Tag Archives: retention

How to Win the Retention Game

In an insurance industry battling rising costs and losses, the struggle to attract and maintain customers is real.

Fortunately, studies show that existing customers value good service and meaningful relationships even more than low rates. This means that, to maintain the customer relationships they already have, insurers must focus on customer experience and engagement.

Here’s why customers leave after a closed deal, and what you can do to forge stronger, more profitable, long-term relationships.

Why Customers Leave (and Why They Stay)

New customers often shop on price, but even the best insurance rates don’t retain customers who experience poor customer service.

In Gladly’s 2018 Customer Service Expectations Survey, 92% of customers polled said that they would stop doing business with a company after three or fewer bad customer service experiences — and 26% said it would take only one bad experience to make them leave, says Shep Hyken, chief amazement officer at Shepard Presentations.

“Your customers no longer compare you just to your direct competition. You are being compared to the best service they have ever received – from any company or any person,” Hyken says.

That’s a tall order for insurance companies, which continue to lag behind other sectors in customer service, the Actuary’s Chris Seekings writes. The insurance industry’s customer satisfaction index score fell in 2018 while the scores of a majority of sectors rose, says Affinion Vice President Karen Wheeler.

Insurance customers’ needs are relatively simple: They want policies that meet their needs at prices they can afford, and they want good communication with their insurance company, says Bain’s Darci Darnell. “They expect their insurers to help alleviate their anxiety, not add to it.”

In practice, however, insurance companies aren’t delivering on these basic needs. Bain’s fourth annual Customer Behavior and Loyalty in Insurance report, written by Henrik Naujoks and fellow researchers, found that most insurers are not delivering the quality products or ease of use their customers demand. The study found that 80% of insurance customers ages 25 to 40 rated their insurer low on the items that mattered most to them.

See also: How to Enhance Customer Service  

The transition to a digitally based customer service world remains racked with growing pains. Mark Breading describes an attempt to cancel a magazine subscription that required three phone calls, two web forms and an online chat session. In the end, Breading says, he contacted his credit card company and blocked the transaction — a process that was simpler than contacting the magazine itself.

Unlike magazine subscriptions, however, insurance coverage is often a requirement. Customers may already feel that dealing with their insurance company is a chore; when the available communication tools are tough to manage, the relationship can be damaged beyond repair.

“The challenge (and opportunity) is to enable the smooth transfer of those interactions and the related information between different channels in real time, so that the customer is provided with choice, and the use of digital and human capabilities can be optimized,” Breading says.

How Insurance Companies Respond to Customer Variability

Emboldened by easy information access and driven by a desire to save money, insurance customers are quicker than ever to switch carriers when their policy anniversaries arrive. To combat the regular shift in customers, insurance companies have leveraged a number of tactics.

These tactics include leveraging data to improve personalization and employing new tools and strategies to make it easier for customers to purchase property and casualty insurance, says Tom Super of J.D. Power.

However, digitization and its corresponding personalization no longer make companies stand out from their competition. In fact, companies that don’t offer a simple, personalized on-demand experience stand out from the crowd by falling short of everyday customer expectations, says Kevin Haydon, who works at the digital insurance platform EIS Group. While customers understand that buying insurance isn’t as simple as ordering pizza, they expect the same relative level of ease and personalization from both transactions.

When prices rise but communication doesn’t get easier, customers feel the pressure to switch insurers from two directions at once. That customers place such high value on ease of use sends a strong message: Insurers’ understanding of value must also extend beyond the bottom line, says marketing automation manager Brandon Carter.

“Value doesn’t necessarily equal cheaper prices or more stuff. It simply means enhancing the customer’s ability to solve problems and reach their goals,” Carter says.

Customers have made it clear that they value insurers who help them solve problems and reach their goals — and who make it easy to do so. These two elements thus become a powerful focus area for insurers.

Helping Customers Find Value in Their Insurance Relationship

Understanding how different policy options will affect their lives is the biggest factor influencing customer satisfaction in insurance, says Mikaela Parrick at Brown & Joseph. Customers want to know how their coverage benefits them.

Currently, only 67% of insurance consumers — about two in three — believe that their insurer helps them understand their policies thoroughly, Parrick adds. When insurance companies put effort into helping customers connect coverage to personal benefit, however, their overall customer satisfaction scores increase by an average of 9 percentage points.

The process of learning how to communicate value to existing customers teaches insurance companies more about those customers, as well. This understanding helps insurance companies retain existing customers, attract new ones and boost their own bottom line, says David Pieffer, who works in property and casualty insurance at J.D. Power.

