capturing hearts, minds and market share - the digital insurer · capturing hearts, minds and...

©2015 IBM Corporation1 6 July 2015

How connected insurers are improving customer retentionCapturing hearts, minds and market share

Minas Koulisianis |Service Delivery Manager, Business Analytics & StrategyJune 24th 2015

©2015 IBM Corporation 6 July 20152

Customer retention is one of the industry‘s biggest challenges– Eroding customer trust leads to a steady decrease in loyalty– Intensifying competition and increasing customer empowerment also make customers

harder to retain

Successful retention strategies center around three courses of action– Know your customers better

The goal of improved customer understanding is to increase customer involvment, both emotional and rational, with positive retention outcomes

– Offer customer valueMost customers decide on value provided, not on price. This means thinking past traditional insurance coverages to personal value-add products

– Fully engage your customers across access pointsToday’s customers – and more so those of the future – are looking for a holistic, omni-channel experience in anything they buy, including insurance

Executive Summary


We surveyed 12,000 consumers in 24 countries on their insurance relationships, value preferences and switching behavior

Source: IBM Institute for Business Value survey data 2014, n=12,210

> 50 years

30-50 years

< 30 years

Male

Female

Very high

High

Average

Low

Very low

Income

Age

Gender


The churn challenge

The three dimensions of retention

Getting it done

Agenda

©2015 IBM Corporation 6 July 201555 ©2015 IBM Corporation 6 July 2015

“Retention of customers is critical – we have to become more customer centric.”

CIO, Health Insurer, South Africa


Despite a slight improvement, customer loyalty remains a global issue for insurance companies

Trust in the insurance industry continues to be low…1

42 39 39 4045 44 43

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2012 2013 2014

Source: [1] IBV survey data 2007-2014 “Do you agree with the statement ‘I completely trust the insurance industry’?” [2] IBV survey data 2012, 2013, 2014 „Please state how often you switched your insurance provider inthe past two years“, n= 3,898 (2014), n=12,467 (2013), n=7,760 (2012)

%

… and customer churn high2

31,035,3

31,3

1,61,6

1,5

2012 2013 2014

3+ times

1-2 times


Other challenges such as intensifying competition and changing customer behaviors force carriers to adapt faster

This is why millennials aren’t buying insurance from you


Surprisingly, consumers don‘t even trust their own insurers all the way

16%

6%

8%

4%

47 %

55 %

50 %

51 %

37%

39%

42%

44%

disagree neutral agree

Source: IBM Institute for Business Value survey data 2014, n=12,210

For many insurance customers, there seems to be an expectation and trust gap

My insurer always meets my expectations

My insurer always provides good service

My insurer is reliable

My insurer can always be trusted

“Customer service … is appalling.”“[Innovativeness is] coming up with new ways to take your money...”

Focus group participants, “Trust, transparency and technology” study, 2008

Despite various efforts in the past six years, insurers still have a long way to go to reach true customer centricity


Most insurers are too far away from their customers’ real needs

33%

Customerswho switched

insurers

Source IBV survey data 2014, n=3,898. Q: “Why did you switch providers? Please choose all answers that apply.”

When our respondents switched insurers it was seldom just about price

41%

29%

24%

19%

20%

My needs changed and the previous provider could not meet my new needs

My agent/broker recommended a new provider

Poor service by previous provider

Poor product performance

Other (price etc.)

©2015 IBM Corporation10 6 July 2015

The churn challenge


Getting it done

Agenda


Three dimensions of customer retention

Customer Behavior

Value Proposition

Technological Innovation

Retention

Know your customers better

Offer customer value

Fully engage your customers across access points



Customer Behavior

Value Proposition


Retention





Customer loyalty starts with a positive customer experience

22.3%

3.6%

low medium high

Satisfaction Index

Loyalty Index

low

medium

high

Satisfied customers are six times less likely to leave their insurer

“Our goal is to really excite our customers to improve satisfaction.”

COO, All-lines insurer, Germany

Satisfaction is most influenced by

Service quality

Responsiveness

Personal attention

Will you stay with youryour insurer in 2015?

(Answer „no“) low satisfaction

high satisfaction

Source IBV survey data 2014. Left: n=12,210. Right: n=6,901


To create emotional involvement

Address the individual personally

Make participation easy

Make participation worthwhile

Include friends, groups and interests

To achieve this, insurers need to engage customers, let them participate and get them emotionally involved

Loyalty Index

medium

high

low medium high

Participation Index

Source IBV survey data 2014. n=12,210


One size does not fit all - understanding customer profiles allows a treatment based on individual preferences and behaviors

Attitude Cluster Security-oriented individualist

Demanding support-seeker

Loyal quality-seeker

Price-oriented minimalist

Support-seeking skeptic

Informed optimizer

% of total 16% 16% 18% 16% 19% 15%

Key theme "I know what I want and organize myself"

"I need personal advice"

"I trust my insurer and remain a loyal customer"

"I do not like insurers –make it cheap and stay away"

"I need advice but prefer to keep my distance from insurers"

"I take time to research to find the best"

63

74

71

44

54

61

63

60

59

67

59

71

Security-oriented individualist

Demanding support-seeker

Loyal quality-seeker

Price-oriented minimalist

Support-seeking skeptic

Informed optimizer

Quality of servicePrice

Customer segments predict retention factors

Source IBV survey data 2014, n=12,210. Q: “Which factors make you stay with your insurer?” (bottom)


This allows insurers to fine-tune their engagement models

website insurer

aggregator

telephonetied agent

peers

Demanding support-seeker Support-seeking skeptic

Informed optimizer

Analytics show how insurers should communicate

Source: IBV survey data 2014. n=6,211. Q: Please select the three channels most important to you when searching for INFORMATION about your insurance coverage.


