The Customer-centric Insurer in the Digital Era - The Digital Insurer - Accenture
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The Digital Insurer The Customer-centric Insurer in the Digital Era
What it takes to succeed in a
connected, always-on world
Accenture’s approach to planning and executing a
successful customer-centricity journey
Contents
Introduction 3
1. The New Context 5
1.1 What’s new in customer-centricity 5
1.2 The new insurance customer 6
1.3 The insurer at a cross-road 9
2. Customer-centricity 11
2.1 The foundations of customer-centricity 11
2.2 The digital enablers 14
2.3 Competition, value at stake and value creation 17
3. The Journey 21
3.1 The conceptual challenges 22
3.2 The execution challenges 25
3.3 Approach to the customer-centricity journey 27
Final Remarks 29
1
2
Introduction
The digital era gave birth to the new fulfil the needs of the individual customer capabilities and we have a view on cloud-
“connected world”, in which people are best, that insurer earns the mandate to based solutions. However, we are nowhere
“always on”, and a growing number serve him. on customer-centricity, using customer
of devices are linked in the so-called data, offering customized products and
Internet of Things. These developments Banks have already entered the insurance service levels, and achieving operational
and their underlying technologies are space in search of new fee-based business. simplicity.”
paving the way to new competitive They currently distribute a significant
landscapes, questioning the sustainability portion of the life business and are Merely adding customer-centricity to an
of traditional business models, and increasing their presence in the general insurer’s vision statement is not enough.
raising consumers’ negotiating power and insurance sector too1. High customer- Knowing the customers below the surface
expectations. touch mobile telecom providers, Web of a name, an age and a zip code – often
dominators (e.g. Google, Apple, Facebook, poor and fragmented data stored in
Nowadays, consumers expect friendly, Amazon, Alibaba, etc.2), retailers and the different systems within the company
personalized, relevant and enjoyable like are testing the ground. – is the first big task. But this is only a
experiences across multiple channels, prerequisite.
selected on the basis of their specific As such, the competitive pressure on
circumstances and points in time. They insurers to re-assess their strategies and The real challenge of customer-centricity
want to be in control, too. Information operating models and to enhance their is to move away from the product-driven
asymmetries are fading away, since customer-centricity comes from both push and to develop the corporate ability
scrutiny and comparison of offers are inside the industry and from other sectors. to truly understand the customer’s
only a click or a touch away for almost stated and tacit needs, to generate new
everyone. Due to the disruption it brings to the ones, and to provide highly personalized
consolidated patterns of the insurance solutions and remarkable experiences
Additionally, consumers tend not to make industry, customer-centricity in the digital that are relevant to each individual’s
distinctions among industries (retail, era represents, at the same time, a must, preferences, circumstances and point in
telecommunications, media, travel, a challenge and a significant business time.
insurance, banking, etc.) when it comes to opportunity for insurers which aim to
searching, purchasing, or justifying below- serve the end customer. As we will see, customer-centricity is
standard experiences. They simply expect a journey, an iterative one that may
all industries to match or beat the highest In today’s world, have significant impacts on the entire
customer experiences they have already Digital + Customer Experience = organization, including its culture and
had or simply have heard about. Customer centricity. DNA. Achieving customer-centricity
requires insurers holistically to rethink the
Consumers might appreciate that The consequences of not taking customer- way the business is conducted, starting
insurance is a regulated industry, but they centricity seriously are grave for any insurer from its customers. Customer-centricity,
cannot accept that it fails to provide them that wants to compete in distribution. at its best, means having each current and
with similar experiences to those they Studies suggest that failure to deliver a prospective customer at the center of the
enjoy from other industries. No excuses. high quality customer experience can result insurer’s business and operating models.
in a staggering erosion of a company’s
As barriers across industries blur and customer base – a loss of as much as 50 One of the risks of such a journey is to
digital technologies help to unveil percent over a five year period3. depend too much on the possibilities
individual customers’ needs, preferences offered by technology, confusing the tools
and locations, so competition intensifies. But what does it take to become with the end. Customers come first.
This is especially true in distribution. customer-centric? The following In 1997 Steve Jobs, then back at the helm
Today’s mass technologies negate statement reflects the challenge that of Apple, warned us:
the need for broad segmentation and most insurers face as they work resolutely
standardization. Whichever insurer – towards this goal: “You’ve got to start with the customer
incumbent or new, composite or niche, experience and work backwards to the
domestic or international – manages to “We are progressing on multi-channel technology… As we have tried to come
3
up with a strategy and a vision for Apple, embark and succeed on their journey to
it started with ‘what incredible benefits customer-centricity in the digital era.
can we give to the customer? Where can
we take the customer?’ … Not ‘let’s sit Section 1 – The New Context – describes
down with engineers and figure out what the new relationship between consumers
technology we have and how we can and insurers and questions its implications
market it…’” for the competitive landscape and the
insurer’s strategic options.
What incredible customer experience can
you provide to your insurance customers? Section 2 – Customer-centricity –
Where can you take them? discusses the foundations of customer-
centricity, how it can be enabled by
Customer centricity = Value Creation. digital, and the implications for value
creation.
In today’s insurance environment, where
products and prices can be quickly Section 3 – The Journey – explores the
matched by competitors, tailored offers customer-centricity path, highlighting the
and superior customer experiences conceptual and execution challenges it
are becoming the primary drivers of poses, and providing a sound and proven
differentiation and, therefore, value framework for implementation.
creation. Customer-centricity in the
digital era is not a goal per se: it is all
about business. Customer-centricity is a journey, an iterative one,
The purpose of this paper is to share our
that may have significant impacts on the entire
research and experiences to help insurers organization, including its culture and DNA.