“Since insurance is a ‘must-buy’ product for most customers, the reason they buy the product is straightforward; however, why they buy a particular insurance company’s product is not so obvious,” Pieffer says. Failing to understand a customer beyond their risk profile is a big mistake for insurers hoping to adapt to current demands.

Think Big With Omni-Channel

Omni-channel in insurance offers benefits to the insurer by enabling more streamlined service, and it offers benefits to customers in the form of easier communication and transactions with their insurance companies.

Yet one of the biggest values of omni-channel for customer retention remains largely untapped: the power to leverage an omni-channel platform as a tool for customer engagement.

“Companies with the strongest omnichannel customer engagement strategies retain an average of 89% of their customers,” says Kris Hackney of Applied Systems. Companies at the weak end of the spectrum, however, retain only 33% of their customers on average.

Enabling customers to contact their insurer via their preferred channel is a form of personalizing the customer experience, and it doesn’t require investments in big data.

See also: Building a Customer-Service Culture  

Build Networks as an Insurer

Insurance companies are busily building digital networks to improve the customer relationship. The value of human networks, however, should not be underestimated — particularly when today’s platforms offer the opportunity to add valuable perspectives to the relationship between insurers and the insured.

An approach that incorporates insurance agents into the company’s overall de-siloing may have a stronger impact than merely improving technology, says Casey Gustus, CEO of Apliant. Agents remain the single best way to maintain the level of human personalization insurance customers want — and they make it easy for customers to get their questions answered, building a relationship customers want to maintain.

Expanding beyond traditional relationships can help bring insurance customers into the fold and keep them there. For instance, insurance companies can partner with financial advisers to reach potential P&C customers who turn to their financial adviser for coverage assistance, says Brian O’Connell at Insurance News Network.

Research from Chubb and Oliver Wyman reveals that 40% of customers who seek the help of financial advisers would consider switching to a financial adviser who also provides help with acquiring insurance, says Annmarie Camp, executive vice president of sales and distribution at Chubb Personal Risk Services.

Partnerships like these, boosted by technology, help customers feel that their personal needs are met and that receiving the insurance assistance they need is easy. This sense of support provides significant value and strengthens the bond between insurers and their customers.

Underwriting, Marketing: Sync Up!

Marketers play a pivotal role in the success of insurance carriers, but that success is under threat. Profitability is at risk because the marketplace is highly competitive; many policyholders shop and switch to a new carrier long before the original carrier is able to recoup the cost of acquisition.

To understand the dynamics of the marketplace, LexisNexis Risk Solutions surveyed marketers, underwriters and product managers at the top 50 auto, home and life insurance carriers and found that, to succeed, marketers and underwriters need to be on the same page. The study uncovered three key takeaways, which can help these teams overcome their challenges and improve their overall acquisition and retention success rate.

1. Understanding Insurance Team Responsibilities Improves Results

It should come as no surprise that insurance marketers are distinctly different from their underwriting and product management counterparts.

While profitability was the No. 1 metric for all groups in the survey, marketers identify cross- and up-selling to current customers, meeting sales quotas and retaining customers as their top three goals. Underwriters and product managers also identified these three objectives as top priorities for marketers.

Conversely, underwriters and product managers identified their own top goals as enhancing existing products and creating new ones. Likewise, marketers agreed these were the most important goals for underwriters and product managers.

See also: How Acquisitions Are Reshaping Landscape  

While it is reassuring that both camps have a clear understanding of each other’s top priorities, an interesting disconnect that emerged from the study was that only 18% of marketers nominated “obtaining an optimal spread of loss exposures” as a core business goal for themselves, and 43% of project managers and underwriters nominated “obtaining an optimal spread of loss exposures” as a core business goal for their marketing counterparts. Does this suggest that underwriters and product managers want marketers to be more driven by obtaining an optimal spread of loss exposures?

2. Collaborating Is Essential

While many marketers recognize the need for cross-functional collaboration, far fewer excel at actually doing it.

As part of the research, the respondents were quizzed on their relationships with counterparts. The results were clear: 94% of respondents said that working more collaboratively was either “extremely important” or “important.” This suggests a willingness to embrace closer working relationships to achieve business goals.

However, this resounding endorsement for working hand-in-hand seems to be contrary to reality. Only four of 10 teams reported that they build their strategies together.

Given the challenging market dynamics, it seems counterintuitive for these teams to recognize the value of collaboration yet fail to embrace it within their organizational culture. So, what’s going on?

