Jason Andrew, CEO of Limelight, says what his company is doing is a harbinger of even bigger changes: “We are witnessing one of the largest transformations in the history of a multitrillion-dollar industry. New technology is changing the game for the entire insurance ecosystem. Quicker, more seamless data integration is changing the insurance process, from the way consumers research and purchase insurance to how claims are underwritten. As a result, companies large and small are sprinting to keep up with the demand for agile and integrated technology platforms that can harness this growing data volume and extract real value from it. The largest carriers are now paying attention to big data, spending more money on research and bringing on data scientists to analyze and shape the future of insurance. “
As the industry moves from a legacy framework to a series of more connected systems with intelligent logic built in, all parties involved in the selling and decision-making process will be allowed to spend more time executing decisions and much less time on the administrative work that is a large and protracted part of the process today.
Andrew says, “For the health insurance market, which is fragmented with a lot of outdated systems that don’t connect or communicate easily, and where redundancy often leads to a high probability of error, we see this as being where QuotePad will make a significant impact on the insurance industry.”
Limelight Health was born in February 2014. Before that, the insurance technology boom had not fully launched, and it took several years of pitching, partnering and persistence to gain the attention of an industry that now supports the cause. Prior to 2014, no one was really interested in investing in insurance.
What we now know as #insuretech and #fintech was not the sexy vertical it is today. And we’re just getting started.
If you’re in the industry you are probably keenly aware of some of the changes that are coming, but not all. Please consider joining us for future Insurance Disrupted conferences, with our start-up Showcases. The next will be held March 22-23 in Silicon Valley. ITL readers receive a 15% discount here.
This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.”To download it, click here.
Part 1 of this series explained why retention is so much harder these days. This article explains how insurers can solve the problem.
Know Your Customers
Understand values and behaviors of your customers. Start with available data sources. Augment structured data from traditional back-end systems with unstructured data like those collected through call centers and written correspondence. With these data, you can deduce meaningful patterns and behavior-based customer segments.
Enter into active dialogues to establish meaningful relationships. Use social media analytics and conversations via social networks to increase customer touch points. Use the knowledge gained about their wants and needs to sustain intermittent conversation about things that are helpful to the customer.
Build an environment where sharing data creates mutual benefits for customer and insurer. Transparency is key. Create and publicize a “customer data policy” that specifies how and when you will use data shared directly or generated through means such as “big data gathering,” and how customers will benefit. Use shared data to create extra customer value, as detailed in the next section.
Offer customer value
It is no surprise that customer value – that is, the value that a customer derives from the relationship with his or her insurer – drives customer loyalty. In a previous study, we defined customer value as the adequate response to customers’ changing needs. How can insurers translate this to understand which value drivers influence retention?
The fairness zone: The first component of customer value we will discuss is – again – price. For most of our respondents, the absolute level of premiums mattered less than individual perception of price fairness – a too-low price has the same negative effect on loyalty as one that is too high (see Figure 5). This means that a customer to whom the price seems right is two to three times less likely to switch in a given year. The fairness of premiums is also an emotional component that insurers need to get right (and tools like social media analytics can support this).
What is the power of brand? The second value factor we examine is brand. What is the retention value of a good brand? According to our data, it’s less than expected. Only 21% of our respondents name “reputation” as one of the factors that cause them to stay with their chosen insurers. Could brand still be an implicit value driver?
Our recent consumer products industry study, “Brand enthusiasm: More than loyalty,” showed that brand consciousness and brand loyalty are changing, and our data echoes those findings. Only 12% of respondents have a high brand consciousness, and that is the only bracket where it has a strong effect on loyalty in the insurance world (see Figure 6).
This suggests that an extra investment in brand creates limited loyalty returns; a great brand only matters if your customers belong to the few who are brand conscious to begin with. Moving customers to the “high” consciousness bracket might prove difficult to achieve.
So how can insurers, many of whom already have a strong brand, make this work to their advantage? We propose adopting the concept of “brand enthusiasm.” Brand enthusiasm is influenced by the level of customer engagement, which we will explore in the next section, and again leads to the increased emotional involvement with the insurer that we call “heart share.”
Transparency, not complexity
Last but not least, we examined other product-related value drivers. We suspected that the often high complexity of insurance products has a negative effect on loyalty, but our data proved this hypothesis wrong. Although product complexity might be a deterrent to purchase (which was outside the scope of the survey), even those who perceived the product they bought to be highly complex did not show a higher propensity to switch.
