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Keys to Loyalty for P&C Customers

In a rapidly changing industry, some P&C insurers are pulling ahead of their competitors by focusing on customer satisfaction and retention.

“The insurance industry as we know it is at the edge of a new business environment,” says  Michael Costonis , head of Accenture’s global insurance practice. “Breaking away from the pack and capturing new revenue opportunities requires a shift in business mindset – a shift from product-focused to customer-focused.”

Customers want extra benefits, and one way to provide them is to offer value-added services. Travel companies and other insurance branches are already exploring the benefits of value-added services for retaining customers, as  Jamie Biesiada  at Travel Weekly points out. Because P&C insurers have been slower to adopt this strategy, however, many opportunities for capitalizing on this strategy remain.

Here, we look at some of the most popular value-added services in P&C insurance, which of these services focus on building loyalty and how to create the right service offerings or packages to encourage your customers to stay with your company in the long term.

Value-Added Services: The State of the Industry

For many years, P&C insurers have struggled with the challenge of selling a product that is substantially similar to their competitors’ products. “Because customers don’t discern much difference between insurers, companies end up competing largely on price,” write Bain & Co. partners Henrik Naujoks, Harshveer Singh and Darci Darnell . A downward spiral occurs, in which costs and profits are cut and customers jump ship the moment they see the same coverage for a few dollars less.

See also: How to Build Customer Loyalty in Insurance  

When insurers compete on price, customers do what Brandon Carter at Access calls the services shuffle: quitting or threatening to quit their insurance providers to access the same price-lean deals that new customers receive. “My goal is to pay less in a system that actually punishes people for being loyal customers,” Carter explains. Focusing on cost decimates loyalty. Focusing on value can boost it.

Yet insurance companies aren’t making value-added services their first choice when it comes to customer retention  Tom Super, director of the P&C insurance practice at J.D. Power, adds that many P&C insurers are turning to digital tools to court customers, particularly in the auto insurance business.

But digital technology is only a tool. The insurers that will stay ahead of their competitors in the race for customer retention and loyalty are the ones that best leverage that tool to provide the value customers want, says Mikaela Parrick  at Brown & Joseph.

Which Value-Added Services Boost Customer Loyalty?

Value-added services provide an extra benefit that enhances the core product or service. This additional service may be offered at little or no cost for the customer, yet it may make both the customer’s and the insurer’s work easier.

Connecting experience-based services to the product and brand can be a powerful way to encourage loyalty, adds Roman Martynenko , the founder and global executive vice president at Astound Commerce. While this approach is most commonly seen in retail, P&C insurers can adapt it to their needs. A top-of-the-line mobile app or a personalized starter kit featuring smart tools for each customer’s home can make customers feel like they’re part of a family.

Unique, innovative or specially tailored value-added services can also help encourage loyalty and boost customer interest by becoming a cornerstone of an insurance company’s brand.

Value-added services don’t have to be expensive or complex, suggests Mike McGee of Investment Insurance Consultants. For instance, a disaster preparation email sent at the start of tornado or hurricane season can help customers take loss-prevention steps, address safety and feel supported by their insurer, at very little cost to the insurance company.

Partnering with other companies can boost loyalty for both organizations while providing value-added services that attract customers, digital transformation executive Fuad Butt says on the IBM insurance industry blog. For instance, working with telecommunications providers to offer reduced-rate packages can help both companies succeed.

A highly specific partnership that uses existing technology to add value for both customers and companies is the recently announced alliance between Hyundai Motor America and data analytics firm Verisk.

“Hyundai customers will have access to their portable Verisk driving score, which can lead to discount offers on UBI programs and support driver feedback that helps improve their driving,” says  Manish Mehrotra , director of digital business planning and connected operations for Hyundai Motor America. A similar arrangement through an auto insurer can help both insurers and drivers have access to more information to improve safety and make better choices.

Choosing and Implementing Value-Added Services in P&C Insurance

The changing landscape of insurance offers one significant advantage to companies seeking to improve their value-added services: access to data about why customers remain loyal.

“The connections that enable excellent customer experiences aren’t always easy to make,” says Chris Hall of Pitney-Bowes. Siloing fragments customer information, leaving staff without a complete picture of each customer. This fragmentation makes it difficult to determine which value-added services will actually pique customers’ interest.

If data access is an issue, start by de-siloing information to get a better sense of each customer. Then, find the services that best support your organization’s key differences from your competitors.

