the journey toward greater customer centricity - ey

The journey toward greater customer centricity

Ernst & Young2

The journey toward greater customer centricity 3

01 Executive summary

03 Introduction: evolving consumer dynamics

•Consumerdemandsandexpectations

•Influencingpersistencyandretention

•Insurersarenotmeetingcustomers’expectations

05 Coreprinciplesforredefiningcustomerrelationships

07 Protectingthecore:becomingmorecustomer-focused

•Customer-centricmodels

•Dataforcompetitiveadvantage:advancedsegmentationanddataanalytics

•Harnessingthepowerofdigitalaspartofanintegratedchannelstrategy

15 Customer-centricinnovation

•Asignificantculturalshift

•Developacultureofinnovation

16 Practicalstepsonthejourney

19 Conclusion

Contents

Ernst & Young4

Advancesintechnology and communication,

combinedwiththeexplosive growth in data

andinformation,havegivenrisetoamore

empowered global consumer.


Executive summaryAdvancesintechnologyandcommunication,combinedwiththeexplosivegrowthindataandinformation,havegivenriseto amoreempoweredglobalconsumer.Recenteconomicandpoliticaleventshighlighttheneedforinsurerstounderstandhowconsumersviewtheworldandthemostimportantattributesfortheirpurchasingdecisions.

Ourdiscussionswithglobalinsuranceexecutives,non-executivedirectorsandregulatorscorroboratethisviewanddemonstrate,withoutexception,thatthechallengeofrespondingeffectivelytorapidlychangingconsumerneedsisoneofthetopstrategicagendaitems,alongsideregulatorychangeandtalentmanagement.

InourErnst&YoungGlobalConsumerInsuranceSurvey2012report,Voice of the customer,1welearnedaboutthevalueofcustomercentricityandwhyitissoimportanttoaninsurer.Oursurveyprobedcustomerattitudesandbehaviorstodeterminehowcustomersviewandinteractwiththeindustry,aswellastheirexpectationsforthefuture.Ourfindingsconfirmedthatthoseinsurerswhorespondbesttowhatcustomerswantnowaremostlikelytosucceed.Aclearunderstandingofcustomerneedsandbehaviorsacrosstheorganizationwillhelpdriveprofitablegrowthstrategiesandprovidetheconfidencetoinvestinopportunitiesatatimewhenstayingwithinbudgetisextremelydifficult.

Inthispaper,weexplorehowtechnologyischangingconsumerdynamicsandshowhowinsurershaveanopportunitytoinfluencepersistency,retentionandexpectationsthroughimproved

customerengagement.Wediscussthestrategicparadigmandoperationalareaswhereinsurerscanbecomemorecustomer-focused:developingcustomer-centricmodels,applyingadvancedsegmentationanddataanalyticstodesignaneffectivecustomerexperience,harnessingthepowerofdigitalinanintegratedchannelstrategy,andshiftingtoanewcultureofinnovationthatwilldrivegrowthandcompetitiveadvantage.

Thejourneytocustomercentricitywillnotbeaneasyendeavor.Inbuildingastrongfoundationforthefuture,insurerswillneedtofocusonanewsetofcoreprinciplestoredefinerelationships.Therewillbemanychallengesindevelopingthecriticalnewcapabilitiesthatalignobjectives,targets,rewardsandrecognitionwithcustomer needs.

Weofferpracticalstepsforinsurerstoconsideralongthewayastheybuildmomentumforcustomercentricityacrosstheirorganizations.Someofthetopicswillbepresentedingreaterdetailinthemonthsahead.Lookforadiscussionofhowinsurerscanharnessdigitalmoreeffectivelyinanupcoming2013report.

Inthispaper,weexplorehowtechnology ischangingconsumerdynamicsandshowhowinsurershaveanopportunitytoinfluencepersistency,retentionandexpectationsthroughimproved customer engagement.

1. Voice of the customer: time to rethink your relationships,Ernst&Young.Downloadatwww.ey.com/insurance.

Ernst & Young2

By2020,itisanticipatedtherewillbe

morethan50 billion connected devices

globally,withmobilebeingtheprimary

internetdeviceformostindividuals.


Introduction: evolving consumer dynamicsTechnologyisgrowingatanexponentialrate,influencingconsumerbehaviorandinsurancemarketingstrategies.By2020,80%oftheglobalpopulationwillhaveaccesstomobiletelephonyandmorethan60%tosmartphonesorlow-costtabletcomputers.Itisanticipatedtherewillbemorethan50billionconnecteddevicesglobally,withmobilebeingtheprimaryinternetdevicefor most individuals.