3. Teams Need to Be in Sync for Customer Acquisition and Retention

Insurance marketers live in an imperfect and challenging world. Not every acquisition strategy will draw all the right customers. Nor will every retention program keep valuable policy holders. However, the survey’s results were eye-opening: 43% of marketers said they were not completely satisfied with how underwriters and product managers executed acquisition and retention strategy, and 46% of underwriters said the same of marketers.

See also: Underwriters Need Some Power Tools  

While neither group disparages the other’s performance or efforts, the results clearly show that both camps are eager for improvement.

Key Takeaways

Through collaboration, marketers are better able to target policyholders with retention in mind. Acquiring longer-term policyholders delivers the promise of greater opportunity for profitable growth for carriers.

Clearly, cross-functional collaboration is rapidly becoming a strategic imperative within the insurance industry. The good news is that teams are willing and eager to embrace it in pursuit of high-return opportunities and to achieve the greatest value from that collaboration.

At the end of the day, it’s one team both on and off the field. And increased collaboration between marketing, underwriting and product management teams allow all teams to better align their strategies for more profitable growth.

For more information, please refer to the white paper Collaborate Across Function to Acquire with Retention in Mind.

Insurtech Takes Aim at Personal Lines

If you have gone three days without seeing the term “insurtech,” well, you are probably on a remote Caribbean island with no means of connecting to the outside insurance world. Putting your head in the sand on some nice island might sound tempting, but there is an issue that any insurer with a vested interest in an agent and broker distribution model for personal lines can no longer afford to ignore the situation.

See also: Asia Will Be Focus of Insurtech in 2017  

SMA research indicates that 30% of the approximately 600 insurtech startups being tracked are focused on disrupting and displacing conventional distribution channels – the largest of all insurtech categories. What does this mean? With great urgency, personal lines insurers need to work with agents and brokers to ramp up connectivity capabilities so that traditional distributors can execute sales and service transactions at the same speed and efficiency as the newly minted distributors emanating from the insurtech world.

Most personal lines insurers are not asleep at the wheel relative to the overall situation. 64% of survey respondents indicate the top business driver for investing in agency connectivity is improved customer experience for the agent. The No. 2 reason for investment, agent/customer retention, follows close behind with a 56% response rate. Even though these two reasons correlate from a strategic and tactical perspective, 37% of respondents indicate they are mainstream investors in agency connectivity, not investing for differentiation, and a further 11% indicate they are not investing at all. This leaves a fairly large hole for insurtech-enabled distributors to drive straight through, gathering up customers … customers who used to be with traditional agents and brokers.

I am a big fan of remote Caribbean islands, so any reader who has been on holiday and without the insurtech ref is forgiven. However, creating seamless and transparent personal lines sales and service transactions between agents and brokers and insurers is critical. This is the personal lines consumer mandate!

There are competitors in the market who have figured out the technology piece of the equation. And no one can assume that tradition and familiar corporate logos are going to protect market share.

See also: The Future of Insurance Is Insurtech  

Our recent SMA report, Agent-Carrier Connectivity: Personal Lines Insurers, provides survey results and looks at the subject of personal lines agent connectivity. Last month, the commercial lines view of this topic was published. There are some interesting differences. In the next few weeks, we will close the loop with the agent and broker view of connectivity, so please stay tuned.

Thinking on Core Systems Is Backward

Insurance technology spending is high. In April 2015, Celent estimated that global insurance technology spending would top $181.6 billion by the end of 2016. This spending will include a combination of standard modernization, keeping legacy systems alive and well, supporting infrastructure projects and (increasingly) building digital and data frameworks.

Many insurers remain focused on upgrading or maintaining their core systems. The common internal debate is whether the insurer should maintain the legacy system or start over by adopting a modern solution. This debate almost completely ignores the proper approach to determining the answers to technology decisions, placing the cart squarely ahead of the horse. If one accepts the basic premise that core new business, policy, claims and billing management systems are really just table stakes, why not focus on the business — improving growth, increasing market penetration and improving both the combined ratio and profitability?

If we do this, we are likely to achieve all of these things AND construct a technology framework that fits now and is flexible for the future. For the sake of conversation, I have come up with three areas where business focus will lead to the right kind of modernization and transformation.

The first two are concrete business goals: reduce the cost per acquisition (CPA) and increase customer retention. The third is less concrete and more philosophical: embrace change by improving an understanding of the opportunities it may provide.