Kirk Ford , compliance and T&C manager at RWA Business, suggests first considering how you’d like your clients and customers to perceive your brand in relation to competitors. Balance your differences against your similarities so that customers see they’ll receive all the services they need, but with the value-added extras that make their relationship with this particular insurance company meaningful.

See also: The Future of P&C Distribution  

However your insurance organization chooses to add value, resist the urge to announce it to customers merely as being higher-quality. “It doesn’t matter whether or not a company can pull off quality or exceptional service because quality and customer service rarely are differentiating strategies,” adds  Mac McIntire , president of the Innovative Management Group.

Instead,  Ryan Hanley  formerly of Agency Nation, now at Bold Penguin, recommends finding ways your value-added services can improve customer lives. When customers feel a sense of shared values, they’re more likely to stick with their insurance company, rather than risk their luck with a company that may not share those values—even if the prices are lower.

One way to connect with customer values is to change your company’s language surrounding insurance. “If you can sell insurance and not talk about insurance, it’s a win-win,” says  Rusty Sproat , founder of Figo Pet Insurance. He notes that many customers find insurance language obscure and frustrating. That’s why Sproat’s company focuses on providing quality information on pet care and health, switching the conversation to insurance only when necessary to complete a transaction.

Finally, don’t shy away from technology—but use it as a tool rather than a cure-all. Smart home sensors, telemetrics for vehicles and other tech tools are increasingly common in U.S. households, plus they can greatly improve the customer experience, says  Ramaswamy Tanjore  at Mindtree. Consider the best ways to manage telemetric or other data, as well as how to position these tools to best showcase their value to loyal customers.

A P&C Guide for Digital Distribution

Property and casualty insurers aren’t shying away from digital distribution. “[F]our out of five insurers either have, or are planning to set up, wholly digital sales processes in which humans are involved only when customers need advice,” Accenture global insurance industry Senior Managing Director John Cusano reports.

But taking digital distribution from concept to reality still poses major challenges for many P&C insurers.

Here, we look at some of the biggest challenges of implementing a digital distribution strategy and how to overcome them.

Everyone’s Going Mobile

In a 2013 article for Wired, Christina Bonnington predicted that the world would contain 24 billion connected devices by 2020 and that the Internet of Things would result in people doing ever more tasks from their smartphones.

We got there early: Statista estimates that the world of 2018 already contains 23.14 billion connected devices and that the number will be more like 31 billion in 2020. And more of these devices than ever are mobile devices.

It seems as if the insurance industry only just began to embrace the opportunities afforded by digital technology when customers’ attention switched to this highly connected, primarily mobile world.

Today, customers “expect the same intuitive experience from their insurance carriers as they do from their favorite mobile app,” says Rahim Kaba at OneSpan. And they’re not the only ones. “Even insurance agents are demanding better digital capabilities from insurers to increase their ease of doing business,” Kaba says.

See also: Is P&C Distribution Actually Digitizing?  

Putting Numbers to the Scope of Mobile’s Impact

Mobile is an essential consideration for insurance companies, according to Andrew Sheridan at DialogTech, who cites several statistics that illuminate the opportunity available:

  • 40% of customers’ time researching insurance was spent on mobile, and 51% of these customers purchased insurance as a result of their research.
  • 25% of insurance shoppers do all their buying via their mobile devices.
  • 66% use a specific insurance company’s app.

Yet going mobile poses some challenges for insurance companies. For one thing, customers expect to be able to do everything from pay premiums to file claims, get driving tips or find a repair shop via a mobile app. That’s a lot of work for an app to do — and the more an app does, the slower and thus less appealing it is likely to be

Another challenge is the integration of older technologies with new ones. As Parmy Olson notes at Forbes, older telemetrics devices like Progressive’s Snapshot are starting to give way to smartphone apps that perform similar tasks, measuring speed, distance and other driving-related factors that can affect premium calculations.

These apps can seem more convenient to customers, but they can also make certain measurements or calculations more difficult. For instance, telemetric devices installed in the vehicle itself can more easily detect a crash and call for help, says Jim Levandusky, vice president of telemetrics at Verisk Analytics.

Embracing Industry Shifts

One solution? “Collaboration with the disrupters,” says Trevor Lloyd-Jones at LexisNexis Risk Solutions. Embracing mobile tools like telematics can make mobile apps easier for customers and more effective for insurance companies, and when these tools are approached through software as a service (SaaS) or similar providers, concerns about security or analysis are often addressed as part of the platform.

