, while many deals have been driven recently by organizations with a (fully understandable) strong focus on costs and efficiency, we often find that scale, in itself, is not a good enough reason to support a deal. Indeed, we believe that acquisitions must also bring complementary capabilities (such as new expertise in specific product lines, increased geographical reach or new distribution models) to create a sustainable platform for future growth.

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GROW: Responding to a changing environment

New technologies, changing customer demands, new ways of doing business and the threat of innovators disrupting the traditional business model are all changing the way that insurers view their portfolio of assets and businesses.

See Also: The Formula for Getting Growth Results

Clearly, understanding and capturing the benefits of innovation is a critical imperative, and there are major opportunities available for companies willing to invest in new technologies. Recognizing this, many insurers are now starting to develop new models and ways of working with the financial technology (FinTech) community.

Key takeaway: Be bold

Regardless of whether the decision is to grow or go, insurers need to start facing up to the difficult decisions that must be made about their underperforming assets.

Interestingly, our experience suggests that — in this rapidly evolving space — outright acquisition may not always be the right answer. As our recent report, The Power of Alliances, demonstrates, many insurers are now exploring the value that could be generated by investing in partnerships, alliances and innovation hubs to broaden their exposure to innovations and technology solutions.

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Simply put, insurers can no longer afford to sit on businesses that are not delivering value; they must make bold decisions and then execute on them to win in this environment.

Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation.

For additional news and information, please access KPMG’s global website.

growing

If Growing Gets Tough, Tough Get Growing

Successful businesses continuously draw on their strengths – and their people – for growth.

How do you describe the strengths of your business now? How would you describe the strengths that you’ll likely need in a year? In a few years? And how do these strengths translate into the skills your people will need in the future? For most companies, the answers to these questions are always evolving, as disruption increases and the pace of business picks up.

We’ve seen the recent evolution of companies’ capabilities — like fast-food chains rolling out deluxe coffee-shop menus, or utilities delving into smart home appliances.

A lot of organizations have solid processes for evolving their business strategies. But as sound as the development and approval process is, it often leaves out an important aspect: Can your people evolve, too?

Most CEOs aren’t certain that theirs can. In our latest CEO survey, nearly 80% of U.S. business leaders say they’re concerned that a lack of key skills threatens their organizations’ growth prospects.

This stat raises the question: Are some of these organizations taking their growth strategies too far afield, beyond their core strengths, in a desperate search for faster growth?

In Strategy+Business Magazine, we recently wrote about how companies that deliver sustainable growth remain true to what they do best and take advantage of their strongest capabilities—what we call a capabilities-driven strategy.

It takes a substantial effort. As we say in the story, “If you respond to disruption by changing your business model and capabilities system, you can’t dabble. You have to commit fully.”

That level of commitment is only possible, of course, with the right people to step up and deliver on your company’s greatest strengths.

Think of the potential talent issues at hand for so many businesses: How does a legacy technology company avoid disruption and commoditization? How can a fast-food chain turn up its café side of the business without trained baristas on hand? How can a utility amp up the tech-savvy talent needed to design Internet-and-data-fueled thermostats and security devices?

They’ll all need to align their talent strategy with their business strategy.

In our advisory work with clients, we are in frequent talks with companies that need to make these moves. And talent is at the top of the priority list.

Before preparing to grow your strengths, think about the capabilities in your current ecosystem of people and where gaps might pop up: 

People strategy, leadership and culture: Does our people strategy support our growth initiatives (and, more importantly, is there a strategy)? Is the right leadership development system in place, including a robust global mobility program? Will our culture support the execution that’s required?

  1. Reward: Does our compensation and benefits strategy still fit? Is pay competitive? Are there areas to be restructured that could free capital for re-investment?
  2. Talent acquisition: Do we need to pull in brand-new talent by strategically hiring from the outside or by making strategic acquisitions?
  3. Organization design and operating model: Have we designed an organizational structure and operating model that have clear links between all our capabilities?
  4. Change management and communications: Do we have the right program management structure and strategic change methods for execution? Do we know who the real information brokers are in the organization who will informally drive the change?
  5. Technology: Do we have the right technology to support the kind of employee experience our people need? Are we leveraging workforce analytics to retain our top-performing people, and are we conducting frequent employee surveys to understand the pulse of the organization?

These are just a few of the talent areas that are important to understand.

Odds are you won’t need to revamp all of them. But a carefully designed and innovative talent strategy underlies the successful evolution to get growing.

 To read more details on the strategic changes you may need to make to stretch your growth, read the full article, “Grow from your strengths” in strategy+business magazine.

2016 Latin America Insurance Outlook

Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright. The rollout of new insurance products and distribution approaches at a time of low market penetration should drive strong growth for insurers. Insurance premium growth is expected to rise by around 6% to 7% in 2016 and possibly beyond should the economic environment improve as expected. At the same time, the emergence of end-to-end digital capabilities is transforming the Latin American insurance market. This digital market disruption will force insurers to make rapid revisions to existing business models to stay competitive and build market share.

Customer expectations rising

Commercial customers will continue to require more sophisticated insurance solutions in 2016, including coverage for business interruption, cyber security, civil unrest and errors and omissions. Latin American consumers, many of whom are young, cosmopolitan and tech-savvy, will continue to push for new insurance channels and services that fit their lifestyle. To respond, insurers will need to simplify and adapt products for Millennials and sharpen their focus on mobile and social media interactions. Evolving customer needs throughout the region are compelling insurance companies to rethink their strategies, processes and services. The rise of financial technology, or fintech, companies is causing insurers, particularly in the consumer insurance sector, to reconsider their business models and increase their investment in new digital technologies. Despite a desire to avoid conflicts with legacy models, insurers realize that flexibility, efficiency and innovation are critical for success in a more demanding marketplace

Competition heating up

The liberalization of industry regulation across Latin America has opened insurance markets to wider competition. The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region to local insurers looking to expand cross country to entrenched insurers defending their turf. These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property.

