From Good to Great: Taking Customer Relationship to the Next Level

Abstract

Rapidly evolving technology, digital communication landscape, and access to readily available information have profoundly empowered the customer. Customer is king—this—age-old adage holds true now more than ever. To effectively compete in a dynamic business ecosystem, insurance companies must reassert their focus on developing a strong, loyal customer base. In their endeavor to build a strong foundation for business growth, insurance companies are focusing on a new set of core principles to redefine customer relationships. Smart businesses are investing heavily on high-impact solutions that bolster customer relationship and ensure increased satisfaction and retention through improved customer engagement

Long Live the King: Meeting Evolved Customer Expectations

The insurance industry worldwide stands at a critical crossroads. A combination of sluggish economic growth, uncertainty about the future, and tightening regulatory pressure has put insurers in a bind. Add to this the changing customer expectations and an increasingly digital and connected world. Growth and profits do not come as easy as they once did, and this has left insurers scrambling to find new formulas for success.

The customer is at the center of all business decisions. This is particularly challenging given that today’s customer is price-sensitive and tech-savvy, with nearly one in three admitting they are, or will be, using the Internet to compare and purchase specific insurance options. Armed with the Web and mobile devices, customers today enjoy tremendous leverage, are able to shop around with ease, switch carriers painlessly, and interact with insurers in appealing new ways. Every day, new communication and sales channels open up, carrying the promise of higher levels of convenience and service.

This white paper discusses how the battleground for customers has moved beyond simply products and pricing. This shift has brought into play a range of new competencies that insurers must master if they want to stay competitive. And the most innovative carriers have already jumped ahead.

Power of Customer Experience: A Look at the Statistics

• A modest improvement in customer experience for a $10 billion insurance carrier will increase customer loyalty and boost revenue by approximately $298 million
• Dissatisfied insurance customers are 40% more likely to tell others about their bad experiences
• A 1% increase in customer retention increased annual premiums by $1 million (Nationwide Insurance)
• Reducing customer attrition by 5%–10% can increase annual profits by as much as 75%
• On average, one person will tell eight persons about a bad customer experience—and one in those five will tell 20 more
• Satisfied customers are 50% more likely to listen to a sales offer, while dissatisfied customers—if they choose to listen at all—are twice as likely as satisfied customers to decline an offer after listening to it
• By 2020, it is anticipated that there will be more than 50 billion connected devices globally, with mobile being the primary Internet device for most individuals

Perform or Perish: Challenges Faced by the Insurance Industry

Technology is growing at an exponential rate, influencing consumer behavior and insurance marketing strategies. Less than two decades ago, customers interacted with business through traditional modes of face-to-face interaction, through phone or postal services. Today, insurance companies serve and interact with customers through a host of new communication channels including email, chat, social media, and SMS.

The meteoric growth of the mobile and smartphone industry has truly and deeply changed the game—it is a time to ‘perform or perish.’ By 2020, it is expected that 80% of the global population will have access to mobile telephony and more than 60% will be using smartphones or low-cost tablet computers. Social media and unprecedented access to information, such as peer-to-peer product and service reviews, are giving greater power to consumers, creating more informed and demanding customers.

Evolving Customer Dynamics: This growth in mobility and Internet is fueling customer expectations across all sectors, including insurance. Insurers need to continually evolve customer propositions to meet changing needs and expectations, particularly by improving information and transparency, and they need to look outside the industry to do this effectively.

Inability to Meet Customer Expectations: A survey conducted by Ernst and Young indicates four dimensions where insurers fail to meet customer expectations: service quality, rewarding loyalty, communication, and product transparency. This clearly indicates that the customer believes that more could be done to service them. They tend to judge insurers against other consumer industries, expecting comparable standards of service and rewards for loyalty. Insurers typically benchmark themselves against their peers in the industry.

Migration from Legacy Systems and Traditional Distribution Models: This is perhaps the most daunting challenge. Despite having a well-defined strategy and a customer-centric business model in place, many insurers fail to transition from existing traditional distribution models to those that deliver what customers want. Most of these systems are legacy-based and developed using old technology that cannot be accessed from devices like mobile.

Redefine Customer Relationships: Industry Best Practices

Meeting bespoke business challenges and maintaining the competitive edge required businesses to focus on industry best practices and set in motion critical fundamental changes:

Customer Orientation

For any business to be successful in today’s hyper-dynamic environment, it is critical to not lose sight of customer expectations. Successful insurers are focusing on one or more of the following: scale in their chosen sector, outstanding solutions to their customers’ needs, genuine deep pricing and risk management expertise, and ease of customer access. Whatever their situation, they must place their customers at the heart of their business.

“Customer value has several different dimensions which extend beyond the premiums they pay and the claims they make.”

Source: Forrester, KPMG, Ernst & Young

Developing Customer-Centric Operating Models

A customer-centric organization builds an operating model around a deep understanding of its customers, what they value and the contribution each makes to the profitability of the company. This requires:

• Designing business processes that recognize different customer segment needs
• Delivering a positive and seamless customer experience at every touchpoint across the customer lifecycle
• Maintaining an active dialogue with customers (and acting on feedback)
• Fostering a culture that places the customer at the heart of the decision-making process

Customer Centricity Maturity Assessment

A regular maturity assessment will provide insights into what customers want and help fill gaps and address any issues or diversions at an early stage of the interaction. As part of the assessment, the following areas can be covered:

Process: Customized product offering based on discrete customer segments.

People: Customer-centric culture pervasive at all levels of the organization.

Technology: Unified vision for data management across both enterprise and business partners; master data managed as a corporate asset.

Brand and Market Positioning: High brand recognition and strong positive associations among target customers, based on real evidence and reputation for customer focus.

Customer Segmentation: Clearly defined target segments based on robust understanding of current and potential customer lifetime value.

Distributor Management: Highly selective approach to distributors driven by customer and distributor profitability; partnership approach with selected distributors with joined up customer engagement model.

Propositions: Focused product range based on insight into needs of profitable customer segments; flexible design with transparent pricing; supporting fee-based advice and/or customer self-service.

Service Delivery: Relevant and high-value customer contact through a host of channels including phone, social media, chat, and online self-service tools.

Getting it Right and Driving Customer Delight

Customers have always been at the center of the universe for successful companies, and the digital revolution has only taken this customer focus to the next level. This journey, to excel at customer relationship management, is now not easy. There are several challenges in developing critical new capabilities that align objectives, targets, rewards and recognition with customer needs.

For one, a customer-centricity vision without suitable investment in back-end operations or business processes is bound to fail. Organizations need to judiciously invest in technology solutions across their business and internal processes to create a vibrant, digitally aware organization that understands the impact of this highly pervasive transformation.

Digitalization of business processes across an organization presents a tremendous opportunity to leap ahead for the competition. But make no mistake—it is a high investment, high risk, and high return game. Organizations that have the required mettle to make technology universal in their front-, middle-, and back-end operations will not just survive, but thrive.