In contrast, transparency about the product strongly influences loyalty in a positive way. Transparency leads the customer to understand and be more comfortable with the product (and the insurer) even when it is complex. Seventy percent of respondents who reported that their product understanding was high expressed high loyalty – almost three times as many as those with low product understanding. High transparency leads to rational involvement: the “mind share” in our study title.
What current technology can help insurers promote customer value? To give customers an emotional connection and involvement with a fair price and a transparent product, telematics is ideal. Regarding fairness, customers can see that the rate is based on their personal risk and influenced by their personal actions. Examples include a “pay-how-you drive” auto product or the use of exercise tracking devices in health insurance. Transparency of this sort of auto product is high, and for many telematics offerings, there is an additional fun factor by seeing how well you drove, thus competing against yourself for better driving scores.
Recommendations: Offer value
Support your customers in areas they personally value, even if they are not directly related to your core business. Offer information to your customers in useful areas that are widely related to their coverage: for example, traffic or weather information for auto insurers. Create communities of interest – in social networks or directly hosted by you – to share news, tips and enhance exchange among like-minded individuals and your organization.
Add risk mitigation or prevention into your products and services. Commercial insurers have been doing this for years. Start offering these at the outset of the contract relationship. Later, add tracking via telematics, plus assistance services.
Personalize offerings and provide pick-and-choose product options. Product flexibility starts in the back end. Your application architecture must enable a modular approach to products and services. Build a roadmap for flexibility using industry standards such as IAA. From the front end, add in-depth analytics to flexibly balance the offered options with market needs.
Fully engage your customers across access points
Incumbents at risk
One characteristic of the Millennial customer is the desire for omni-channel shopping for their goods and services. For insurance shoppers, this extends well beyond using traditional insurers – many Millennials are open to using adjacent providers and new entrants into the market (see Figure 7).
In the short run, offerings like Google Compare mainly replace existing aggregators; insurers still cover the actual risk. In the long run, online service providers – given their good customer knowledge across many products and services – could start to accept risk themselves. In this case, customers’ already-stated willingness to switch would become a real threat to incumbents.
In addition, the reason respondents gave for considering those providers should be troubling to insurers: They describe non-traditional providers as faster, more transparent and easier to reach (see Figure 8). To counter this, carriers need to engage with their customers across a broader range of access points than ever before.
The age of mobility
One option is to be more accessible on the go. Ninety-six percent of our respondents own some form of mobile device, most often smartphones (owned by 82 percent of respondents) and tablets (owned by 49 percent); they have become commonplace modern accessories throughout the world. Still, only 13 percent of respondents who bought their insurance online, either directly or via an aggregator, used their mobile devices to buy. On the other hand, 29 percent of all respondents stated they would like their insurers to offer an option to buy through a mobile device, and that this would increase their loyalty.
Expanding mobile offerings outside of searching and buying is an instant accessibility increase with potential loyalty gains. The biggest effects would be in submitting claims (42 percent) and in simple communication (43 percent). Many insurers have already invested in apps for claim submission, but again, they seem to be either unknown or too hard to use.
The effect of expanded mobile offerings differs widely by country, with the more empowered customers in developing markets increasing their loyalty more (see Figure 9). Still, given the larger market sizes in mature markets, investment in mobile services are still expected to generate returns.
Connecting everything, everywhere
Looking toward the longer term, insurers will also need to consider investing in the Internet of Things (IoT) to enhance customer engagement. A growing number of consumers either own or can imagine owning an Internet-connected device like a refrigerator or a washing machine (56 percent of millennials, 36 percent of boomers).
Currently, only a small percentage of customers told us they would be comfortable with insurers using the data from these devices (21 percent of millennials, 15 percent of boomers.) Still, for those respondents, the greater accessibility and convenience of the IoT would lead to an increase in loyalty. Insurers can make use of the IoT if they sell it right: with high transparency regarding how the data is used (and not used).
Recommendations: Fully engage
Embrace mobile to enable constant access for your customers. For your main set of lines of business, envision “customer journey maps.” These maps document the typical steps a customer must take during the provider relationship, from needs discovery through information gathering and purchase, all the way through after-sales services and claims processes. For each step, identify interaction options to generate a complete picture of potential mobile touch points.
Support decision making throughout each step of the sales process at the convenience of your customers. Create one unified front end for the customer, whether they come in through an agent, call center, the Internet or mobile devices. Make customer data and product information equally available at all touch points.