Pockets of premium increases can be found in areas of instability, such as Venezuela. However, insurance capacity is very limited for Venezuelan political risk, with most risks dependent on the international reinsurance market.

As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry to the private sector in Mexico, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil, where only a few insurers offer such liability coverage.

Read our Market Outlook for LATAM Insurance in 2016 to understand more about the dynamics facing the South America Market here.

The Formula for Getting Growth Results

Real growth — not incremental improvements to last year’s numbers, but big results coming from new opportunities you manage to seize and commercialize — is hard to come by.

There are so many distractions, so many rabbit holes you can fall into — the lure of a cool technology, a move by a competitor that appears to be smart, a high-pressure conversation with a board member, a convincing argument from a colleague on why an idea will or won’t work or a CFO waving a red flag.

There are also so many ways to convince yourself that the status quo, at least for now, is tolerable — the comfort of a good current quarter, the reassurance of lots of money being plowed into new technology, the establishment of an innovation team or being recognized with an industry award.

But somehow, things still don’t feel quite right. You wonder why, in spite of upbeat business reviews from trusted employees, the new product pilots aren’t quite panning out. Some new start-up (or two, or three or more) seems to be whipping up a storm in the market, and you feel left in the dust (or left to contemplate paying a hefty premium to buy what someone else managed to build right under your nose).

What to do?

The answers are astoundingly simple, so simple, in fact, that they elude the very smart, big-school-degree types running around corporate America today. These leaders are fully in control of their growth destinies, yet all too often are unable to deliver and either blame some externality or create a mirage that all is well.

Here’s the three-step formula to get real growth:

  1. Define the customer problem you are solving. This is the first, almost painfully obvious step. Yet, consider how many people in big roles define their business’ marketplace value around internally generated definitions of value, claim to know customers’ needs but never talk to customers or allocate resources to deploy new technologies with no connection to how customers act or how they lead lives in which your business probably plays only a teeny, tiny role.

Let’s parse what this first step means.

  • Define: with absolute clarity, in a way that lets you understand the total scope of opportunity, not just what’s in front of your nose and linked to today’s P&L drivers.
  • The: one, with focus.
  • Customer: the people who take their wallets out of their pockets and give you their money – not the internal lobbyists.
  • Problem: a real pain point, not something that merely makes people feel good. People will prioritize getting rid of their pain as way more important than a gratuitous feel-good purchase.
  • You: the bigger you, the organization, mobilized around your singular focus.
  • Solve: dramatically better than anyone else, so you have a massive jump on others in the market who will chase after any good business opportunity to eat into or take over share.
  1. Establish the fundamentals to cultivate growth.
  • Governance: If your plan is to create big sources of growth, the CEO has to own the goal, including implementation, and hold the rest of the C-suite accountable. If not, accept your destiny as an incremental player, at best.
  • Accountability: Big new sources of growth will come from separate accountability outside the established P&L structures. No fault to the P&L leaders; their work is important and drives the company today. But the goals, timeframes, talent and implementation path to run a scale business is based on predictability, control and risk reduction. Contrast these attributes with what’s needed to spawn a big, new business: experimentation, failure, ambiguity and risk-taking. The established P&L priorities will always overwhelm the nascent ideas trying to grow into big future profit producers.
  • Talent: The people who are absolutely brilliant at running the machine are unlikely to be the same folks who will create the next big thing, and vice versa. That’s not personal, it’s the reality that we are all really good at some things and mediocre at others and should just avoid yet others. Be truthful about that, both regarding yourself and when evaluating others.
  • Metrics: Find the metrics that connect customer needs and wants to the customer actions driving the P&L. It’s a cop-out to say this can’t be done, and it’s easy to fall back on familiar but irrelevant metrics. Focus on customer behavior measurements to drive decisions. High-level reporting of income statement and balance sheet line items are interesting, and certainly matter to your investors. But they will blind you to the below-the-surface measures that matter – the real drivers that are moving every day as your customers make decisions affecting your performance whether or not you acknowledge them. Operate your business at that level, and you will drive your destiny.
  • Process: Industrial-strength processes that enforce predictability, control and risk reduction will steamroll over anything that doesn’t look exactly like what came before. Remember the definition of insanity often attributed to Albert Einstein: “doing the same thing over and over again and expecting different results.”
  1. Embrace and behave according to the mindset of a founder, or move on. In The Startup Playbook, author David Kidder cites the five qualities of the successful entrepreneur. These attributes apply equally well to leaders in any enterprise, not just what we have traditionally defined as start-ups.
    1. Know thyself. Your team’s success will be a direct reflection of your self-awareness and deployment of your own gifts to whatever opportunity you go after.
    2. Ruthlessly focus on your biggest ideas. Focus means laser-like drive against the beacon you see out in front of you that represents realization of your solution to the customer problem. But not to the exclusion of listening – being able to filter and apply that which is valid, without getting diluted by the well-meaning, but utterly useless opinions you will be offered. It’s a tightrope.
    3. Build painkillers, not vitamins. Back to Point 1. Solve a real problem. Don’t create a nice-to-have.
    4. Be 10x better. That’s Kidder’s estimate of how far ahead you have to be to outrun and outlast the inevitable competition.
    5. Be a monopolist. At least in mindset, think gigantically. Think about how you can own the market, not just create something that will satisfy a near-term demand.

Creating big sources of growth with real results can be predictable. You just have to follow the formula.

This post also appearing in Huffington Post.