Socialmediaandunprecedentedaccesstoinformation,suchaspeer-to-peerproductandservicereviews,aregivinggreaterpowertoconsumers,creatingmoreinformedanddemandingcustomers.Theseexperiencesareshapingconsumerexpectationsacrossallsectors, including insurance.

Consumer demands and expectations

Althoughtechnologyischangingthewaycustomersengagewithinsurers,oursurveyindicatesthatpersonalinteractionisstillhighlyregarded.Thecomplexnatureofinsuranceproductsandcustomers’needforadvicemeanthatsomelevelofpersonalinteractionwillremainanimportantcomponentofoverallchannelstrategy.

Customerspreferproductstobesimplerandmoretransparent,soitiseasiertomakeinformedchoices.Thishasimplicationsfortheroleofinsuranceagents.Inanindustrywheremarginsarecomingunderincreasingpressure,insurersneedtochoosewheretheyinvestacrossthevaluechaintoavoidaddingextracostwhilestillpayingagentsforservicescustomersmayprefertodothemselves.

Thesechangesareforcingadramaticchangeinthebusinessoperatingmodel,asinsurersneedtofocusonwheretheirsaleschannelsaddvaluetotheendcustomer.Thiswillbehelpedbygreatertransparencyinthesalesprocessandinproductdesign.

Overall,customersarelookingforvaluetobeclearlydemonstrated,reflectingabalanceofprice,productfeaturesandservicetailoredtotheirneeds.Theyprefertobuymoreproductsfromcompaniestheytrust.Oncetheyhavemadetheirchoiceandestablishedarelationshipwithaninsuranceprovider,theyexpecttheprovider’sproductsandservicestomeettheirexpectations—andthroughtheirchannelofchoice.

More demandingIncreasedexpectations: convenience,flexibilityandpersonalizationareagiven

More diverseGlobalgrowthofwomenintheworkforce

More sophisticatedEmergingmiddleclasseswantmorefinancialservices

More hedonisticIt’sallaboutme

Ernst & Young4

Influencing persistency and retention

Recognizingthevalueofthecustomerrelationshipisvital—atthepointofinitialsaleandoverthecustomerlifetime.Customersegmentationmodels,whichidentifythosewhohavethehighestpropensitytopurchase,canimprovecustomersatisfaction,comparedtotraditionalunfocused“productpush”cross-sellefforts.

Insurersalsohaveanopportunitytoinfluencepersistencyandsupportretentionthroughimprovedengagementwithexistingcustomers.Thismustbebackedbyflexiblydesignedproductsthatrespondtochangingcustomerneedsandfinancialincentivestorewardcustomerloyalty—overthecustomerlifecycleratherthanjustatthepointoflapse.

Butthekeytoimprovingpersistencyisremovingthereasonswhycustomersconsiderleavinginthefirstplace.Useofpredictivemodelscantargetcustomersbasedonlikelihoodoflapseandthevalueofretention,but“testandlearn”approachesareessentialtodeterminewhichinterventionsaremosteffective.

Customersarewillingtobuildlong-termrelationshipswiththeirprovidersandpurchasemultipleproducts.However,insurersmustimprovetheeffectivenessoftheircommunications,aswellasrecognizeandrewardthevalueoftherelationships.

Insurers are not meeting customers’ expectations

Our Voice of the customer surveyindicatesfourdimensionswhereinsurersarefailingtomeetcustomers’expectations:servicequality,rewardingloyalty,communicationandproducttransparency.

Consumershaveastrongsensethatinsurerscoulddomoretoearntheirtrust.Theytendtojudgeinsurersagainstotherconsumerindustries,expectingcomparablestandardsofserviceandrewardsforloyalty.Yet,inourclientexperience,insurerstypicallybenchmarkthemselvesagainsttheirpeersintheindustry.That’s

abigdisconnect.Insurersneedtocontinuallyevolvecustomerpropositionstomeetchangingneedsandexpectations,particularlybyimprovinginformationandtransparency,andtheyneedtolookoutsidetheindustrytodothiseffectively.

Theneedforclarityandtransparencyisalsodrivenbyregulatorsprotectingconsumerinterestsmorethaneverbefore.Insurersthatalignthemselvestoacustomer-centricmodelofoperationwillfindthetransitiontothenewregulatoryenvironmentlesspainful,andtheymayevengainacompetitiveadvantage.