4
1. The New Context
1.1 What’s new in customer-centricity?
Customer-centricity is not a new The average time spent on social media physical and digital components coexist
paradigm. It has always been there. is 2.1 hours a day7. and enrich each other. Mobility and
Customers started to matter since the first • Smartphone sales surpassed feature machine-to-machine (M2M) connectivity
business activities emerged. mobile phones for the first time ever in are providing additional opportunities
2013, and tablet sales increased 53.5 for real-time tailored services and access
What makes customer-centricity a percent (to 221 million units) in the to ecosystems – and thus to the borders
renewed priority on CEOs’, CMOs’ and same year8. of new industries. The improvement
other C-suite agendas is the new way • They represented 21 percent of the of infrastructure and computing
it can and should be interpreted and total mobile devices in use in 2013, but capabilities, and the availability of
executed in the digital era. accounted for 88 percent of all mobile scalable pay-per-use services, are
data traffic9. creating new options for internal and
Nowadays, every business is a digital • People check their phones approximately external competition.
business4. As recently as five to 10 years 150 times a day, on average10. Global
ago this was not the case. Things like mobile data traffic grew 81 percent Emerging technology trends are
digital penetration among consumers, year-on-year in 2013 (1.5 exabytes per enabling new patterns of behavior (see
smartphones, tablets, connectivity across month by the end of that year), reaching Figure 1), and are having a significant
multiple devices, massive real-time data nearly 18 times the size of the entire impact on the relationship between
and analytics, cloud computing, social global Internet in 200011. the insurer, its distribution channels
networks and others simply did not exist. • Nine-tenths of all of the world’s data and its customers. The polarization of
Now they do, and they have emerged with in 2012 had been generated in the customer-centric and production-driven
all their importance. previous two years12, and according to business models is becoming amplified
Gartner, worldwide information volume (see 1.3 below).
Let’s look at some telling facts and is predicted to increase by at least 59
figures: percent a year13.
• At the end of 2013, the Internet was
accessible to approximately 40 percent
• By 2017, more than 50 percent of
analytics implementations will make
Brand new customer-
of the world's population (8 percent use of event-data streams generated by centric value propositions
in 2001), with developed economies instrumented machines, applications,
reaching a penetration of about 77 and/or individuals14. can be launched on all
percent (29 percent in 2001)5. • The Internet of Things is forecast to digital channels in less
• 75 percent of the Internet population is comprise approximately 212 billion
on at least one social network6. Globally, “things” by 2020. This will include 30 than 12 to 18 months, by
the average time spent on the Internet
is 4.8 hours a day on laptop / desktop
billion connected (autonomous) things15.
There is no longer a physical world
new digital players as well
and 2.1 hours a day on mobile devices. and a digital world. In most situations, as incumbent insurers.
Figure 1. New emerging technology trends are enabling new consumption models.
Analytics
Revolution
n g technologica
e rgi l tr
Digital Evolution em en
w d Cloud
(Digital Marketing
s. .
Computing
Ne
.
Social Media, Mobility)
Customer-
centricity
.en
..
ab s
le n del Social to Share,
High Demand for e w behavior mo
to Know and
Customization to Co-create
Multi-channel
Customer Experience
(Mobile, Web, Physical)
5
Time is of the essence16. In the early 2000s, after it acquired an asset manager and since 2007. And what about insurance?
incumbent banks could defend themselves launched the fund on its platform18. What if these giants were to direct their
against the new Web-based entrants by advantages in customer-centricity toward
setting up their own online systems and, But much more is going on with incredible the life or P&C industries? Will insurance
thus, largely preserving their customer base speed, both by the known players and be their next area of focus? No – but
and relationships17. Since then, a new wave the unknown – or to be known in the simply because it is already happening,
of developments has occurred. Customers, future. Let’s take Apple, for example. Its as we will highlight when we assess the
with the Web accessible on mobile devices iTunes has 575 million registered users, insurance competitive landscape (see 2.3).
in their hands, are much more informed growing by half a million daily. It has sold
and demanding thanks to search engines, approximately 375 million iPhones over Brand new customer-centric value
relevant content, comparison sites, social the past five years and 155 million iPads propositions can be launched on all digital
networks and more choice. Customers since they were first introduced in 2010. channels, including mobile and social
are also closer than ever before to a vast These numbers compare with PayPal’s 137 networks, in less than 12 to 18 months.
number of players from other industries, million active accounts and Amazon’s 182 This is possible by new digital players as
and are accessible to almost anyone who million customers. well as incumbent insurers. Adding to the
has a relevant proposition to reach them. threat: customers’ propensity to change
This makes it even more challenging – and E-commerce can only continue to grow. their insurer in the next 12 months is
urgent – for established financial services With the many features and capabilities higher than ever (see below).
companies (insurers being on top of the needed by Apple to charge for its products,
list) to mount an effective defence and including clients’ trust, it is not difficult Moreover, contrary to what some may
counter-attack. to understand why many commentators think, financial services regulators are
expect the giant from Cupertino, California, not likely to be the anchor that preserves
The pace of change is indeed dramatic. to soon become more active in the the status quo. On the one hand, they
Amazon surprised the market in late 2012 financial services arena19. embraced the consumer agenda vigorously
when it announced the introduction of and are posing important challenges to
“Lending”, a service which provides loans At the time of writing, Facebook was just the way products are marketed, priced and
to merchants which operate through weeks away from receiving authorization sold. On the other, they are progressively
the company’s platform – and whose by Ireland’s central bank to become an exploring new ways to promote
creditworthiness is therefore very well “e-money” institution20. Vodafone has competition in the industry.
known to Amazon. But in fact, it simply acquired an e-money licence for the
copied what the Chinese e-commerce firm phone company to offer financial services The race to achieve growth through
Alibaba did three years earlier. The same in Europe, and has purchased a vehicle customer-centricity in the digital era is
Alibaba became the world’s fourth-largest tematics software firm. Google has held well under way. But most insurers have
money-market fund only nine months a banking licence from the Netherlands yet to leave the starting blocks.