Have information available anytime, anywhere to support instantaneous fulfillment of client requests. Equip tied agents, underwriters, claims adjusters and other fulfillment roles with mobile technology like tablets and other handheld devices. This allows you to abandon a fixed workplace in favor of greater fulfillment flexibility – for example, claims can be adjusted directly on-site.
Ready or not – are you capturing the hearts and minds of your customers?
How are you using your in-house sources of customer knowledge? In what ways are you gathering and adding external information, such as that from social networks? How are you combining internal and external information? How is it used to generate greater customer value and loyalty?
Where and how are you using needs-based or persona-based segmentation approaches? How will you deepen your level of understanding individual customers?
To what degree can your customers pick and choose options from your product portfolio? What is your plan to remove the barriers to further customization?
How do you communicate with your customers? What is your approach to staying abreast of the ways they prefer to communicate, now and in the future?
In what ways are you engaging millennials? And how will you stay updated to address the customers of the future, such as Generation Z and beyond?
This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.”To download it, click here.
Whether you are new to college, single and dating or newly divorced (because you panicked and confessed when news of the Ashley Madison hack hit the media), I’ll bet there is at least one socially transmitted disease you haven’t started worrying about: identity theft.
If you use Facebook, you’re making easy work for identity thieves. The same goes for the whole cosmos of social media whether you favor Twitter, Instagram, Reddit, Pinterest, YouTube or LinkedIn or prefer to Tumblr your thoughts, preferences and predilections to anyone who cares to know what they are. The more you put out there in publicly viewable spaces, the more your personal identity mosaic is exposed. An identity thief’s day job is piecing together that mosaic into a passable, or usable, version of you: one that will get through the authentication process of financial, medical or governmental organizations.
The echo of another kind of disease here is intentional. Like the more widely known kind of STD, the socially transmitted diseases that fall under the rubric of identity-related crimes are contracted by unsafe personal information practices. Unlike the more familiar variety, where safety is taught in high school, tacked to college community boards and heralded by countless other media new and old, not as many people these days know how to stay as safe as possible from the threat of identity theft, especially online.
How to practice “safe social”:
Don’t overshare. It’s okay to let the world know you’re on vacation so long as you have a great security system at home or you have a house sitter. Traditional trespassers use social media to know when houses are unguarded. It is far better to share the memory than report the experience as it’s unfolding.
Be careful when posting pictures. While it’s fun to brag about a purchase—whether that be a diamond ring, a car or the smartest TV on the market, just be aware that anyone following you now knows where they can get your newest trophy or indulgence for free.
Geotagging is for victims. There is no upside for you here. Companies like geotagging photos and other people-powered media assets because it gives them bankable information that could lead to future sales. Whether you are letting Twitter or Facebook or FourSquare narrowcast (or broadcast, depending on your privacy settings) your location, failure to disable location services on your device permits geotagging, which also gives thieves bankable info that could lead to future crimes.
Know your privacy settings. Make sure you understand how your posts are being displayed or distributed by the social network you use. For instance, on Facebook you can set a post to “Public” or “Only Me,” with many choices in between.
Lying is good. Facebook, especially, is a perfectly acceptable place to not be forthcoming about your age, hometown, place of employment or even the college you attended and what years you were there. Identity thieves comb social sites for information to complete dossiers of personally identifiable information that will allow them to correctly answer security questions and thus open new financial accounts or empty existing ones. If you don’t want to actively fabricate answers to these questions, just don’t fill out those parts of your profile.
Beware of quizzes that require personally identifiable information. Make no mistake, your email address and name count.
There is no immunization
Unlike the other kind of STD, the socially transmitted disease of identity theft is not avoidable. There is no immunization, no safe way to avoid it—not even complete abstinence. There have been too many breaches with too much data for anyone but those living entirely off the grid to be completely safe. (And even still you can’t be sure.)
Your best bet, in my opinion, is a system detailed in my book (forthcoming in November). A key element to that approach is acceptance. Specifically, you need to come to terms with the fact that it’s no longer a question of “if” but “when” you will become a victim of at least one type, if not multiple types, of identity theft. Anyone who tells you that they can keep you from getting got is selling snake oil. In fact, they are running afoul of the Federal Trade Commission. There is no guarantee. There are, however, best practices.
THE THREE M’S
If you accept the basic premise that you are at risk for identity theft no matter what you do, here are some thoughts as to how you might stay as safe as possible. The good news may actually be that you are a seasoned and intelligent user of social media, because that means you already have several of the habits in place that you will need.