Customersarewillingtobuildlong-termrelationshipswiththeirprovidersandpurchasemultipleproducts.However,insurersmustimprovetheeffectivenessoftheircommunications,aswellasrecognizeandrewardthevalueoftherelationships.


Inthisfast-changingenvironment,insurersneedtofocuson anewsetofcoreprinciplestoredefinerelationshipswith customersandtransformbusinessmodels.Toachievethis newstrategicparadigm—andthefirststeponthejourneytocustomercentricity—insurersneedtotakethefollowingsteps.

Protect business against disintermediation:Insurersunabletounderstandordeliveragainstcurrentandfutureconsumerneedsandpreferencesfacetheprospectoflosingtheconnectionwithorbeingpushedfurtherawayfromtheendcustomer.Insurersneedtomakesuretheyretainastronginfluenceonhowcustomersviewtheirproductsandservices,regardlessofoverallchannelstrategy.

Redefine customer relationships:Insurancehastraditionallybeenaproduct-centricbusiness,focusedondevelopingthebestproductsforagivenriskanddeliveringthoseinthemostcost-effectivemanner.Nowinsurersneedtobetterunderstandthetrueneedsoftheircustomersinordertoredefinetheproductsandservicestheyofferandthewaysinwhichtheyinteractandservethem.Theyneedtoknowtheircustomersbetterthaneverandusetheinformationandknowledgeasasourceofcompetitiveadvantage.

Increase productivity to gain a competitive advantage: Historically,productivityimprovementswereviewedasaresponsetoadversemarketconditions.Insurerstypicallycurtailspendingintimesofshrinkingrevenueorincreasingcostpressures.However,thoseinsurerswhoareabletoviewproductivityenhancementswiththeduallensofimprovingtheexpensepositionwhilegrowingthetoplinewillachieveacompetitiveadvantage.Asconsumerexpectationsforbetterlevelsofcustomerservicegrow,insurerswillneedtonavigatethechallengesimposedbylarge-scale,paper-basedlegacysystems.Thosecarriersthatareabletoincreaseproductivitythroughstreamlinedbusinessprocessesandtechnologyimprovementswillbeabletoenhancetheirexpensepositionsandincreasethequalityoftheircustomerservice.

Diversify sources of revenue:Insurancebynatureiscyclical.Non-lifeinsurersfacehardandsoftpricingcycles,whilelifeandpensionsalesandprofitperformanceareaffectedbyinterestratemovementsandequitymarketvolatility.Insurersneedtodiversifytosustainstabletop-linegrowthandearningfluctuations.Thisalsoaffectscustomercentricity,asitrecognizesthatproductperformanceandconsumerneedsshiftwithmarketconditionsandlifeevents.

Collaborate with new partners across the value chain:Theshiftfrompushingproductstodeliveringsolutionsoftenrequiresinsurerstodevelopnewcapabilitiesorprovideproductsoutsidethecurrentportfolio.Inaddition,theadoptionofnewtechnologies(SOA,webservices,etc.)isopeningopportunitiestooutsourcenon-strategicfunctionstoimprovetheefficiencyandeffectivenessofbusinessfunctionsacrossthevaluechain.Successfulinsurerswillbethosethatdevelopcapabilitiestoidentifyandmanagestrategicbusinesspartnerships.

Byfocusingonthesecoreprinciples,insurerscanbuildastrongfoundationforthefuturewhileimprovingtop-linegrowthandprofitabilityoverthenearterm.Totrulysucceed,theymustembraceandembedtheconceptofinnovationwithintheirorganizations.Futureindustrywinnerswillbenimbleandabletorespondquicklyandeffectivelytochangingmarketconditions,newconsumer demands and emerging regulations.

Coreprinciplesforredefining customerrelationships

Ernst & Young6

The challengeishowtotransition

fromexistingproductandtraditional

distributionmodelstothosethat

deliver what customers want.


Withthesecorestrategiesinplace,thefocuscanshifttooperationalissuesthatwillenablechange.Insurancecompaniescandrivegrowthinrevenueandprofitbyimprovingtheirbusinesses,attractingcustomersandstrengtheningrelationships.However,implementationisnoteasy,particularlywhereinsurershaveextensivelegacysystemsandoperations.Thechallengeishowtotransitionfromexistingproductandtraditionaldistributionmodelstothosethatdeliverwhatcustomerswant,aswellashowtodevelopthecriticalnewcapabilitiestoenablethistransformation.

