Attention to service levels is imperative in a firm of any size, yet both measurement and implementation may be better outsourced, says Kate Roy.
Even without the current market conditions, effective customer service is an aim shared by almost every truly successful organisation, from the cornershop to the multi-billion pound insurance company. Such organisations focus on the customer experience because excellent service combined with a proven product will lead to increased profitability.
Everyone recognises good service when they see it or experience it. Yet for many businesses and organisations service may simply be expected and thus taken for granted in terms of training staff or building customer service principles into the business model. Meanwhile, what stands out in the customer's mind is excellent service that exceeds their expectations - and poor or inferior service that fails to meet them.
Greater satisfaction = greater profits
Put simply, the greater the satisfaction of the customer, the greater the profits. Unfortunately, simply measuring customer satisfaction does not create customer satisfaction. It is necessary to understand the factors that drive customer satisfaction and focus on these drivers to attain and maintain the desired level of customer retention.
Satisfied customers of an insurance company will continue to pay premiums, buy more products, and cost less to service. Plus satisfied customers will usually tell other people of their experience. On the flip side, unhappy customers may tell more people about their experience than if they were satisfied. This is becoming more prevalent with the increasing use of the internet and social networking sites which can broadcast immediate feedback around products and service experience.
In this climate, the insurance industry should strive to exceed expectation and create brand loyalty by doing so. For example, many customers believe that insurers will do everything to decline a claim. This is simply not true, but there needs to be a little more transparency, more flexibility and a lot more communication with customers - which includes managing expectations. And if an insurer does fit that clichéd mould it is sometimes because they've not considered other, more customer-friendly, ways of driving down costs.
Measuring Satisfaction
So how does a company know whether its service is meeting or exceeding those expectations? How does it determine whether the customer was overwhelmed with good service or ‘under-whelmed' with poor service? One way to do this is to measure customer satisfaction either directly or through the third party who delivers outsourced customer services.
Third parties often have access to operational solutions which speed the processing of the majority of genuine claims or help with early identification of those which are higher risk. Given its cost, flexibility and service-led benefits, outsourcing may well begin to play a larger role in this market.
This interest in insurance outsourcing springs from the convergence of two major business issues that, in turn, stem from core economic and competitive forces. One is the need to provide the highest levels of customer support to both gain - and retain customers. The other is the need to increase efficiency and control costs by maximising resources and reducing overhead costs.
How can you improve customer service while limiting or reducing your resources? Fortunately two ways to meet such a challenge emerged in the 1990s.
The first was the incorporation of technological advancements. The strategic use of technology can allow a company to offer better customer service with fewer people. But the high cost of keeping ahead of the technology curve remains daunting to many companies, particularly those whose primary business focus is not about technology. And, even with increased technology, significant resources and time are still needed to accomplish tasks associated with insurance business servicing.
That is why a second option has become so attractive to insurers: outsourcing. Outsourcing presents a logical alternative to performing all insurance servicing tasks in-house because it can cut expenses, free up resources and allow insurers to concentrate on more profitable core competencies.
Delivering Results
Insurers outsource because, quite simply, it delivers results. It is a proven tool in improving business performance and transforming customer services.
For a major example, the Coal Health Contract is the largest industrial injury compensation scheme in British history. Here Capita's challenge was to meet stringent quality and volume throughout targets. By the end of 2008 we had settled more than 700,000 claims, disbursed over £5 billion in claims payments, stored and archived more than 50 million electronic images using an electronic document management solution and, because of a range of efficiency initiatives, including the design of compensation ‘calculators' had delivered overall operational delivery savings of more than £20 million and a reduction of over 200 processing man-years.
As outsourcing becomes more commonplace in the insurance industry, companies of all sizes have become increasingly open to the idea and less concerned about giving up control of these functions to a third party. They appreciate the ability to better plan and control operating spend by having commercial certainty around their annual servicing costs over the life of the contract. And, importantly, they understand that customer service might be better handled by a third party who can give it the focus it deserves.
Overall service standards have changed over the last decade but we are still not at a stage where they are acceptable across the board. Could we now be entering a more service led era?
Kate Roy is director at Capita Insurance Services