1.2 The new insurance customer
A new insurance customer has emerged. • 71 percent are willing to purchase at on-year increase in consumers who
The new insurance customer is much least some insurance products via digital contributed to online product or service
better informed and more demanding, may channels. reviews or blogs.
belong to consumer groups, and may have • 67 percent would be interested in being • Consumers rely on “the wisdom of
different requirements and expectations, offered insurance services via their crowds” (social media, blogs, etc.) and
depending on products and circumstances mobile devices. want to contribute, share and learn.
(see Figure 2). • They express significant interest in
Social buying products which they help to
According to recent research studies • 47 percent gather information about design22.
conducted by Accenture21, the new products and services from social media.
insurance customers are: • 48 percent regard the advice they Informed and self-directed
receive from social media, blogs and • It is the norm for consumers to research
Connected consumer sites as “important” or “very online (and digital purchasing of small-
• 72 percent use mobile devices while important”. ticket and commoditized insurance is
in-store for price comparison (UK and • 55 percent would be interested in set to boom).
US respondents). insurance services provided through • Digital channels are the preferred
• 2 out of 3 consider it “extremely social media, blogs and consumer sites. solution for almost every interaction
important” to be able to buy what they with insurers, ranging from 44 percent
want, when they want and how they Co-productive and willing to share for “advice” to 68 percent for “updating
want (e.g. in the shop or online). • In 2013 there was a 46 percent year- personal data”.
6• If convenient, third-party distributors • Consumers want to be in control. assured their data will be used sensibly
are welcome (67 percent would consider They know how to search the market and can be deleted on request.
buying insurance from non-insurance and they switch insurers if they are • 57 percent of US consumers are likely
channels such as banks, online service not happy. As a result, the insurance to abandon an online purchase if an
providers, retailers, etc.23). “switching economy” was calculated to answer is not immediately forthcoming.
• Consumers expect real-time access to be worth as much as US$400 billion in • Insurance customers want to be
relevant content and are used to instant personal-lines P&C and life premiums24. recognized by their insurer, irrespective
gratification. of the channel they use to contact it.
Experiential
Price-sensitive • 80 percent would switch for more The traditional insurance customer has
• 64 percent are actively searching for personalized services and 41 percent been joined by the digitally-oriented,
value for money rather than brand, and would be willing to pay an average multi-channel and 24/7 connected
are willing to spend an additional 5 to 10 increase of 7.8 percent for such services. customer. Sometimes they are two
minutes online, after finding the product • Customers would consider providing different types of customer; in many
they want, to secure a better price. personal information in exchange instances they are the same person, simply
• 40 percent of insurance customers say for optimized coverage (82 percent), in different spatial and temporal contexts.
they are likely to change their home or an optimized premium (81 percent)
motor insurance provider in the next 12 or better service (78 percent). The The new insurance customers increasingly
months (51 percent in the 25 to 34-year conditions would be that they know manifest 10 demands – see alongside.
age band). what the benefits are, and that they are
Figure 2. The new insurance customer.
Self-directed Changing customer behavior
Looks for what he wants,
anytime, anywhere
71%
Experiential cs Big of consumers are willing to purchase insurance
al yti Da
Looks for “unique experiences” ta via digital channels
An Self-D
tailored to his personality & ed irec
orm te
preferences Inf 67%
d
Customer-centric would be interested in being offered insurance
Experiential
Co-productive via their mobile devices
Connected
arketing
Engages with service providers
in product co-creation 48%
Mobili
The new customer
is now... regard product advice on social media as “impor-
lM
Social Soc
e
tant” or “very important”
ty
tiv
ial c
ita
du
Relies on “wisdom of crowds” Co-pro
Dig
8 (social media blogs) to share 67%
Social Networks would consider buying insurance from non-
Connected insurers such as online service providers or
Switched on to multiple retailers
devices & channels
40%
Informed say they are likely to change their home / auto
Gets relevant content with insurer in the next 12 months
high frequency
80%
would switch for more personalized services
7What customers increasingly demand of their insurers
1. Be at least as digital as 8. Offer them relevant
they are. products and services with
transparent and convenient
2. Recognize them, always and pricing structures.
across all channels (and not
as mere policy numbers). 9. Develop customized
solutions which reflect
3. Listen to them and their inputs and
remember what requirements, preferences,
they say (to take it circumstances and previous
into account in any interactions, at prices and
subsequent interactions conditions which are right
or relationships, as for them.
appropriate).
10. Recognize and reward
4. Be there to support and their loyalty.
help them when they need
it, 24/7.
5. Engage with them with the
frequency of interaction
they consider appropriate,
through the channels they
prefer, and in ways which
are tuned to their
personality and the
specific situation.