Webelievetherearethreeessentialstepsalongthejourneytocustomercentricity.Insurersneedtofocusoncustomer-centricoperatingmodels,advancedsegmentationanddataanalytics,andharnessingdigitaltobetterengagewithcustomersatalowercost.

Customer–centric operating models

Acustomer-centricorganizationbuildsanoperatingmodelaroundadeepunderstandingofitscustomers,whattheyvalueandthecontributioneachmakestotheprofitabilityofthecompany. Thisrequires:•Designingbusinessprocessesthatrecognizedifferentcustomer

segment needs•Deliveringapositiveandseamlesscustomerexperienceat

everytouchpointacrossthecustomerlifecycle•Maintaininganactivedialoguewithcustomers(andacting

onfeedback)• Fosteringaculturethatplacesthecustomerattheheartofthe

decision-makingprocess

Maturity model assessment

Assessinganorganizationagainstacustomer-centricmaturitymodelmayprovideabetterunderstandingoftherelativematurityofkeycapabilitiessuchassegmentationorlifetimevaluemanagement,aswellasofferguidanceonwheretoinvest.Throughourworkwithclients,wehaveaclearviewofwhatconstitutesdifferentstagesofmaturity,fromundevelopedtoleadingpractice.

Protectingthecore:becomingmorecustomer-focused

Figure1:Compareshowfourmajorglobalinsurersarecurrentlypositionedinthefivestagesofdevelopment.Definingandunderstandingwhatitmeanstobe“emerging”versus“advanced”canbeaprocessinitself,evenbeforemappingyourcompanyagainstthesecriteria.

Indeed,understandingandcommunicatingthescaleofthechallengeaheadisthefirststepofanyjourney.Itisimportanttoberealisticaboutexpectations—leadingcustomercentricity(thefarrightofthematuritymodel)maybeunattainable.However,theprocessofconsideringhowtobalancecustomer-centricprincipleswithfinancialconsiderationsiscritical.Forsome,thetrade-offsbetweenthelevelofinvestmentrequiredandrealizedbenefitswilldeterminehowfartheyprogress.

Thejourneytodeliveramatureoperatingmodelmaytakeyears.Suchasignificantorganizationaltransformationmustbebrokendownintoamanageable,phasedimplementation.Focusingon quickwins,keytechnologydecisionsandtargetedimprovementsinitiallycanhelptoprovethecaseandgarnerorganizational buy-in.Prioritizing“hightouch,lowtech”changesthatimprove thecustomerexperiencerelativetothecostandimplementation effortwillfurthergeneratemomentumformoreextensivetechnology-enabledchange.

Barriers to successful transformation

Typically,mostinsurerswillencounterchallengesinherentintheircurrentoperatingmodelsduetotechnologicalandoperationallimitations,aswellasculturalconstraints.Amongthemoreobviousarestrongorganizationalsilos,whichcreateaninabilityorunwillingnesstosharecustomerdataorcooperateacrossbusinessunitsandfunctions.

Thisisparticularlycommoninbusinessesthathistoricallyhavebeensegmentedalongdistributionchannels,e.g.,intermediaryanddirect.Infact,thetraditionalinsurancecustomerengagementmodelpresentssignificantbarriers:inmanycases,initialcustomercontactandongoingadvicearecontrolledbyanintermediaryoragent—andoften,providerengagementatthisstageispurelyadministrative.Legacysystemsandprocesses,andpoorqualityorinsufficientend-customerdata,constrainmanyorganizations

Ernst & Young8

Figure 1: Customer–centric maturity model

Brand and market positioning

Lowbrandequityamongtarget customers—knownbutnotvalued

Highbrandrecognitionandstrongpositiveassociationsamongtargetcustomers,basedonrealevidenceandreputationforcustomerfocus

Customer segmentation

Broad,undifferentiatedoffering,not specifictoanydistinctcustomersegments

Clearlydefinedtargetsegmentsbasedonrobustunderstandingofcurrentandpotentialcustomer lifetimevalue

Distributor management

Distributorrelationshipsdrivenbyvolume, littleornoproviderinvolvementinsaleor post-salecustomeractivity

Highlyselectiveapproachtodistributorsdrivenbycustomeranddistributorprofitability;partnershipapproachwithselecteddistributorswithjoinedupcustomers engagement model

Propositions Broadrangeoftraditionallifeproducts:complex,inflexible,opaque,capital–intensivewithprovider-financedcommission

Focusedproductrangebasedoninsightintoneedsofprofitablecustomersegments;flexibledesignwithtransparentpricing,supportingfee–basedadvise and/orcustomerself-service