Companies that dismiss disruptors in the insurtech sphere do so at their peril, says Nikolaus Sühr, co-founder and CEO of KASKO. The era of relying solely on historical data may be coming to an end. “Disruption in other industries is actually changing user behavior and the nature of risk, so there is no relevant historical data anymore,” Sühr writes.

When moving into mobile for customers, agents or both, don’t be afraid to A/B test mobile apps, try new things and to innovate, says Amir Rozenberg, director of product management at Perfecto. While experimentation must account for the tight regulatory world insurance companies inhabit, trying out options in the mobile sphere allows P&C insurers to better understand how their customers use mobile — and how the company can use what it learns to attract and keep better customers.

Within this process, however, it’s important to keep mobile in perspective. “Even with this trend, companies need to ensure a mobile app supplements the overall experience and doesn’t dominate it,” says Rodney Johnson at Kony.

One Size Doesn’t Fit All

“With customers using more devices in more ways, there are new options for customer engagement,” stated a recent Incom Business Systems white paper. There are also plenty of challenges. Mobile devices feel personalized to customers, and with companies in other industries extending that personalization to their apps, insurance companies are feeling the pressure to personalize, as well.

A hallmark of in-person or traditional channels has been their one-size-fits-all approach to customers, according to Shashank Singh in an article at Insurance Nexus. Many P&C insurers have attempted to transfer this approach to the digital world, only to discover it doesn’t work.

Data and analytics offer insurers an unprecedented opportunity to understand and respond to each customer as an individual, from recommending products to calculating risk.

Digital distribution can also make it easier to capture a growing segment of the P&C insurance market that has changed its behavior as it finds itself priced out of coverage. “Rethinking distribution is key to successful inclusive insurance,” says Peter Wrede of World Bank Group USA. “Low distribution costs make insurance affordable for low-income people.”

A 2017 article by in The Street noted that 18 million adults in the U.S. currently cannot afford auto insurance, so they go without, often turning to public transportation or rides from friends instead. As a result, “personal automobile insurance is in a crisis,” said Dave Delaney of Owner Operator Direct. “Rates have been increasing steadily since 2011, and there is no end in sight.”

By turning to a digital distribution system to reduce costs, however, insurance companies gain the opportunity to make coverage more affordable, recapturing some of the 18 million customers who currently believe auto insurance won’t fit into their household budget.

See also: The Future of P&C Distribution 

Lack of Support Systems

Personalization of the digital customer experience, leveraging tools like mobile apps, presents a profound opportunity to understand and respond to customers’ needs better than ever before, said Ash Hassib, senior vice president of insurance solutions at LexisNexis. But “data availability isn’t the issue,” Hassib said. “It’s how you use it to underpin sustainable and profitable growth that’s the real challenge for insurers.”

And for many insurers, this challenge arises the moment they try to use that customer data within their current organization.

“Insurers have focused on digitalizing the front end, with insufficient focus on the systems that support distribution,” said a May 2017 report from the Insurance Governance Leadership Network. Additional challenges in retention have resulted, with insurance companies noting that customers leave because the system doesn’t provide adequate support for their experience.

Customers who use multiple channels to communicate with insurance companies are more likely to face problems caused by insufficient systems inside the organization itself. Perhaps this is why, relative to other industries, insurance company employees rated their companies 9% lower on providing a high-quality customer experience, according to Tom Bobrowski at The Digital Insurer. P&C companies were also rated 8% lower than average at “good cooperation between functions,” allowing the company to meet the customer’s needs effectively.

One option is to take a hybrid approach, says Sasi Koyalloth in a Wipro Ltd. white paper. A hybrid approach focuses on incorporating human agents into the digitization process, focusing on giving agents and employees the digital tools necessary for seamless communication throughout the organization.

Regardless of approach, “a single view of the customer is crucial,” says Robert Paterson at Afinium, noting that software as a service (SaaS) providers already exist with the tools and support needed to help P&C insurers move to a single platform for managing information.

And the systems’ cost needn’t be onerous. “Another key driver for adoption of SaaS solutions is its use in developing pricing models that can be directly related to system usage,” Paterson says.

Final Thoughts

The switch to digital is now or never for P&C insurers. Working with knowledgeable insurtech providers can help companies address concerns about data security, analysis and customer experience, allowing insurers to take full advantage of the digital world to build more personal and long-lasting customer relationships.