6. Make the interactions
easy, consistent,
convenient and enjoyable
across all channels.
7. Empower them and let
them be in control, and be
able to satisfy their needs
when, where, and how
they like.
81.3 The insurer at a cross-road
How do the digital revolution and the satisfy their requirements, and to delight customer we often see traditional insurers
new customer behavior impact your them with superior customer experiences, that appear too absorbed in dealing with
competitive position and corporate delivered seamlessly across all channels? the constraints and costs of their legacy
strategy? systems to focus attention on what they
Are you able to efficiently and effectively really need to compete and prosper:
Do you really know all your current and provide them with personalized solutions making their customers happy and loyal.
target customers and their stated and tacit (e.g. through modular offerings and mass-
needs and preferences, and can you address customization engines), as providers in It is common within the industry that
them in real time, across all channels and other industries already do25? insurers’ attributes make it difficult
customer points of contact? for them to meet the needs of the new
Very few insurance players can reply insurance customer. Retail insurers
Do you have the right products, people, “yes” to the above questions. In fact, are often:
processes and technologies in place to contrasted against the new insurance
• Distant, with an average of fewer than two contacts per customer per year, and fewer than
1.5 products per customer.
• Product-driven, with silos that pervade their culture, their organization structure and their
distribution platforms.
• Third-party-dependent, with distributors often having an unbalanced negotiating power and
enjoying the lion’s share of the customer value.
• Old fashioned, with only 7 percent of services provided through digital channels – in spite of
customers’ expectations being 7 to 10 times higher, depending on the type of interaction.
• Reluctant to change, with 48 percent of P&C insurers and only 23 percent of life insurers
acknowledging the pressing need to change26.
There is a great opportunity for insurers genuinely with customers and prospects, mainly dedicated to B2B and/or B2B2C
to seize the first-mover advantage, and taking advantage of the multiple models. In other words, they should
adjust their strategies and operating possibilities that the digital era offers. become excellent at underwriting and re-
models for the new insurance customer. They should leverage all of the insights insurance, selling their products through
This will allow them to deliver unique and data available to them to understand reliable and effective distributors for a fair
propositions and seamless and consistent the important things about their share of value.
experiences across both traditional and customers: their likes, social trends,
innovative channels, before others are communities and friends. They must take We might say the insurance industry is
able to do so. advantage of partnerships and ecosystems at a cross-road (see Figure 3). Each and
to create new value and loyalty for their every insurer needs to decide if it wants
Customer-centric themes should drive customers. to reinvent itself to compete in the new
insurers’ agendas. distribution arena for the new insurance
Alternatively – an equally legitimate customer, or if it prefers to specialize as
Insurers need to learn how to understand strategic decision – they should opt a utility, providing superior underwriting
and to deal with the customer beyond to move away from customer-centric skills and capital to existing and new
technicalities and, most likely, beyond strategies, primarily focused on B2C distributors.
current companies’ boundaries. They distribution models, in favour of
should acquire the ability to engage production-driven strategies, which are
9Figure 3. The dilemma facing the insurance C-suite.
Become a Utility Reinvent the Model
Low cost - Industrial - Ultra-efficient Reinvented differentiation
?
• Narrow focus on specific insurance products • Everyday life (insurance but also other
• Specialized / standardized approach financial and non-financial products and
• Underwriting excellence and capital efficiency services), through differentiation on customer
• Low cost / low price experience, while optimizing cost-to-serve
• Process industrialization and optimization • Multiply interactions with customers, and
(“digitization”) tailored solutions to charge a premium when
applicable
• Real-time analytics
• Open to third parties, start-ups and new talent
across industries
This is the C-suite dilemma, although As mentioned, the pace of change
we would argue that the underwriting demands decisive action. Early innovators
capabilities needed for the utility option are quickly seizing market share from
are prerequisites also for those players the laggards. The transition from analog
that aim to compete in the “reinvent the to digital may entail a redistribution of
model” arena. market share, the emergence of new
value chains and the development of new
The choice is especially stark for those business models. Large incumbent insurers
players that are incumbent, that have may also be affected by the scale of the
significant legacy costs in distribution, transformation.
production, IT and operations, that are
mono-liners with an undifferentiated and In the following sections we will focus on
limited product suite, and that have an the journey to build a customer-centric
unexceptional reputation for providing insurer.
meaningful customer experiences.
Whatever their strategic choice, they will
have to prepare themselves for a significant
amount of change, to say the least.
102. Customer-centricity
What is customer-centricity? While This took place prior to the advent of But what does it take to become
difficult to describe, it is very evident online social networks, which meant the customer-centric?
when it is lacking. retailer had the leeway to survive, learn
from its lesson and recover. Today it might Digital technologies are a prerequisite,
Until recently large corporations, not be so fortunate. but are not sufficient on their own. The
especially in regulated and quasi- real challenge of customer-centricity
monopolistic industries, could overlook Insurers were among the group of large is to develop the corporate ability
their customers, who had few choices, corporations in regulated industries, to truly understand the customer’s
little influence on the success of the together with telecommunication stated and tacit needs, and to address
corporation, and no united voice. providers, utilities and banks. While most them by providing highly personalized
Executives tended to devote their of their peers have adapted to the new and remarkable experiences that are
attention to internal issues such as reality, the majority of insurers still have a relevant to each individual’s preferences,
production and costs, rather than predominantly internal focus. circumstances and point in time.
look outwards at customer needs and
preferences. Why? Among the reasons are their In today’s world, Digital + Customer
embedded enterprise-centricity, their Experience = Customer centricity.