Minimize your exposure
The same strategies you can adopt to make yourself a harder-to-hit target on social media go for the rest of your life. Whether that means saying “no” when asked for your Social Security number, limiting the amount of sensitive personal information you provide to anyone who contacts you, making sure all your accounts (email, social networking, financial or retail) have different user names paired with unique, long and strong passwords, properly securing your computers and mobile devices or freezing your credit—there are a variety of things you can do to make your attackable surface smaller.
Monitor your accounts
If you use social media regularly, you are used to checking in on a regular basis—the Pew Research Center found that 70% of Facebook users check in daily, as did about half of Instagram users, and nearly 40% of Tweeps. The same behavior, applied to your financial life, may keep you from getting got … or help you undo or minimize the damage in case you do. Check your bank and credit card accounts daily. Other things you can do include signing up for free transactional monitoring alerts at your bank, credit union or credit card provider, or purchasing more sophisticated credit and noncredit monitoring programs.
Manage the damage
When the dark day comes that your daily practice of monitoring your credit or financial life yields a compromise, you need to get on it immediately by informing the institution of the account that is involved, as well as law enforcement and the fraud department of at least one credit reporting agency. Because many insurance companies, a number of financial services organizations and the human resources departments at a number of companies offer complimentary or low-cost identity theft assistance as a perk of your relationship with the institution, check to see if you are covered or, if not, how you can get covered. Resolution experts can greatly help you speed your way back to normalcy.
Identity theft is a permanent threat. The best way to stay safe is to change your behavior. The above tips are only some of the ways to do that. In the age of universal data vulnerability, practicing safe information hygiene is a must—lest you contract the one STD that may haunt you for the rest of your life.
It’s a common thread in nearly every industry: Innovation occurs when consumers’ growing needs and expectations converge with intense competition. It’s no surprise, then, that insurance — not exactly known for being on the forefront of technology — is one of the last remaining industries to innovate and fully embrace data, analytics and customer communication technologies.
Insurance is a complex purchase business with a convoluted ecosystem and ever-changing regulatory requirements that has kept the industry in a well-protected bubble from external competition for decades. Now in 2015, the announcement of Google Compare for auto insurance pushes the industry to innovate from a technology standpoint, but most importantly from a structural standpoint, by changing the way insurance companies interact with their customers. The reasons below outline why Google has the greatest chance to succeed where others have not.
A Lesson From Other Industries
Google has previously disrupted numerous industries to great success — think health, travel and navigation — mostly because of its dominance in search. Many of Google’s consumer-facing businesses have followed as logical next steps in the Google search process. For example, do you want to use Google to search for the best insurance company, or would you prefer to find the best insurance company with the cheapest policy? Do you want to use Google to find the route for your road trip, or would you prefer to have Google find you the best route? Google’s constant innovation stems from a simple but effective idea: Eliminate an unnecessary extra step (or steps) in the process, and give the consumer what they desire most — ease and simplicity.
There are some who believe that the tech giant may not be doing anything noticeably different from other aggregators in the auto insurance space. However, if its accomplishments in other industries tell us anything, Google will find a way to engage the consumer better than incumbent insurers do. Rather than writing its own business and determining individual risks, Google has teamed up with carriers of all sizes to reach customers efficiently, allowing them to quickly search, get rates and compare policies “pound for pound.” Already, this platform has helped shift the insurance industry’s emphasis on the customer by allowing peer-to-peer ratings and allowing consumers to openly disclose any negative or positive experiences, which will breed superior customer service and experience.
Millennials Trust Google
It is highly unlikely that Google will ever become a full insurance company with its own agents and underwriters, but Google brings a brand name that elicits trust and familiarity. This is especially true of Millennials, who are set to overtake Baby Boomers as the largest consumer demographic, at 75.3 million in 2015. When Strategy Meets Action reported in early 2014 that two-thirds of insurance customers would consider purchasing products from organizations other than an insurer — including 23% from online service providers like Google — it created tension in the insurance industry. These findings are largely a reflection of consumer discontent with insurance companies and their seeming lack of transparency.
Millennials do not trust insurance companies, but they do trust Google with just about every engagement they have with the Internet. And consumers trust other consumers: Google Compare’s user feedback platform brings transparency to consumers and requires the insurance industry to reevaluate how to effectively engage customers in a tech-driven environment. Pushed by Google’s unique insight into Millennials, traditional insurance companies must acquaint themselves with their new consumers, who are often considered impatient, demanding and savvy about social media.
