October 11, 2013

To their sorrow, insurers have learned that customers have become increasingly fickle. Accenture research -- conducted last year among thousands of customers around the world -- shows that more and more life insurance customers are planning to switch to a new provider.

Insurance customers are the most loyal among 10 industries studied, but still more than two-thirds of respondents (67%) said they were ready to re-evaluate providers. Just under a third are satisfied with their provider, while still fewer (24%) are loyal or would recommend the provider (22%).

We see this trend as being driven mainly by the continuing economic pressures on household budgets. Customers are motivated to seek out savings opportunities on discretionary expenses like insurance, but they also have better access to knowledge and are more skilled at using it. The Internet has made price comparison easy, and customers, having compared prices online, are also keen to use the Internet to purchase insurance, either on company websites or through aggregators. They swap experiences with fellow consumers through social media and are increasingly comfortable using multiple channels to ship and make transactions.

John Del  Santo, Accenture
John DelSanto, Accenture

In this environment, insurers need to rethink and restructure the experience they deliver to their customers, with emphasis upon:

Multiple channels. Customers now use a growing range of digital channels interchangeably to deal with service providers in all industries. In line with these expectations, insurers have to develop the capability to provide an integrated, consistent experience across existing and future channels.

Personalized interaction. Customers do not just expect their digital experience to be integrated across channels, they want all interaction and offers to be customized and/or personalized in line with their specific circumstances.

Increased competition and comparison. Proliferating digital channels have made large amounts of comparative data available to customers. Consequently, insurers' offers do not just have to be personalized and consistent across channels, but also competitive in price. At the same time, customers continue to demand increased efficiency and speed.

Proliferating digital technology. The range of digital technologies is wide and constantly growing. Servicing customers across of all them means constantly mastering these new and fast-developing technologies — in itself a challenge for insurers. Analytical engines, digital touch-points and internet-connected sensors offer usage and contextual data for new products and relationships

Insurers seeking to offer a truly differentiated customer experience must, we believe, turn themselves into "Digital Insurers". This means transforming both their infrastructures and their operations. Our experience suggests that successful metamorphosis to Digital Insurer status rests upon acquiring and developing four key capabilities:

1. Insurers must achieve cross-channel excellence. To do this, it will be necessary to create a single 360-degree view of customer interactions, and operate seamlessly across multiple channels. For example, marketing will have to integrate campaigns across channels, leveraging customer information to identify the best channel to reach each individual customer. Distribution must expand its horizon to include multiple devices and mobility offerings.

2. Insurers must become customer-centric, with the ability to personalize interactions. Using analytics to draw insights out of the huge stores of data at their disposal, insurers will be able to personalize offers and products. This data is extracted from internal systems and external sources, such as social media. For example, products and services can be tailored to specific channels and even segments, leveraging data gathered on social media to increase customer intimacy. Claim submission and status monitoring should be digitally enabled.

3. Insurers must strive for operational simplicity. By digitizing customer-facing processes as well as certain support functions, insurers can reduce complexity, lowering costs and increasing their ability to respond to change--including introducing variable pricing. For example, mastering this capability will enable insurers to provide advice and quotations to consumers via their channel of choice, as well as to offer self-service and straight-through processing. Operational simplicity can also transform many support functions, among them collaboration across the value chain, legal compliance and interaction with actuaries.

4. Insurers must ensure superior execution combined with agility. Digitization will help insurers to improve execution while new technologies like cloud computing confer the agility needed to respond to constantly changing market conditions and consumer requirements without increasing back-office complexity. Insurers should be able to provide one-stop paperless underwriting.

While this four-step approach provides a basic framework, each insurer must make adaptations to reflect the firm's strategy, footprint and operational structure. A phased approach can help minimize disruption while maximizing the insurer's digital capabilities.

As customers move online and recalibrate their expectations of their insurers, we believe that becoming a digital insurer is necessary, first for survival, and then to maintain consistent, profitable growth. The insurers that successfully navigate this transformation will have numerous opportunities to differentiate themselves from less nimble competitors.

About the author: John Del Santo is Accenture’s Senior Managing Director – Global Insurance, and is responsible for setting the industry group's overall vision, strategy, investment priorities and client relationships. He is also a regular contributor for Accenture Insurance Blog.