There is no shortage of anecdotes that love-hate relationship with risk27, the
typify the bias. A memorable one tells of a myth that being in a regulated industry A customer-centric insurer should
large retailer that installed revolving doors protects them from external threats, think and build its strategy, products,
at the entrance to its stores to reduce the argument that insurance is a distribution channels and operations
heating costs. When shoppers (many complex business that customers cannot around its customers. It should clearly
with carts or pushchairs) complained, understand, the notion that customer- define its vision and develop new
the solution was to install loudspeakers related matters pertain to brokers and business and operating models capable
instructing customers on how to use the agents, and the belief that, in any case, of delivering these kinds of experiences,
revolving doors. The view was that since customers have few requests, little choice, and of significantly increasing the value
the engineers and accountants liked the and no effective voice. of every targeted customer and of the
solution, shoppers would just have to company as a whole.
accept it. As we have seen in the section above, in
the digital era customers do indeed have At its best, customer-centricity means
Needless to say, customer traffic and choices, and they have many different ways having each current and prospective
revenues declined, forcing the retailer to combine their voices and make them customer at the center of the business and
to acknowledge its series of mistakes, heard. This has forced consumer firms in operating models.
apologize, and re-install the larger doors all industries to rethink the role of the
which its customers preferred. customer. Even, eventually, insurers.
The real challenge is to develop the corporate ability to truly understand the
customer’s needs, and to address them with personalized experiences relevant to
each individual’s preferences, circumstances and point in time.
2.1 The foundations of customer-centricity
According to our experience, each Customer-centric insurers listen to preferences regarding the utilization of
customer-centricity journey is grounded customers. They organize their data by distribution channels based on access
on five “pillars” and five “digital enablers”. customer and not by product. They detail data, geo-location data, telematics data,
The five pillars (see Figure 4) are: and enrich their management information family members, friends and professional
systems with customers’ metrics and networks, likes and dislikes as expressed
Customer listening and understanding. key performance indicators (KPIs). They on social networks, etc.).
This represents the first step and the provide relevant views of the customer
cornerstone of the journey. It is key based on traditionally held data (e.g. This data is collected across all
to intensifying the relationship with age, address, family status, products, distribution channels and across the entire
existing and prospective customers, to premiums, transactions, contact history, organization. In fact it is acquired from all
establishing a dialogue with them, and claims, queries, complaints, etc.) as well possible sources, including internal and
to responding to their needs and their as new available data (e.g. price elasticity external databases, customer listening,
preferences. of individual product components, social networks, connected devices in cars,
1112
homes and workplaces, and even wearable Multi-modal interaction management. There is never room for complacency.
devices associated with an insurance The third pillar is about allowing Customers quickly become accustomed
offering. the customer to use traditional and to higher standards of service, and so
innovative channels according to his continuous improvement is essential.
Big data and advanced analytics are preferences. Consumers have no interest The higher the levels achieved, the
used to extract the greatest value from in the organization model chosen by the greater the disappointment when it is
customer data, to deeply understand insurer to govern its distribution channels not sustained, and the more severe the
and dynamically adjust all relevant (e.g. full integration, coordination, impact on customer experience, loyalty
dimensions which describe the or competition), nor in the financial and advocacy.
customer’s preferences and expectations arrangements it uses to govern them (e.g.
over time, and to make every interaction pay-out levels, cost allocation, etc.). They This is a complex challenge for insurers. In
with the insurer a memorable are only interested in transparent pricing the digital era, in which people and things
experience. Internal and external and seamless multi-modal interaction are more connected than ever, customer-
data-rich micro-segmentation, built on experiences, and in being able to choose experience management embraces not
behavioral factors and customer-specific the channel which best serves their only all of the points of contact within
preferences associated with traditional purposes given their circumstances at the extended enterprise, but also the
transactional and socio-demographic that point in time. The same applies if ecosystems to which the insurer belongs.
dimensions, have proved to be extremely it is the insurer that wants to reach the
productive in helping to generate an customer: even the best proposition at Organization redesign and change
authentic customer understanding as the wrong time or through the wrong management.
well as the predictive models to best channel is likely to fail. This pillar includes the soft components of
engage with them. the journey towards customer-centricity.
Multi-modal interaction management The development of a customer-centric
Customer-oriented offering. may consider different pricing for business model is likely to require that
Insurers need to devise value propositions products and services, depending incumbent players undergo painful
which are as tailored as possible to meet on the channel used and the micro- organizational changes.
each customer’s needs and preferences. segmentation of customers28. Whatever
This includes when (in real-time) they the channel mix chosen by the insurer, by Without losing their core technical and
are needed and the way in which they now it has to include mobile interaction actuarial skills, they will also need to
can best be delivered. In the case of through smartphones and tablets. evolve their culture, embracing and
unexpressed needs, insurers’ offers sustaining a prioritization of the customer.
should reach the customer through the
most appropriate channel at the moment Even the best proposition In a truly and wholly customer-centric
in time when acceptance is most likely. at the wrong time or organization, all employees and partners
These are often emotional moments in are obsessed with what they can do for
the life of the customer, such as a new through the wrong their customers. They strive relentlessly to
birth, an anniversary or a wedding. It find new or better ways to contribute to
could also coincide with the purchase
channel is likely to fail. this overriding cause.
of real estate, white goods or travel. It
may often entail the development of Customer-experience management. Customer-centricity is first and foremost a
partnerships and ecosystems. This pillar is itself a journey within the matter of corporate culture, which is why
customer-centricity journey. The most the most important change agents are the
Customer-oriented offerings can be successful insurers truly know their board of directors, the CEO, the CMOs and
developed by means of modular elements customers, are sensitive to changes the members of the executive committee.