Service delivery

Transactionalandadmin–driven,reactivetocustomeranddistributorrequests;low-touchapproachwithnoproactivecontactorvalueadded interaction

Relevantandvalue-addingcustomercontactthroughvarietyofmediaincludingphoneandonlineself-servicetoolsandinformation

Customer lifetime value management

Noattempttomanagecustomerlifetime valuebeyondstandardservicemodel

Explicitunderstandingofcustomerlifetimevaluewithvalue–addinginterventionsatkeystagesincludinglapse,life-stagechanges,maturity,retirementetc.,tailoredtoneedsandvalueofspecificcustomersegments

Culture Newbusinessvolumeandmarketshareare keymetrics;enforcethosecustomersnotactively managed or measured

Customerlifetimevaluemanagementiskeymetric:clearfocusonmeetingneedsofprofitablecustomersegmentsacrosstheirwholelifecycle

Process Productpushapproach;littleornocustomer segmentation;productsdevelopedadhoc; “Onesizefitsall”servicefootprint

Tailoredproductofferingbasedondiscretecustomersegments;real–timecustomerinsightsupportspersonalizedinteractions;predictiveanalyticsemployed toadjustoffersandserviceactionsaccordingly; multi-channelapproachbasedonbehaviorsand buyingpreferences

People Noownershipofthecustomerwithinthe organization;compensationdrives inconsistentbehaviors;customer–facingemployeesnotsupportedbybackofficefunctions;lackofauthoritytoresolve customerissuesatpointofcontact

Customer–centricculturepervasiveatalllevelsoftheorganization;customerinsightisakeycomponentofthecompany’sstrategicagenda;employeestakeclearownershipforcustomerproblemsandmanageissuesthroughtoresolution

Technology Technologystrategynotalignedwith customer–centricculture;legacysystems limitabilitytomeetcustomerrequirements;customerdatatrappedinorganizational silos;lackofenterprise–widedatastrategyhampersintegration

Unifiedvisionfordatamanagementacrossbothenterpriseandbusinesspartners;masterdataismanagedasacorporateasset;proactivemeasures areinplaceorongoingdataqualityimprovements; theorganizationembracescustomer–facingtechnologiesasintegraltochanneleffectiveness

Stage 1: Undeveloped Stage 5: Leading

Stag

e 2:

Em

ergi

ng

Sta

ge 3

: Dev

elop

ing

Sta

ge 4

: Adv

anci

ng


inmanagingtheend-to-endcustomerrelationship.Evenwhencustomersare“orphans”(theynolongerhaveanactiveagentorintermediary),manyorganizationsdonot,orcannot,seizethisopportunitytore-establisharelationshipdirectlywithadviceandserviceofferings.

Oneofthegreatestbarriersforinsurersisthebusinesscasethatoftenrequiressubstantialinvestment.Culturally,traditionalindustryfocushasbeenonnewbusinessandmarketshare,ratherthanderivingvaluefromthein-forcebook.Whenviewedwithanarrowlensandashort-termfocus,manyinvestmentsdonotmakeitpasttheplanningstage.Thekeyforinsurersistoshifttoalonger-termperspectiveandtorecognizetheopportunitytoreducecostswhileimprovingcustomercentricity.

Executivemanagementownershipandcommitmenttodrivingcustomercentricityisimperative.Thismustbesupportedbyclearlydefinedcustomer-centricobjectivesandmetricsacrossallbusinessunits,withperformancemanagementandcompensationalignedwithcustomer-focusedbehavior.

Insettinggoalsforcustomeroperatingmodeltransformation,insurersneedtoaskthesestrategicquestions:

• Whydoyouwanttobecustomer-centricandtowhatdegree?

• Isthereaclearstrategicimperativefromtheboardofdirectors?

• Howincrementalorrevolutionaryachangeisrequired,andhowmuchchangeistheorganizationpreparedtoundertake?

• Whatarethemainbarriersandkeystrategicimperatives?

• Whereandhowwillyoustart—bytargetingspecificfunctionsorbusinessunits,orwithanenterprise-widephasedapproach?

Data for competitive advantage: advanced segmentation and data analytics

Manyinsurersgrasptheconceptofsegmentingandtailoringtheirservicepropositions.Thisisoftendonebasedonsocioeconomicfactorsandproductholdings.Leadinginsurersaregroupingcustomersbasedonbehaviorsandvalues.

