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You do not have to search hard to find recent examples of insurance companies announcing a focus on customer experience. For example, the major US health insurer, Aetna, recently opened two in-house multicultural call centers that can handle over 200 languages. AXA, the global insurance giant, launched a €200 million venture capital fund dedicated to improving the insurance customer experience. USAA has organized their entire image and value proposition around a superior customer experience. Not only are insurers investing in customer experience technologies and processes, many of these same companies are hiring executives who are focused entirely on the customer. These new executives have titles ranging from chief experience office to chief customer advocate. Why are major players in insurance—an industry not known for rapid adoption of new trends—moving so aggressively into the customer experience arena?

In order to understand this customer experience focus, we first have to discuss the nature of insurance itself. Insurance is something of a strange business. When a customer purchases an insurance policy, he/she is not actually purchasing a physical product or even a service. What he/she is purchasing is a promise. The insurer is promising that in return for prompt payment of premiums, if an event occurs that harms the policyholder, the insurer will make the policyholder whole again (all subject to the terms and conditions of the policy, of course). The critical point here is that from the view of the policyholder and in the absence of a claim, the insurer has done nothing to earn the premium dollars. The critical service of insurance only takes place in the aftermath of an accident, storm or other unfortunate event. No event, no service. It is this policyholder view that makes customer experience so critical.

Outbound customer communications are often the only contact a policyholder has with his/her insurer. Modernizing these communications so that each one is timely, personal, relevant and delivered to the customer’s channel of choice is one way to quickly improve customer experience.

All of this goes out the window in the event of a claim. Superior claims experiences create lifelong customers. Insurers know this and most invest heavily to ensure that claims are processed efficiently and fairly. The issue from an insurer point of view is that many insureds will never file a claim. According to the Insurance Information Institute's "2015 International Insurance Fact Book," only around 5.7% of automobile policyholders and seven percent of homeowner policyholders will have a claim in any given year. Compounding this problem is the commodification of personal lines products. The policy language for automobile and homeowners insurance is largely standardized inside a state. So fundamentally, a customer is getting the same coverage no matter which company he/she uses. This creates a huge competitive problem for insurers. Insurers are selling a largely indistinguishable product to customers who will likely never have to make use of the service. In this environment, price rapidly becomes the customer’s main decision criteria. How can a company break out of this destructive price spiral? By improving the customer experience outside of the narrow window of claims processing where insurers have traditionally focused.

One of the main challenges facing insurance companies today is that their systems and processes are not optimized for the end customer. Many insurers who sell through agents or brokers traditionally regard those intermediaries as their customer. While this distribution channel remains important, all insurers must now update technologies, skills and processes to meet demands arising from the new class of customer-focused executives. Information technology (IT) needs to be able to say “yes” to a chief customer officer who is developing new strategies to differentiate from the competition.

Technology upgrades are an important first step in this process. Insurers are investing heavily in modern core systems for policy and claims administration to support new workflows. These core system transformations are risky and expensive, as each project touches almost all aspects of an insurer’s business. Another common place to start with this transformation is customer communications. Outbound customer communications are often the only contact a policyholder has with his/her insurer. Modernizing these communications so that each one is timely, personal, relevant and delivered to the customer’s channel of choice is one way to quickly improve customer experience. The industry is also seeing a second wave of customer-focused native mobile applications. The first wave of mobile applications in many ways failed to meet the needs of the customer, so insurers are trying many new and innovative approaches to satisfy the digital customer. One example of this new, targeted approach is the AllState “GoodRide” app, specifically designed for motorcyclists’ needs.

The simple truth is that while insurers increasingly recognize the importance of customer experience as part of a competitive strategy, no single insurer has developed an effective playbook that other insurers can follow. Each insurer must evaluate his business, people and processes and begin to transform the customer experience to emphasize his strengths and minimize his weaknesses. A few common places to start this journey include:
  • Mapping the digital customer journey
  • Creating an inventory of all customer touchpoints and reviewing with stakeholders
  • Putting a metrics and analysis strategy into place to measure and evaluate the success of all digital projects
Insurers that ignore this quiet customer experience revolution risk irrelevance and slow decline.

For more information on transforming your customer experience strategies, don't miss GMC's session, "The Customer Experience Journey: Building the Voice of the Customer Programs" at the DOCUMENT Strategy Forum on Tuesday, May 10 in Chicago.

Andrew Hellard is marketing manager at GMC Software Technology. He has 10 years of experience in insurance, as well as 15 years of experience in software development and team leadership. Contact him at a.hellard@gmc.net.