December 06, 2011

Customer experience is top of mind for insurance executives these days. To attract, retain and engage customers in the age of Facebook and the iPad, carriers are more willing than ever to sacrifice previously established best practices in favor of new technologies and fresh approaches that aim to mitigate customer churn. Yet there still are some obvious places where they are missing the boat.

1. Not Speaking Customers' Language

Insurance is a necessarily complicated product. The underwriting decisions about what to cover, to what threshold and for whom have been developed and refined over decades. But insurers often have failed to develop "plain English" versions of the industry jargon that explain to those outside the business exactly what is going on with coverage. When customers get their policies in the mail and they're both thicker in terms of pages and denser in terms of language than they expected, it can create doubt that they have just made an informed decision.

"Insurers have a very hard time communicating with our customers," says Ellen Carney, a Boston-based analyst with Forrester Research. "We send them information that has a lot of legalese, and we speak in industry terms."

As customers' standards for clarity have changed, insurers have been forced to adapt their correspondence with them. Life insurance company Penn Mutual ($77.6 billion in force as of June), for example, has undertaken a document management effort with New York-based Thunderhead to redesign the carrier's statements, policy forms and more so that the information it needs to communicate is clear to both insureds and distributors, according to Kirsten Pedersen, the Philadelphia-based insurer's VP of operations. "We were previously having a lot of problems with our correspondence and how things were set up," she acknowledges. "We want to add a lot more flexibility to the data and how we want to present things."

Life insurers especially are feeling pressure to put in place content management processes and systems that will carry a consistent, positive experience through the entire lifespan of their products, Pedersen notes. The industry's sales process is paper-heavy from the outset, and by streamlining the presentation of both the initial information and follow-up correspondence, Penn Mutual's customers won't have the anxiety associated with insurance sales and could become brand advocates, she adds.

"What we're looking at as far as the experience is basically everything from before the application comes out, through the illustration and all these tools we use in the sales process, to when we pay out that death claim," she says. "We're really not a transactional kind of business; it's a relational kind of business."

This is a theme common to insurers across lines of business, according to Liz Boehm, a Forrester analyst who focuses on health insurance. Customers, she says, do their best to avoid insurance transactions -- no one wants to have to make a health or auto claim, because that means something has gone wrong -- so they can easily be frustrated if they look at their source material for the first time in a while and don't understand it.

"Your goal is not simply to provide what the consumer wants, but provide it in a way that gives them information about something they might not want to understand," Boehm explains. "It's a complex experience to deliver."

2. Not Meeting Consumers' Standards For Transparency

While it is somewhat related to speaking customers' language, transparency isn't just about explaining policy terms, insists Boehm. "It's not just about changing call center scripts and metrics and redesigning the website," she says. "It's looking at their internal processes."

Consumers frustrated with their health insurance carriers are in a vulnerable position, Boehm notes. When they call with questions about something related to their wallets or their lives, the last thing policyholders want is a runaround.

"By the time someone calls and says, 'Why didn't you pay this claim?' there's someone who decided why not to cover it, someone who decided how to explain it in more of a 'CYA' way than one that provides a true explanation, and someone who sent out a memo based on regulatory pressures or something," Boehm asserts. "Everyone keeps blaming the last mile, and customers are frustrated by the disconnect between expectations and reality."

Indianapolis-based WellPoint (nearly $3 billion in 2010 revenue) has taken this to heart. The company's VP of consumer experience and e-marketing, Meg Rush, says she has led an effort to install "a full consumer transparency strategy." A big part of this is giving customers the tools they need to understand exactly how their policies work and get accurate estimates to avoid "sticker shock," she explains.

"Healthcare is incredibly complex, and the reality is that consumers don't know what their costs are going to be before they go into a healthcare situation," Rush says. "There are a lot of factors that go into giving people estimates: What kind of tests is your doctor going to prescribe? Are they in or out of network? Where are you in your benefit plan? There has been a plan to create applications and capabilities to provide more information on cost and quality to our members."

WellPoint's position is similar to the positions of many other health insurers, Forrester's Boehm points out. Traditionally, health insurance has been based on group sales and not individual interactions; as more health carriers explore the individual buyer market, they'll have to make adjustments to some entrenched processes, she says. "Health insurers tend to think of the employer as their customer, and their systems might have been set up before transparency was the goal," Boehm relates. "In some cases transparency would show how messy their processes really are."