Establishing a Preferred Consumer Platform
An eye-opening Celent study recently found that less than 10% of North American consumers actually choose financial service products based on better results. Instead, a vast majority places higher importance on ease (26%) and convenience (26%). Based on these findings, Google is using a business model that embodies the preferred consumer experience, a notion that is being reinforced by initial pilot results in California.
According to Stephanie Cuthbertson, group product manager of Google Compare, millions of people have used Google to find quotes since its launch in March, and more than half received a quote cheaper than their existing policy. Other new entrants, like Overstock, have reported issues with completion of purchase because consumers will browse offerings but still hesitate to complete their purchase online in a single visit to a website. Google’s platform is attempting to avoid this issue by announcing agency support through its partnership with Insurance Technologies, allowing consumers peace of mind by speaking to an agent before purchasing a policy — but maintaining the online price quote throughout the buying experience.
Potential for Future Growth
While Google Compare is beginning with auto insurance, work with CoverHound gives a glimpse into where it may be looking to expand. CoverHound’s platform specializes in homeowners’ and renters’ insurance, the latter of which is growing exponentially with the Millennial generation, who prefer to rent rather than buy. According to a recent TransUnion study, seven out of 10 Millennials prefer to conduct research online with their laptop, computer or mobile device when searching for a new home or apartment to rent.
Google Compare has also already shown momentum by recently announcing its expansion of services to Texas, Illinois and Pennsylvania, while adding a ratings system for each company it works with — much like the insurance version of TripAdvisor or Expedia.
The Bottom Line
Nearly every industry undergoes disruption when consumer expectations shift and businesses are forced to adapt and keep up. For decades, insurance didn’t have the kind of pressure from outside entrants that it is currently facing. Whether Google fails or succeeds early on makes little difference: Its entrance is a wake-up call. The more tech companies enter the space, the more traditional insurance must struggle to play catch-up.
These new entrants are helping to not only force innovation from a technology standpoint but also to bring an innovation culture to the industry so insurers can stay ahead of consumers demands around buying and customer service. Agents and insurance carriers have a level of expertise that is unmatched by the Googles of the world, but it will be wasted if insurers can’t figure out a way to integrate that expertise in a modern way and connect to consumers through different social channels.
The writing is on the wall, and how traditional insurance reacts will ultimately decide its relevance in the industry of the future.
As SMA’s Karen Furtado wrote in last month’s blog post about core systems, “Now that the insurance industry recognizes modernization as an indispensable tool for remaining competitive, it is worthwhile to take a step back and look at the technical capabilities that insurers really need.” With underwriting, this requires a platform that extends beyond the policy administration system and makes optimal use of the expertise of the underwriters themselves.
Today’s environment is full of infinite possibilities for the future of underwriting. Advances in the electronic exchange of information have benefited the insurance industry in major ways. One example is apparent with the portals and exchanges that are making it easier for agents to submit business opportunities. Given the ease, more submissions are coming in the door. This increased workload coupled with new data sources for validation and verification leaves underwriters at a tipping point. With increased demand and increasingly more complex variables, they need a solution that gives them enhanced capabilities that extend beyond the same old way of doing things.
In today’s competitive market, the ability to issue a quote for every desired risk is critical. The power literally has shifted to the palm of the consumers’ hands, where they get instant gratification via their mobile devices. For some insurers, not being able to handle the volume of quotes that are being submitted to them means leaving significant money on the table.
Therefore, a modern policy admin system is necessary for its ability to automate the processes that are performed by the underwriting department. These systems automate the data capture, base rating and rules and final pricing, and they manage formulas and document production for all risks. They process transactions for new business, renewals, endorsements, cancellations, reinstatement, etc. But, for complex risks, the risk analyses and evaluations that are determined based on information about credit, hazards, financials and loss experience are made outside the policy admin system. Automation supporting these decision-making processes takes place outside the policy admin system. SMA research shows just 37% of the entire underwriting process is managed via the policy admin system.
Before that harsh reality sets in, realize that the modern underwriting platform is not, should not be and cannot be a standalone system. Nor is the modern policy admin system a standalone solution. Now, the two (underwriting platform and policy admin system) should be connected, with the ability to perform the complex functions mentioned above.
One of our SMA imperatives is: “Interconnect Intelligence for Underwriting.” Nothing in modern insurance can happen in isolation, in a traditional silo. Those days are over, but, fortunately, the technology is available to support current and future needs. The key is finding the right connection points, the right technology and the right fit for your organization. Today’s real-time, big-data, high-volume market dictates the same from your company’s system, and that is why modern support for underwriting requires more than just a policy admin system.