Reduce Cost Per Acquisition

The CPA is the largest cost in the current insurance business model (outside of claims). It is currently under pressure because of the rise in aggregators and comparison sites that are forcing insurers to sell standardized products for the least amount they can. The result is a market designed to churn because of a continual focus on price.

See also: 4 Benefits From Data Centralization  

How can insurers break out of this cycle, reduce the cost per acquisition and use the savings to remain competitive? Here are a few ideas:

  • Insurers should consider a cloud solution for core systems/back-office administration. U.K. insurers have, unfortunately, been slow to adopt shared services and technologies when they are proving themselves in other industries and geographies. Now is the time to consider cloud solutions if they fit with cost reduction objectives and if they can sustain or improve service levels.
  • The industry should use a permission-based consumer data storehouse. Churning policyholders benefits no one and costs all of us a great deal of time and effort. What is needed is a true permission-based marketing model, where consumers grasp the benefit of letting insurers see relevant profile information. This would enable the direct-to-consumer or small-business framework where insurers would provide a digital front-end that “pre-fills” the quote with existing data on the customer or other third party data, streamlining the process. It would also enable insurers to better match tailored products to prospects, instead of having to offer standardized products.
  • Insurers should hone data-driven target marketing. Today’s data sources and analytics allow for much more granularity and fine-tuning in the marketing process. With the right tools, insurers can now use consumer-provided data and detailed third party data to provide qualified offers to only those consumers and small businesses that fit a certain product’s risk profile. This would reduce CPA and improve risk selection.

Increase Customer Retention

With a high cost per acquisition, customer retention becomes an increasingly critical metric for insurers, particularly because initial acquisition costs are recouped over multiple years. The increasingly price-sensitive market has reduced the number of multi-year policyholders. Industry studies have shown a clear correlation between a customer having multiple policies with a single insurer and their retention rate. Yet with the exception of multi-car policies, there has been little effort in creating an overarching combined personal lines product with auto, homeowners put forward by U.K. general insurers. This is in stark contrast to insurers in the U.S. market that have been focusing on the customer relationship with a goal of a multi-policy environment and customer retention business processes.

Most U.K. insurers’ core insurance systems are legacy systems built around the product, not the customer. Realigning technology choices, process reengineering and customer-centric product development will result in the ability to offer multi-risk and multi-year policies (and discounts) and preventive risk management services. These will help to build loyalty and retention.

Embrace Change and New Ideas

Technology is enabling exciting changes in insurance. Whether it is innovative new products, new customer relationship business models, implementing modern core insurance solutions, leveraging new data sources or embracing new technologies — each offers an opportunity to begin the journey to a new future that is rapidly unfolding in the industry.

New technologies will give insurers improved data, better analytics and lower transactional costs through self-service. Consumers will benefit with services closer to an “Amazon experience” with a greater level of insurance understanding.

See also: How Technology Breaks Down Silos

To capitalize on the opportunities presented right now, insurers must embrace new ideas and change before new entrants do so and disrupt the industry. Insurtech is the conceptual umbrella containing insurance ideas and technologies that are rewriting the rules of insurance and helping insurers succeed. Internal education on the highlights of today’s insurtech landscape may be an excellent catalyst for change within your organization.

Preparing for change should still include conversations about the core insurance solution. The core can serve as a catalyst for change instead of an inhibitor to market potential. Discussing even a small part, such as the financial benefits of core change, can fuel both creativity and a desire to create and capitalize on a new model. Nothing will pull leadership together faster than a plan for real growth and solid change where efforts are directly tied to outcomes. Those are healthy approaches to core conversations.

So where do we begin?

To begin, focus on business priorities. If you do this, your organization will end up with the right technology solutions and a core system that fits and supports the business. You’ll make technology investments, not expenditures. Your costs will be lower. Your customers will be more loyal. You’ll recruit better businesses. And you will keep the horse in front of the cart, enjoying the way systems and processes and people work in unity to accomplish goals.

Beat Brain Drain: Boost Your Talent Pool

Overview

Shifting demographics are starting to reshape the workforce. As baby boomers retire, in most developed markets there will simply be fewer people of working age to fill positions. Not only is the pool of locally available replacement talent shrinking, but competition for their talent is on the rise.

The people shortage is exacerbated by the lack of growth in graduates with science, technology, engineering and math (STEM) degrees. This is happening at a time when, because of rapid advances in technology, the demand for these skills in the workplace is on the rise.

At the same time, businesses are also finding that the leadership and experience of the baby boomers are being sorely missed. As they leave the workforce, baby boomers are taking decades of knowledge with them, while younger generations often have yet to build up the experience and leadership skills needed to maintain successful businesses.