Insurers from all lines of business can learn from what health insurers are dealing with and build more transparency into their processes, Forrester's Carney points out. In fact, she says, there are a number of places from which they can take cues. "Take a look at online retailers or banks -- customers use them more frequently, and it has created a heightened expectation about what that entails," she says. "[Customers are] saying, 'If Dominos can let us track the status of a pizza online, why can't we do that in insurance?'"

3. Not Proactive in Finding Ways to Speed the Application Process

Insurers need to understand that sitting down with an agent or beginning the online application process for a new policy can make busy consumers anxious that they won't have the right information at the ready and the process will end up taking longer than they want it to, says Bruce Temkin, a Boston-based customer experience consultant and founder of the Temkin Group. "Delays cause problems -- people don't get things done in a timely manner, or they don't at all," he says. "Insurers need to figure out, 'What is the minimum amount of stuff we need to get from people in order to bind?'"

Predictive analytics is the key to solving this puzzle, Temkin asserts. For example, rather than ordering expensive medical tests, life companies can use demographic information to find out if someone is likely to be a smoker. Or a multiline P&C carrier can use information from an auto policy to price a home policy without asking a bunch of the same questions twice.

"The analytics are making it easier to manage that portfolio of risk in real time," Temkin says. "We stop thinking about it as the decision of a single underwriter for a single policyholder -- the decision of whether I price this policyholder isn't just dependent on them. It's about: If they became one of ours, what does it do to my portfolio? As soon as a couple of insurers have smooth, easy application processes, there's no way their competitors can operate with really crazy information requirements."

Temkin acknowledges that it won't be easy to convince companies to refrain from getting some of the specifics they're used to in order to bring in more potential risk. But with straight-through processing and automated underwriting gaining popularity, insurers will have to find out ways to identify exceptions so that they can get those customers in the door, he contends. "The idea is that we're going to assume that there's a certain set of applicants that don't need to give us a ton of information because they'll go through our systems pretty quickly," he says. "We can refine our pricing over time and live with a little more risk early on."

4. Not Focusing on Service As Much as on Sales

The U.S. insurance market is notably soft, and many insurers are focusing on bringing in as much business as possible to stay afloat. Forrester's Carney points out that the insurance industry is on pace for about $5.6 billion in media spending this year. But companies that don't commit that amount of resources in dollars and effort to customer retention, she says, could find themselves leaking policyholders out the back -- especially consumers who are comfortable shopping for and servicing insurance policies online.

"It is such a competitive market, and the transparency of pricing is so prevalent, someone who is even minimally tech-savvy can change their carrier," Carney says. "We asked consumers, 'Are you likely to switch your insurance company in the following year?' People who are tech optimists are likely to say 'yes.'"

Insurers need to design an online service experience that measures up to the sales experience, Carney says. And the standards have been raised: What might have been cutting-edge and a real differentiator a few years ago no longer is exceptional. "Those policy-servicing mobile applications are table stakes. An insurer has to step up and deliver a better experience that's beneficial," she says, pointing to Allstate's Digital Locker app, which allows users to catalog possessions in case they have to make a claim, as an example.

"Sometimes 'online claims filing' is just email, or there may be chat services on the sales side but not on the customer side," Carney continues. "This may be as far as a company is willing to go, but consumers are expecting something a lot more."

Jasmine Green, chief customer advocate for Nationwide (more than $20 billion in 2010 gross revenue), says that, for the Columbus, Ohio-based insurer, providing the capabilities that customers want from their insurer is a process of continuous improvement. Green's department, she relates, passes on what it learns from customer suggestions, compliments and complaints to the business units that would benefit from the information. "As we are looking to be innovative and bring on new tools for customers, it's not uncommon for business unit leaders to ask me what we're hearing," Green says. "You have to do something with the data that you have from your customers."

But this approach shouldn't be unique to Nationwide, the Temkin Group's Temkin says. Insurers must be available to policyholders throughout the life cycle of the policy so that the customer becomes a brand advocate. "Insurers don't do a good job reinforcing the value," he asserts.

"We talk a lot about the sales end of things. But after a policy is bound, I don't think insurers are reinforcing the good decision the customer just made," Temkin continues. "How do we make someone feel good about the brand they associated with? The moment after you become a customer is so important, but it's like the emotional part disappears after we get you to sign up."

ABOUT THE AUTHOR
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, ...