Creatingamicro-segmentationmodeltounderstandcustomersandaligningthiswithamodulardistributionmodelthatallowscustomerstoaccesstheorganizationthroughmultiplechannels(whenandhowtheyprefer)willoptimizecustomers’experience.

Dataanalyticshasbecomecriticaltodesigninganeffectivecustomerexperience.Insurersneedtounderstandthetruedriversofcustomersatisfaction—foreverysegment.Whatattributesoftheirexperience(price,personalattention,responsetime,servicecalls,claims,etc.)willhavethemostimpactondeliveringapositiveexperience?Equally,insurersmustidentifywhatisnotdrivingvalue,asthispresentsanopportunitytoreducecosts.

Stage 1: Undeveloped

Brand and market positioning

Customer segmentation

Distributor management

Propositions

Service delivery

Customer lifetime value management

Culture

Stage 2: Emerging

Stage 3: Developing

Stage 4: Advancing

Stage 5: Leading

Company 2

Company 1

Company 3

Company 4

Figure 2: Customer centricity maturity assessment of four global insurers

Ernst & Young10

Ultimately,theobjectiveistoreshapestrategicdecision-makingbyprioritizinginvestmentinservicefactorsthatdelivervalueforeachsegment,channelandproductcombination.Withoutsuchanalysis,itisimpossibletomountasensiblebusinesscase.

Applyingdataanalyticstothecustomerservicefrontlinecanbepowerful.Analysisofcallcentertransactions,combinedwithcustomerbehavioralinsight,canhelpinsurersbetterroutecustomerstotheappropriatetypeofsupport.Innovativeuseof

High satisfactionDelighted

Low satisfactionDisgusted

AbsentQualityforperformancenotachieved

Fully implementedHighqualityperformance

Perform

ance

/ lin

ear

Perform

ance

/ lin

ear

Exciters and delighters

Threshold / b

asic (must haves)

Source:Kano

Figure 3: Customer experience analysis and design framework


onlinetoolsandcalculators,combinedwithcustomeraccountinformation,canenablecallcenterrepresentativestodeliverpersonalizedadviceandservice.

Dataanalyticsandpredictivemodelingcapabilitiescanalsobeappliedinotherwayswithinanorganization:

• Behavioralengineeringmodelstounpacktheexistingriskcultureanditsimplications,aspartofatransitiontoamorecustomer-centricandinnovativeculture

• Customerretentionanalysis—why,whereandwhenyouarelosing customers

• Customerleadsanalysistosupportdevelopmentofafullyintegrateddistributionmodel

• Financialmodeling(ofstaffand/orcustomerbase)toinformcustomerexperienceandadvisorconversationsonhowtoimprovefinancialclientwell-being

• Claimsmanagementandleakageanalysis

Harnessing the power of digital as part of an integrated channel strategy

Mostconsumerswantaccesstoamixofonlineandpersonalcontactthroughouttheproductlifecycle.Digitalisnotthepanacea,butitisacriticalenablertodeliveringtheexperiencecustomerswant.Thekeyinsurancechallengeishowtoharnessthepowerofdigitaltobetterengagedirectlywithcustomersandlowercosts.Digitaltechnologywillcomplicatetheprocessandfrustratecustomersifitisnotjoinedseamlesslywithotherchannels,recognizingthatexistingchannelsoraccesspointswillalsoneedtoadaptand,insomecases,playanalternativerolewithinthebusiness.

Theeffectiveintegrationofchannelsacrosssalesandserviceactivitiesiscriticaltodeliveringapositive,brand-reinforcingcustomerexperienceateverytouchpointinthecustomer

Applyingdataanalyticstothecustomerservicefrontlinecanbepowerful.Analysisofcallcentertransactions,combinedwithcustomerbehavioralinsight,canhelpinsurersbetterroutecustomerstotheappropriatetypeofsupport.

relationshiplifecycle.Asdigitalchannelscontinuetogrowinimportance,insurersneedtodefineastrategyforintegratingthesetouchpointsaspartoftheiroveralldistributioninfrastructure.

Insurersshouldfocusontwocriticalenablers.Forthoseutilizingthird-partychannels,engaging channel partners early in the process and communicating a clear value proposition are essential tosuccessfulintegration.Thiscouldbeintheformofleadsgeneratedthroughdigitalchannelsortime-savingcustomerserviceactivitieshandledbythecallcenter.Second,itisimperative that customer information be handed off between channels with limited consumer effort.Inadditiontoslowingresponsetimes,redundantstepscommunicatethattheneedsofthecustomeraresecondarytoinvestmentsincapabilitiesrequiredtostreamlinebusinessprocesses.