(e.g. types of protection, payment over time in their needs, behavior and They need to visibly, effectively and
schedules, contract durations, pricing preferences, and adjust their offerings and continuously support the journey, and
structures and indemnity levels) which interactions accordingly. they need to inspire, nurture and develop
can be combined to shape the solution an indispensable customer-service culture
in whatever way best fits the specific Customer experience entails a ceaseless throughout the organization.
needs and preferences of the customer search for new and better solutions to
or his micro-segment. The more freedom delight customers. This requires that the On an operational level, a successful
and control a customer is given over the insurer develop capabilities and tools to customer-centricity journey involves all the
purchase, by physically or digitally helping continuously improve value propositions various functions which face customers
him to shape the coverage which best fits and service levels for each customer and/ or have an impact on them. Each of these
his needs, the more likely he is to buy the or micro-segment. must intensify its co-operation within the
solution, to value the insurer, and to stay organization and open itself to external
and grow his account. inputs and contributions.
13Figure 4. The customer-centricity journey.
Customer 1. Customer understanding 2. Customer-oriented
Knowledge - Organizing data per offering
customer, not per product - Developing modular
- Detailing view of customers products based on real
for interactions customer needs
- Optimizing products/
channel pricing
3. Multi-model 4. Customer experience
interaction management management
- Using all channels, in an - Ensuring a superior,
intergrated way consistent experience
- Offering products/ at all stages of the
services on the basis insurance cycle
of effective needs using irrespective of the channel
different channels - Controlling the “moments
of truth”
- +
Customer Satisfaction
5. Organization redesign and change management
2.2 The digital enablers
Each pillar of the customer-centric (e.g. by allowing a deeper understanding
journey can be strengthened by new of customers, enabling new ways of
capabilities and the introduction and interaction, and more customized products
orchestration of “digital enablers”. These and services).
are analytics, digital marketing, mobility,
social media, and the digital foundations: The digital enablers can be exploited at
network, unified communication and each step of the customer-centric journey,
collaboration tools, and multi-channel although their relevance varies from step
contact centers. to step (see Figure 5).
They facilitate both efficiency (e.g. by
introducing digital business processes and
optimizing business models) and growth
14Figure 5. Digital enablers of the customer-centricity journey. Customer experience
management
Multi-modal interaction
management Social Media
Customer Mobility
Social Media Digital Marketing
Knowledge Mobility
Customer-oriented Analytics
offering Digital Marketing
Analytics
Customer Social Media
understanding Mobility
Digital Marketing
Social Media
Analytics
Mobility
Digital Marketing
Analytics
Customer Satisfaction
Digital Foundation
- +
(Global network, unified communication and collaboration, multi-channel contact center)
Organization redesign and change management
The definitions and borders of the digital Insurers have always had good skills Digital Marketing.
enablers are subtle, and in most cases for analyzing data. Now they should The use of digital tools and channels,
they interoperate to a level which makes deploy these skills to the larger pools together with customer insights gained
it difficult to draw clear distinctions of available data, exploiting computing through analytics, can provide tremendous
between them. Bearing this caveat in power and artificial intelligence to support to commercial offerings. Digital
mind, here are brief descriptions of the refine their strategies and further drive marketing helps to deliver customized
digital enablers: business results. Their entire value chain offerings across channels, and to reverse
(e.g. personalization of marketing and the traditional “push” approach of
Analytics. offerings, management of sales forces insurers in favor of a more effective
This refers to business intelligence and other distribution channels, pricing “pull” proposition that is tailored to meet
techniques based on predictive statistical and underwriting, fraud detection and customers’ needs and preferences. An
models and self-learning processes. prevention, claims handling, customer example is the motor insurance product
They are at the core of the first pillar of service, and client-value-based Name Your Price, launched by US insurer
the customer-centric journey, customer management) is set to benefit from a Progressive. By adjusting factors such as
understanding, and are essential more advanced and integrated approach duration, coverage options and payment
throughout the customer-centricity to analytics. schedules in an easy and intuitive manner,
journey. Analytics helps provide insights and in a single session, customers can
from enormous amounts of diverse data Other industries have paved the way. design and buy the policies which fit their
from different sources (combined in big In banking for instance, by applying needs and budgets.
data) and, when deployed effectively, advanced analytics, Spain’s Bankinter
it represents a key digital enabler of recently developed a personalized
customer-centric journeys and business recommendation system for personal
improvements. The power of analytics is and commercial banking products and
immense. Amazon recently announced services. It doubled its retail cross-selling
(and patented) what it calls “anticipatory ratios and tripled them in the small- and
shipping”, which is the capability to ship medium-enterprise segment.
today what the customer will decide to
buy tomorrow.29
15Insurers should deploy their good analytics skills
to the larger pools of available data, exploiting
computing power and artificial intelligence to refine
their strategies and drive business results.