Recommendations: Know your customers

What to do How to get started

Understand the values and behaviors of your customers

Start with available data sources. Augment structured with unstructured data like those collected through call centers and written correspondence. With these data, you can deduce meaningful patterns and behavior-based customer segments.

Enter into active dialogues to establish meaningful relationships

Use social media analytics and conversations via social networks to increase customer touch points. Use the gained knowledge about their wants and needs to sustain intermittent conversation about things that are helpful to the customer.

Build an environment where sharing data creates mutual benefits for customer and insurer

Transparency is key. Create and publicize a “customer data policy” which specifies how and when you will use data, shared and otherwise. Show customers how they will benefit. Use shared data to create extra customer value.



Customer Behavior

Value Proposition


Retention





Value is more than just price. Perception of value matters

Customers don‘t see price in absolute terms, but as a matter of fairness

Price consciousness per se has no immediate effect on loyalty

Loyalty Index

medium

high

Price consciousness

medium

high

Quality consciousness

3,6

3,8

4

4,2

4,4

...too high ... fair ... too low

Do you think the premium of your insurance is…

Source IBV survey data 2014, n=12,210


Brand matters less than expected – for the insurance customer of the future, direct and individual engagement is more important

20% 68% 12%of sample

low medium high

Brand consciousness

Loyalty Index

medium

high

Only very high brand consciousness increases loyalty1

Brand Enthusiasts

High propensity for individual recognition and two-way engagement.

51% Millennials

25%of total disposable

income

The customer of the future tends toward a new view of brand2

Source: [1] IBV survey data 2014, n=12,210 [2] „Brand enthusiasm: More than loyalty“. IBV. Nov 2014.[3] „Digital reinvention: Trust, transparency and technology in the insurance world of tomorrow“. IBV Jan 2014

The insurance customer of the future3

… is less concerned about price alone

… wants to interact with others when shopping for insurance

... is omni-channel

… is looking for advice

… is open to new products and ideas


Customers can accept product complexity, as long as they are allowed to understand how it works.

There is little discernible effect of product complexity on loyalty…

... it is transparency about the productthat counts

“We need to “de-mystify” the world of insurance through increased transparency and reduced complexity.”

CEO, All-lines insurer, Singapore

Loyalty Index

medium

high

low medium high

Product knowledge

42%

44%

Percentage of customers who are highly loyal when they feel…

… their insurance is not complex

… their insurance is highly complex



Source: Haller, Matthias and Walter Ackermann: „Versicherungswirtschaft – kundenorientiert“. Verlag des Schweizerischen Kaufmännischen Verbandes. Zurich. 1992; IBM Institute for Business Value Analysis

level 3

Extended services (added functions from adjacent spaces or other industries)

Core services (to solvespecific problems)

level 2

Core product(insurance coverage; assetmanagement)

level 1

Classical

Package

Comprehensive

Insurers need to explore how to expand products and services beyond the classical core insurance coverage

addedvalue


Recommendations: Offer value


Support your customers in areas theypersonally value

Offer information to your customers in useful areas that are widely related to their coverage: for example, traffic or weather information for auto insurers. Create communities of interest to share news, tips and enhance exchange among like-minded individuals and yourself.

Add risk mitigation or prevention into your products and services.

Commercial insurers have been doing this for years. Start offering these at the outset of the contract relationship. Later, add tracking via telematics, plus assistance services

Personalize offerings and provide pick-and-choose product options

Product flexibility starts in the back end. Build a roadmap for flexibility using industry standards such as IAA. From the front end, add in-depth analytics to flexibly balance the offered options with market needs.



Customer Behavior

Value Proposition


Retention





45%

47%

41%

58%

36%

...they are more competent inmeeting personal needs

...they provide faster services

...their services are easier tounderstand

...they are easier to reach

...they are more competent inproviding customized services

Insurers need to increase speed and accessibility to compete against new entrants to the industry

Many customers can imagine buying insurance elsewhere

49%

26%

17%

16%

13%

30%

Banks

Auto dealers (auto insuranceonly)

Online service providers(e.gAmazon/Google)

Home service providers

Retailers

None of the above

40%

54%

45%

50%

29%

...they are more competent inmeeting personal needs

...they provide faster services

...their services are easier tounderstand

...they are easier to reach

...they are more competent inproviding customized services

Customers would by insurance from... because...