Ernst & Young12

Theoverallcustomerexperienceisinfluencedbycustomers’directandindirectinteractionswithanorganization—bothphysicalanddigitaltouchpoints.Bothmustbemanagedeffectivelyinordertomaximizetheexperience,asshowninFigure4below:

Source:Ernst&Young

Education and awareness

Research and decide

Purchase Use and service Loyalty

Targeted advertising—directmail, telesales

Wordofmouth

Radio,TVandprint

Internet ads

Viralmarketing

Blogs

Socialmedia

Landingpage

Comparisonandthird-partysites

Tools and calculators

Intermediary agent

Interactive chat

Interactive video

Callcenter

Website

Mobiledevices Pushalerts

Instant messenger and chatapps

Email,paper

Callcenter

Rewardsandincentives communication

Figure 4: Overview of direct and indirect interaction flow


Callcenterswillcontinuetoplayacriticalrolethroughthelifecycleandmustbeadaptedwithinthebusinesstorespondtoevolvingtrendsanddrivegreatervalueatlowercost.Currently,callcentersoperateinatelephone-dominatedworldwithlittledataintegrationbetweenotherchannels,andtheyareviewedasanexpensivemechanismtoservicebasiccustomerqueries.Additionally,callhandlersarenotalwaysequippedwiththerightskillsetsandtoolstosupportamultichanneloffering.

Launchingdigitalchannelsformanyinsurerswithanagency-baseddistributionmodelisanenormouschallenge,requiringchangestoagent segmentation, customer management and communication protocols,training,incentivesandrewards.Agentswillneedtobecomemoretechnologicallysavvyandconnected,astheywillbepositionedonthefrontlinetosupplytheunstructuredbutrichcustomerdatarequired.

Anagencyforcewiththe“listening”capabilitiesandagilitytoplaythisrolecanbecomeakeystrategicasset.Agentswhowereprimarilyproducingsalesvolumemaysoonbemorefocusedoninformationcollectionandrelationshipmanagement.Theywillproduceleadstothedigitalchannelsand,inturn,receivethemfromonlinebrowsersascustomersasktospeakwithanagent.

Callcenterswillcontinuetoplayacriticalrolethroughthelifecycleandmustbeadaptedwithinthebusinesstorespondto evolving trends and drive greater valueatlowercost.

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Embedding innovationthroughout

theorganizationwillinvolvetappinginto

external discovery centers and industry

researchlabstoregularly gain insights

fromothersectors.


Theseactivitieswillonlyprovideinsurerswiththeabilitytocatchuptotheleadingcompetitorsandto“protectthecore.”Togenuinelyleapfrogthecompetitionandgeneratesignificantgrowth,anewcultureofinnovationisrequired,alongwithasignificantchangeinapproachtostrategicdecision-making.

Embeddinginnovationthroughouttheorganizationwillinvolvetappingintoexternaldiscoverycentersandindustryresesarchlabstoregularlygaininsightsfromothersectors.Itwillalsorequireintroducinginternaltest-and-learnprocessesthatgenerateideas,testtheirfeasibilityandpilotinitiativesinarapidandagilemanner.

A significant cultural shift

Formanyinsurers,thisrepresentsasubstantiveandsignificantculturalshift.Therisk-aversenatureofmostinsurersisakeyinhibitortoinnovativethinkingandstiflestheexperimentallaunchofnewproducts,processesandotherbusinesschanges.Therequiredchangeinculturemustbedrivenfromthetopdown.Seniormanagementmustinstillandclearlycommunicateacorporatestrategyfocusedoncustomer-centricinnovationandrecognizeandrewardeffortstodeliverthis.Collaborationandempowermentofemployeestospotcustomerimprovements andactuponthemmustbecomethenewnorm,aswellas physicalspacessuchasinnovationcenterstohelpdevelopandincubateideas.

Oneofthemostsignificantculturalchangeswillbeashiftfromshort-tolong-termstrategicdecision-making.Thetraditionalindustryfocus(andonethatisembeddedinmostperformancemanagementandcompensationsystems)hasbeenaroundnewbusinessandmarketshareratherthanderivingvaluefromthe in-forcebook.Thisoftenmeansitisdifficultforcustomerproponentswithinanorganizationtosecureinvestmentinenablingcapabilitiessuchasdataanalyticsorlong-termcustomerrelationship-buildingactivities,asthesemaynotpresentthemostcompellingshort-termrevenue-generatingbusinesscases.

