Technology is generally considered a ‘good thing' in insurance, having come a long way from such primitive beginnings. But which technology, and how does it fit protection? Stuart Hayman investigates
Choice is generally regarded as a good thing, and in many ways it is. As a consumer, we want the flexibility to interact with the organisations we purchase products and services from in the way that suits us best at the time.
The proliferation of new channels has, at least theoretically, given us that choice and our expectations are set by those who deliver the ‘multi-channel experience’ the best, irrespective of the market sector in which they operate.
For product and service providers, however, simply offering more channels is neither simple nor guaranteed to deliver benefits for either the consumer or the organisation. Many organisations to date have succeeded only in delivering multiple channels, not a true ‘multi-channel’ experience. This causes frustration when there is no visibility of transactions or interactions from one channel to another.
Better integration
So choice in itself is not the answer. What is required is the deep integration of whatever channels are offered to deliver a seamless, multi-channel experience. Unless this can be achieved, there is a strong possibility that the addition of new channels will increase operating costs, reduce efficiency, increase customer effort and, as a consequence, negatively impact retention and destroy value.
How should insurers determine which channels and functionality to offer and how can these be delivered to best effect? Firstly, it is important to recognise the fundamentally different customer lifecycle that exists for products, such as protection, that are neither legally required, nor on most people’s ‘must have’ lists in the way that many of our consumer society products are.
Once bought, the level of interaction with the provider is typically extremely low, so the scope for obtaining regular insight into how a customer feels about their product and whether or not they intend to retain it is limited.
Benefits of technology
The good news is that this challenge can be overcome with technology and appropriate data analysis.
The provision of product data – including decision trees and calculators to assist in matching product(s) to needs – can be delivered both to the web and mobile devices. Regular analysis of customer online journeys should be undertaken to ensure that navigation is effective. It should also identify and address any points in the online journey that result in drop-outs or cause hesitation.
Enhancing online help with human assistance is easily achieved through click-to-chat and click-to-call that can be offered to all customers at all times. Better still, it can be offered dynamically – only when needed and perhaps only if the customer profile suggests that the investment in linking the customer to an adviser is likely to be worthwhile.
When customers exit an online application prior to completing the process, software can be used to detect the event and trigger an outbound contact. The choice of contact channel can be tailored to the customer profile and likely value, with a view to attempting to recover the sale by addressing what it was that caused the customer to drop out.
Where underwriting is required, the typical duration and complexity of the process is a well-known cause of failing to convert customers who successfully completed the initial application. Here too, technology can be used to reduce the ‘not proceeded with’ (NPW) rate by providing regular progress updates (e.g. email and SMS updates) and, as already indicated, using tele-underwriting to deliver a more efficient and consumer-friendly process.
Once on risk, technology can be used to address a major issue impacting provider profitability and book value: the lapse rate. Detailed profiling and segmentation of the customer base allows carefully timed, proactive contact to be made to both reinforce the value of products purchased, keep cover in line with changing needs and, where appropriate, attempt to cross-sell other relevant products.
One of the obvious challenges for the protection market is that once cover is in force, the need for policyholders to proactively contact their provider is relatively low, particularly if their needs are not being managed by a professional adviser.
Getting ready for RDR
Unlike a mobile phone operator or utility company, protection policies do not generate ‘usage data’, while billing queries are typically far less frequent. The result is a dearth of regular behavioural information, or any sense of how the consumer views their product or the brand of the product provider.
In order to address this, providers need to consider two strategies. Firstly, to enhance existing policyholder information with publicly available data that can provide clues as to changing needs (such as birth of children or house move) and be used to enrich the data used to drive marketing campaigns and conduct propensity modelling (including propensity to lapse). Secondly, and to quote a well-known phrase: “If you don’t know, ask.”
At every stage in the lifecycle, providers should be actively seeking customer feedback to understand the reasons for their actions, asking questions about their reasons for dropping out of an application, for example.
The industry definitely needs to embrace new technology, especially if it is going to adapt to the likely impact of the Retail Distribution Review on protection, changing consumer behaviour and continued economic pressures.
But this must not be to the exclusion of what came before. In fact, it will mean embracing a multi-channel strategy – of which ‘tele-technology’ will play a vital role – that provides customers with a seamless experience where and when they want it and a provider with one single, detailed view of their customer.
Stuart Hayman is senior business consultant at Vertex
