Tag Archives: insurance customers


What the Primaries Can Teach Us

Super Tuesday’s presidential primaries and all the associated media coverage made me reflect on how candidates interact with their constituencies and the lessons insurers can learn.

I have been a New Hampshire resident all my life, and one of the special privileges of living in this great state is being able to vote in the first-in-the-nation presidential primary every four years. Of course, with that privilege comes some pretty aggressive campaigning. Robocall after robocall, commercial after commercial, canvasser after canvasser; New Hampshire was inundated with candidates for several months until voting day came.

Now, our primary is over, and the rest of the country has its chance to weigh in and experience the campaigning. I can’t help but apply the insights I got as a potential voter to the insurance industry; more specifically, to customer demands and business practices.

First, it is clear 20th century campaign tactics won’t win elections in the 21st century. The rest of the nation saw how New Hampshire voted overwhelmingly for outsiders in both parties. Neither Sanders nor Trump has strong party affiliations with the Democrats or Republicans; they are considered outsiders. Voting along a party line is a thing of the past, and, in New Hampshire, where voters can register as independents and vote in either party’s primary, this is especially true. The same principle is true for insurance—20th century tactics won’t work in the 21st century, either. Customers have more information, more choices and higher expectations than ever. And, just like a New Hampshire voter, every potential insurance customer is an “independent” and can pick any P&C carrier that suits a consumer’s unique needs; the consumer can then leave the carrier just as quickly if a better opportunity comes along. What keeps a customer loyal is new ideas, innovative approaches and efficient and effective service.

Next, I experienced some interesting data and analytics gathering during the campaign. My landline rang off the hook for months, with robocallers asking my opinions on various policy issues or my thoughts on one candidate or another. However, I found it odd that many candidates did not ask basic demographic questions—how many phones I had, how many people lived in my house, how many people were of voting age—that would have been helpful targeting a message. The candidates who used alternative forms of campaigning tended to do better in New Hampshire., and the same is true for insurers: Gathering data is great, but it’s the savvy application of the collected data that differentiates an insurer from the rest of the pack. New technologies are making it easier for insurers to use data to their advantage. It’s time to embrace those technologies.

Finally, I learned a bit about campaign spending. Isn’t it interesting that the two candidates who won New Hampshire are funding their campaigns in non-traditional ways? Similarly, insurers need to look at their technology investments through a new lens.

Insurers should take a moment to imagine themselves as candidates in a race—an insurer’s goal is to be the best option to the greatest number of people. Then, they will win. This means using innovative approaches, gathering and using data for advantage and making sound strategic investments. As in this presidential election, anything seems to be on the table. And the sky is the limit in terms of new ways to reach today’s customer.

Carriers Want Loyalty but Haven’t Earned It

Informed risk-taking is what insurance underwriting is all about. It is also how consumers and business owners navigate every financial decision every day — including whether to stick with their insurance carrier.

Insurers often mistake in-force retention for “customer loyalty,” when the reality may be that a customer is actively shopping for better value.

You cannot stop customers from shopping; you can only benefit from the fact that they want to learn more about where their money goes.

The cost of insurance is top of mind to customers, and they are now intensely seeking to lower their insurance expenses, mostly via direct channel distribution over the Internet and via telephonic access to agents.

Information drives decision making (data and analytics combined with underwriting judgment) in a process where accurate risk assessment, coupled with knowledge of expenses, lets an insurer add a profit factor to get to a market price. If the insurer’s cost structure and risk-taking appetite meet successfully with customers’ needs, then it should grow profitably. If not, then it either grows at a loss or only writes those risks in niches where it find itself competitive (either by choice or by happenstance). The need to drive down costs is the primary reason to adopt Internet and mobile-computing applications for distribution — you can follow the consumers’ own expense-minded shopping behavior as they are now accessing multiple on-line resources and then either buying online or contacting an agent (often with a mobile device).

Insurance customers see thousands of their dollars disappear to protect them from financial ruin — a “lesser of two evils” trade-off. No wonder they want to avoid spending more time and money than necessary. The traditional, intermediated marketplace for insurance keeps customers from caring which “big box” carrier provides their coverage — whether for auto, home, business or life — as long as the institution can pay any claims. In survey after survey, few customers even know who actually insures them. They only know that they are insured because they pay premiums.

Given customers’ agnosticism about who underwrites their risk, and given the state of communications and transaction technology, insurers need to be prepared for changes in how insurance is distributed. Behavioral economics have shown repeatedly that customers shop, give their time and personal data, and then cease shopping for a period while covered under a policy. But we can expect the emergence of intermediaries who can shop for a customer on an hourly, daily, weekly, monthly basis for the cost of the customer opting in for a free service (data and receiving cost-saving promotions is the only fee).

That intermediary will then auction the right to provide coverage into a competitive landscape of carriers looking for customers vs. customers accepting off-the-shelf products. With an active market and modern bill pay options, the new term of duration may be significantly less than a six-month auto policy, and now underwriters can more accurately price usage-based insurance (UBI) in real time.

Carriers have not proven themselves yet worthy of real loyalty — where the consumer won’t toss them aside in return for 15% less in premium. Perhaps carriers will never be able to win that kind of loyalty, if insurance is truly a commoditized transaction simply waiting for progress to catch up.

But if carriers aggressively push the best risk-assessment techniques to their current customers and prospects, then they may be able to win genuine customer loyalty by demonstrating that they are attuned to their customer’s individuated risk.