More broadly, digital marketing is used • Customer service improvement: enabling For example, the insurance company
for the following purposes: 24/7 customer service and remote advice USAA takes advantage of social networks
via videoconferencing, messaging tools to interact with its members – and
• Web presence and sales optimization: and e-advisors (i.e. a nicer and more to learn more about them. Through
improving the company’s Web presence sophisticated version of fully automated Twitter (http://twitter.com/USAA), USAA
and conversion rate with fact-based call-center solutions). provides its members with information
technology-driven solutions (including • Customer oriented services and and tools for managing their personal
digital advertising). offerings: real-time offers of insurance spending, surviving storms, becoming
• Remote advice and selling: increasing coverage based on geo-location (e.g. better at discussing financial matters, and
sales opportunities by exploiting new travel and health insurance offered to preparing their children to go to college or
digital opportunities (e.g. electronic customers who arrive at international university.
signatures) and new digital points of airports).
contact (e.g. apps and online tutorials, On another note, insurers can benefit
the latter likely in the form of videos). Migdal, Israel’s leading life and pensions greatly from listening to the voice of
• Service fulfilment: offering new company, was one of the first insurers to customers on social media, either learning
interactions and customer experiences introduce a complete online and mobile how they can improve their products
to current customers and prospects (e.g. suite of tools to help its independent and services or promptly detecting and
virtual processes and gaming). agents link more effectively to their addressing issues that can seriously affect
• Marketing interaction: providing customers’ multi-channel journeys. Almost their brand and reputation.
differentiated answers based on all of Migdal’s agents now use at least one
customers’ needs and segments. of the new remote digital tools: the online The consumer-products giant P&G
customer database, the iPhone apps, and has developed a social-media system
While experiencing sustained double-digit the agent website31. called Consumer Pulse which gathers all
growth, Nespresso in 2012 had to develop comments by all stakeholders and feeds
new digital marketing capabilities and a The importance of mobility in the them back to the computer screens of the
scalable, global, multi-channel solution that insurance business is set to grow relevant P&G employees who are able to
included e-commerce, point of sale, call exponentially, as connected devices respond appropriately32.
centers and back-office functions in order to become more popular and enable
ensure proper services to its growing digital more personalized and convenient Last but not least, insurers can meet
customer base. A nice issue to have! insurance solutions (e.g. for motor, customers on social media by providing
home and health insurance coupled with secure and easy access to their agents or
Mobility. telematics devices). their direct-on-line services. The Australian
This refers to those services that are bank ASB is one of the first financial
accessible everywhere through mobile Social Media. players to have introduced a virtual
devices such as laptops, smartphones and This set of technology platforms and branch on Facebook33. Aegon, the largest
tablets. online tools allow individuals, groups and insurer in the Netherlands, has developed
companies to interact and share text, a separate brand called Kroodle, which
Almost 70 percent of consumers images, videos and audio files. offers its digital-generation customers
worldwide are interested in mobile- an online insurance platform with access
based insurance services. It is therefore More and more people spend the vast through social networks34. And AXA, which
expected that many more mobile apps majority of their “connected” time reached 1 million AXA People Protectors on
and enhancements to existing services will on social networks, dialoguing with Facebook at the beginning of 2014 - in just
emerge in the near future30. The primary friends and colleagues and posting their 2½ years35 - went the social networking
applications of mobility are: opinions on a wide variety of topics. By route and recently announced a strategic
using social media, insurers can access partnership with Facebook to “further
• Interaction on the move: enabling a an immense amount of customer data develop its digital, social and mobile
new way of customer interaction, such which, coupled with data they already footprint in France and globally”36.
as front-end apps, mobile advisory possess, can provide rich customer
services, and mobile purchases that take insights and enable the development of
advantage of electronic signatures. superior customer propositions.
162.3 Competition, value at stake and value creation
Becoming a customer-centric and outside the industry, involving the saying that the profit at stake varies from
organization as defined above is a must distribution as well as the production value one insurer to another, depending on its
for insurers that want to compete in components. business and channel mixes as well as the
distribution in today’s digital era. The competitive and regulatory environments
cost of not doing so may include the It is estimated that traditional multi- in which they operate. However, few
decline of business volumes and even liners and multi-channel insurers may carriers could endure a reversal of this
exit from the market. lose approximately 35 percent of their magnitude without questions being asked
economic profit in the next five years due about their survival. “Wait and see” is not
As mentioned earlier, insurers today face to distribution, production and regulatory a viable strategy at this time.
increasing competition from both within threats (see Figure 6). It goes without
Figure 6. Insurance economic profit at risk.
Distribution threats
• First-mover insurers
• Retail banks
• Other large retailers & telcos
• Traditional aggregators and new digital entrants
-15%
• Web ‘dominators’ (eg. Google, Apple, Facebook, Amazon, Alibaba)
Production threats
• Price comparison portals
• Scale (and capital) economies
• Telematics providers (auto, home & health)
• Auto manufacturers & telcos -10%
Regulatory threats
• Consumer protection regulations (e.g. CPI sales)
• Product comparability & price/fee disclosure
• Capital adequacy requirements -10%
Distribution is likely to be crowded. In Then there are the “Web dominators”, the too. For example, what are the likely
addition to insurers and aggregators, a Internet giants such as Google, Apple, implications for the home and motor
diversity of new players have already Facebook, Amazon and Alibaba, and the insurance businesses of Google earlier
entered or are considering entering this ones which will come after them. They this year buying Nest, a manufacturer
competitive arena. The numbers are can leverage their frequent and intimate of smart home systems, and investing in
likely to grow. interactions with customers to detect and driverless cars? And what of Vodafone
satisfy their insurance needs. They are likely buying Cobra, a motor insurance
Banks are back. Needing to increase to start providing third-party products and telematics provider? More broadly, what
their fee business, they are offering both to act as aggregators (as Google, which are the implications for the future of
life and P&C insurance. They consider bought an aggregator site in the UK in insurance in the connected world of the
insurance as a natural extension of their 2011, and Amazon already do37). However, Internet of Things, a market to which
core financial product range and are in the medium term, their superior ability Cisco attaches a potential value of $14.4
giving it high priority. They can compete to know their customers and deliver trillion over the next decade?