So how can businesses respond to this confluence of demographic and training challenges to avoid being hit hard by a skills shortage that could be even more pressing than the one the world is already facing? With an emerging challenge this great, this is not just an HR issue – it’s core to future business strategy.

In-Depth

How are business leaders coping with the rising demographic, technological and human resource challenges they face as experienced staff retire and new technologies disrupt industries and require new skillsets?

The first step in addressing these challenges is to understand staffing as part of a holistic business strategy. Organizations need to identify the critical skills and roles needed to support overall goals and objectives and build a sustainable talent pipeline.

Aligning talent strategy to business strategy in this time of rapid change requires taking a long-term view. It’s not just about hiring for the positions you need today but about identifying the critical skills needed to help your business adapt over the long term.

How to Tackle an Emerging Talent Shortage

At a time of increasing competition for qualified people, what many of the firms are focused on now is creating a culture that is attractive for people to join and stay with. With as many as a third of employees thinking about leaving their current job within a year, according to Aon’s latest Workforce Mindset Study, this isn’t just about attracting new staff — it could be about preventing existing employees from being lured away by a competitor.

Both mature and fast-growing industries are focusing on developing a culture to help them compete for scarce talent and become more attractive to their current and future workforce.

When it comes to culture, here are a few things organizations can do:

  1. Develop leaders who are engaging and serve as role models — With corporate leaders increasingly high-profile (and with leaders as a top driver of employee engagement), select and develop people who can act as internal and external role models and create an environment in which people are appreciated and motivated.
  2. Establish a clear employee value proposition — To stand out from the employer crowd, think about how to make your corporate culture feel more distinctive and attractive by offering support in career development and continual training, as well as competitive compensation and benefits.
  3. Develop and articulate a sense of purpose — With workers increasingly wanting employment that means something beyond just making money, explaining what your business stands for can be a powerful tool to attract like-minded talent and drive long-term employee engagement.

In addition to culture-building, planning for tomorrow’s workforce is key. Talent shortages are likely to remain a feature for years to come. Ensure your business has the qualified staff and skill sets needed by adopting a long-term program for attracting, training and developing the people who will drive its success over the long term — not just for this year’s needs, but for five to 10 years.

There are a few things organizations should consider doing to help with their long-term talent needs:

  1. Establish apprenticeships — Not only does on-the-job training help you cultivate the skills your business will need, it can help promote loyalty and long-term engagement. With training and career development opportunities as strong pull factors for modern workers — especially from younger generations. Making training a continuing part of your business from the early stages of employees’ careers can be a powerful proof point in your commitment to employee development.
  2. Work with schools — Encourage changes in the educational system that support the development of needed skill sets in the long term. Ensure students are made aware of career opportunities in your industry and of the true value and potential a career with your organization can bring.
  3. Commit to workforce diversity — Women and minorities still have significant under-representation within the managerial ranks of many industries. Organizations should be reaching out to qualified minorities, not just because practicing equality in the workplace reaffirms your business’ commitment to fairness, but because diverse workforces are a proven driver of innovation. Not only have organizations with greater gender equality proven to perform better, but being seen as promoting gender equality in the workplace can be a powerful attractor for talent.
  4. Globalize your hiring — Developing countries around the world are producing well-qualified staffing for accounting, data analysis and other financial services, while in healthcare a majority of newly qualified healthcare professionals (including nurses and general practitioners) are graduating from schools in these countries. In a globalized world, the competition for talent is also increasingly global, so you increasingly need to look where the talent is, not just where you would like it to be.

Talking Points

“Rather than focusing on salaries alone as the cure-all for attracting employees, corporations would be wise to look closely at the wider expectations and demands of their candidates, if they are to draw in the best talent. … While increasing the flexibility of the job offer can provide an effective short-term solution to draw in the best candidates, ultimately even these measures won’t resolve systemic talent gaps that have a significant impact on the long-term health of the business.” – Tara Sinclair, chief economist, Indeed

“The struggle to fill vacancies is holding back growth and opportunities for business, and it is essential that both government and industry work together quickly to identify ways to plug this gap.” – Mike Hawes, chief executive, Society of Motor Manufacturers & Traders

“Companies looking for sophisticated skillsets are starting to look to foster skills and relationships with future employees among high school age students.… If you’re not already thinking five to ten years ahead for your talent needs, you need to.” – Usha Mirchandani, partner, talent analytics, Aon Hewitt

Further Reading