Customer-centricinnovationAchangeinmindsetisrequired.Ratherthanthetraditional“whatwillIget?”question,organizationsneedtoconsider“whatistheopportunitycostofnotdoingthis?”intermsoffinancials,competitivepositioningandcustomerexperience.

Aboveandbeyondcustomer-centricinnovation,someplayersarethinkingmoredisruptively,developingradicalnewcustomervaluepropositionsthatmovebeyondthetraditionalconfinesofinsuranceandaddresscustomerdemandsinotherindustries.Thisrequiresnewbusinessmodelsandcompetenciesbutcangeneratesignificantrevenuestreamsbytappingintonewprofitpools.Thereareuniqueopportunitiestoenterotherindustries,oftenbyestablishingalliancesandcollaboratingwithnewpartners.

Develop a culture of innovation

ThreestagesofinnovationaredepictedinFigure5acrossthedimensionsofbusinessmodelsandcompetencies.Protectingthecoreisaboutgettingthebasicsright,becomingmorecustomer-centricand,whereappropriate,adoptingtheleadingpracticesthatcompetitorsorotherindustrieshavedemonstrated.However,thisreliesonlargelyexistingcompetenciesandbusinessmodelsandcouldbeacatch-upstrategy.Onlygenuinecustomer-centricinnovationthatisembeddedintotheorganizationwillproducesignificantgrowthanddelivercompetitiveadvantage.

Com

pete

ncie

sCu

rren

tNew

Business models

Insurance as a service andhybridmodels

Customer–centric innovation

Signifi cant growth

Protecting the core business

Disruptive growth

Current New

Figure 5: The stages of innovation across competencies and business models

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Practicalstepsonthejourney

Defineyourtargetcustomersandtheirneeds

Take a realistic look at your propositions(solutions,notproducts)—whatwillittaketodeliverwhatcustomerswantatapricetheywanttopayandstillmakemoney?

Generate customer engagementacrosstheirlifecycle—thisisvitaltobuildingloyalty

Involvedistributorsand,together,buildstrongerpartnerships

Thejourneytocustomercentricitywillnotbeeasy.Weofferthesepracticalstepstohelpyouunderstandtheprocessandguideyoualongtheway.

InvolveGenerate

Define

Take


Learntobeadaptive—usedetailedcustomerinsightto test, learn and act quickly,acceleratingtheprocesswithprototypes

Starttobuildaculturethatputsthecustomeratthecenterandalignsobjectives,targets,rewardsandrecognitionwithcustomer needs

Focusonsomekeyleversandbuildmomentumthroughouttheorganization

Focus

Learn

Start

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Many insurers are not keeping pacewith

changingmarketandconsumerdynamics

andarefarbehindotherindustriesin

meeting customer expectations.


Manyinsurersarenotkeepingpacewithchangingmarketandconsumerdynamicsandarefarbehindotherindustriesinmeetingcustomerexpectations.Tosucceedinthisfast-changingenvironmentandachievesustainabletop-linegrowth,insurersneedtofocusonredefiningcustomerrelationships,transformingbusinessmodelstoembracedataanddigitalandintroducinganinnovativecultureinsupportofstrategicdecision-making.

Achievingcustomercentricityislessaboutimplementingagrandvisionthanaboutbuildingcadencetoday,nextweek,nextmonthandnextyear.Butthetimehascomewhenthejourneyisastrategicnecessity,andallinsurersneedtobeclearaboutwheretheystandandwhatstepslayaheadforthem.

Conclusion

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EYG No. EG0117

1303-1050264

Thispublicationcontainsinformationinsummaryformandisthereforeintendedforgeneralguidanceonly.Itisnotintendedtobeasubstitutefordetailedresearchortheexerciseofprofessionaljudgment.NeitherEYGMLimitednoranyothermemberoftheglobalErnst&Youngorganizationcanacceptanyresponsibilityforlossoccasionedtoanypersonactingorrefrainingfromactionasaresultofanymaterialinthispublication.Onanyspecificmatter,referenceshouldbemadetotheappropriateadvisor.

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Contacts: David Hollander GlobalInsuranceAdvisoryLeader Ernst&YoungLLP +12154485756

Kaenan Hertz ExecutiveDirector,FinancialServices Ernst&YoungLLP +12127735988

Bernhard Klein Wassink Principal,FinancialServices Ernst&YoungLLP +12127734634

the journey toward greater customer centricity - ey

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