with insurers by distributing the full range personalized solutions at the right times
of retail and small-commercial insurance could, in principle, result in them joining Personal lines in motor, home, life and
products, manufactured by their own forces with insurers or reinsurers to be health insurance first, and commercial
carriers or by third parties (in joint even more active in the insurance industry. lines afterwards, seem all to have the
ventures or distribution agreements). And potential to be significantly impacted.
they represent a big challenge to insurers Web dominators could even apply for The key question is not if the Web
in the development of holistic client- full licenses and enter the underwriting dominators have the potential to enter
centric financial services propositions. business. They could reinvent the industry, and disrupt the insurance market, but if
17
18and when insurance will become a top
priority on their agendas. Between now
The key question is not whether the Web giants have
and then insurers should better prepare the potential to disrupt the insurance market, but if
themselves. AXA and Facebook’s strategic
partnership (see above) is an interesting
and when this will become a priority.
development worth monitoring closely.
Internet of Things, where connectivity selling, cross-selling, fraud prevention,
Mobile operators are exploring how is king, it is not difficult to imagine a as well as the re-engineering and
they can take advantage of their market dramatic expansion in the generation of digitalization of processes and the
position, client base and technical useful data (e.g. through telematics from related HR agenda such as organizational
capabilities to develop insurance products private and commercial vehicles, buildings structures and training.
and services around mobility and and factories, appliances, wearable
connectivity. The fast growing markets of devices, etc.). This has the potential to Since “you get what you measure”,
micro- and small-ticket insurance through impact the profitability of almost all it is important to develop a robust,
mobile phones, and of motor insurance insurers’ business lines, from motor, comprehensive and consistent set of
telematics (see Vodafone above), are two household and commercial insurance to customer-related metrics and KPIs, both
illustrative examples. life and health coverage. at a macro enterprise-wide level and at
a micro level, involving single processes,
Large retailers are the natural distributors The regulation of data privacy is moving products, interactions and services.
of specific types of insurance coverage, from the desks of legal specialists to
such as extended warranties and loss of corporate boardrooms as it becomes a key There is a vast amount of literature
the products they cover, pet insurance and business issue. concerning customer-experience
micro-insurance, to name a few. Taking measures, and there are a number of
advantage of their customers’ fidelity and Consumer groups, community insurance metrics and KPIs used by companies. For
financial schemes (e.g. loyalty programs and self-insurance (e.g. Friendsurance example, the Customer Effort Score (CES)
and credit cards) they can scale up the in Germany and Guevara in the UK), is usually applied at a micro level and is
insurance product suite by extending it new insurance ventures (e.g. Oscar and extremely relevant for the organization
to life, pensions, credit, home and more. CakeHealth in the US and Intrasurance that needs to transform its processes
Internal production or distribution of third- in the Netherlands) and regulators pose and operating models to become more
party products may both be applicable. additional threats to the industry and to customer-centric. However, it is not much
the levels of profit that incumbent insurers help to those companies that have already
Auto manufacturers and dealers are enjoyed in the past, and hope to return to achieved effortless customer interaction
likely to continue their expansion into when the economic recession is behind us. and want to improve customers’ share
the distribution of auto insurance, with of wallet, loyalty and advocacy38. CES
telematics, usage-based insurance and But to achieve this, they need to consider is also considered to have an impact on
value-added services linked to mobility being the likely competitive landscape under Customer Satisfaction (CSAT), which is
likely developments. To the extent that more different scenarios. And they need to more suitable as a macro-level indicator
cars become safe, self-driven, and leased decide if, where, and how they intend alongside the Net Promoter Score (NPS)
vs. bought (including car sharing), motor to compete. They need to do all this as a from Satmetrix39 and Forrester’s Customer
insurance is likely to evolve into something matter of urgency, for the pace of change Experience Index (CXi)40, which are widely
different, still to be fully conceived. is accelerating. used for comparison across industries.
Should any of these potential new If insurers want to retain distribution Insurers need to develop a set of robust,
insurance distributors own their and prosper they need to address the comprehensive and consistent customer
own carrier, the competition that new digital and customer-centricity metrics and KPIs which are derived from
traditional insurers face will extend imperatives – not as a defensive strategy, their vision and mission, from their
to products and pricing – referenced but as a growth strategy to gain market customer value propositions and from
above as production threats. It may share and establish a superior competitive their brand promises. Tightly linked to
also challenge the distinction between positioning in terms of customer mix, their business strategies, these metrics
insurance and reinsurance. product mix and channel mix. and KPIs should be an integral part of
the management information system,
Data monetization is another issue that They should strive to deliver a sustainable the appraisal system and the rewards
challenges insurers. Any entity that can performance across all elements of the system41, at all levels of the organization
acquire the information that carriers could value chain, working hard on customer from the boardroom to the call center.
use to predict and mitigate risks, could acquisition and retention, product
potentially usurp a vital link in their value innovation, mass-customization or 1:1
chain. Web portals already do this. In the marketing, pricing optimization, up-
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