Source: IBV survey data 2014. left: Q: „Would you consider buying insurance from these providers?” (n=12,210)right: Q: „Would you consider buying insurance from these providers?” (top n=6,032, bottom n=2,058)


Expanding the use of mobile is an instant accessibility increase

For some stages of the customer journey, mobile offerings would significantly increase loyalty …

... although the effect will stronglyvary by country

“Our customer will be able to initiate all services via mobile devices.”

CIO, All-lines insurer, Poland

36%

35%

29%

29%

42%

43%

Searching for information

Getting a quote

Buying insurance

Sharing relevant data (e.g.driving, exercise)

Submitting a claim

Communicating with yourinsurer

Customer

journey

67%

65%

63%

42%

37%

33%

30%

26%

22%

67%

71%

64%

44%

35%

35%

27%

29%

25%

Brazil

India

China

Poland

Germany

USA

Japan

Canada

UK claims communication

Source: IBV survey data 2014. Q: „If your insurer allowed you to use a mobile device for the following functions, would this increase your loyalty?” (left: n=12,210; right: n=4,597)


In the long term, the Internet of Things will also be an important playing field for insurers –the millennial customer will expect it

Do you own or can you imagine owning devices that connect to the Internet on their own?

(E.g. refrigerator, washing machine etc.)1

I would be comfortable with my insurer using the data from these devices

If my insurer used the data from these devices, this would improve my loyalty

36%

56%

Millennials Gen X Boomers

50%

Source IBV survey data 2014, n=12,210 [1] Answer “yes”

21%

19%

15%

44%

41%

35%

36%

40%

50%

Millennials

GenX

Boomers

agree neutral disagree

21%

19%

14%

45%

42%

38%

34%

39%

49%

Millennials

GenX

Boomers

agree neutral disagree


Recommendations: Fully engage


Embrace mobile to enable constant access for your customers.

For your main set of lines of business, envision “customer journey maps.” These maps document the typical steps a customer must take during their provider relationship. For each step, identify interaction options to generate a complete picture of potential mobile touch points.

Support decision making throughout each step of the sales process for customerconvenience

Create one unified front end for the customer, whether they come in through an agent, call center, the Internet or mobile devices. Make customer data and product information equally available at all touch points.

Have information available anytime, anywhere to support instant fulfillment of client requests.

Equip tied agents, underwriters, claims adjusters and other fulfillment roles with mobile technology like tablets and other larger handheld devices. This allows you to abandon a fixed workplace in favor of greater fulfillment flexibility – for example, claims can be adjusted directly on-site.


The churn challenge


Getting it done

Agenda


Scenario 1: Bill, a known and trusted OpenInsurance customer

Bill, customer of OpenInsurance’ “Mutual Trust Auto”, has a car accident. With the cost

estimate done by his regular auto mechanic in hand, he calls OpenInsurance.

In the background over the next few days, OpenInsurance’s fraud detection and social media analytics

systems check media reports and online chatter for discrepancies.

Fraud analytics all come back clean. Bill’s car is repaired and all costs taken care of by OpenInsurance – all

with minimum hassle for Bill, who never sees any of the background activities.

OpenInsurance’scustomer analytics has marked Bill as highly trustworthy. Mary, the call-center agent, gets

Bill a rental car and initiates payment processing immediately.

1 3

42


Scenario 2: Improved value and engagement through instrumentation and interconnection

Bill’s car has built-in telematics and advanced sensors including an accident

detector. On the crash, a call is triggered automatically via embedded app.

Mary calls Bill in his car right after the accident and lends assistance: a tow-truck is sent and Bill is directed to a garage

connected to OpenInsurance’s claims network.

Claim is handled via compensation in kind; the paperwork for Bill is minimal.

The car’s sensors have recorded the relevant crash data and also make a preliminary

assessment of damages. The embedded app transmits this as well and the claims process is automatically started.

1 3

42


Scenario 3: Upcoming technologies add even more speed and reduce complexity

Bill‘s accident now involves several parties, with damages to surrounding property. After the triggered call,

OpenInsurance sends out aerial drones for the initial damage assessment.

Jim uses augmented reality wearables that allow his assessment app to integrate the drone input with real

pictures and his files from the office.

With additional help from his cognitive expert system in the backoffice, Jim can wrap up the

assessement on site and in real-time. Again, Bill has almost no extra hassle for paperwork.

The drones are immediately followed by Jim, an OpenInsuranceclaims adjuster. Jim does his job in the field

using a handheld mobile device. With GPS info he can get to the accident site quickly.

1 3

42


Technologies that can help you get started

Retention

Know your customers

Offer value

Fully engage

Analytics, Big Data, Social Media Analytics

Telematics, Social, Internet of Things,Standard component architectures

Social, Mobile, Internet of Things, Cognitive Computing


Questions to ask yourself

How are you using your in-house sources of customer knowledge? In what ways are you gathering and adding external information, such as that from social networks? How are you combining internal and external information? How is it used to generate greater customer value and loyalty?

Where and how are you using needs-based or persona-based segmentation approaches? How will you deepen your level of understanding individual customers?

To what degree can your customers pick and choose options from your product portfolio? What is your plan to remove the barriers to further customization?

How do you communicate with your customers? What is your approach to staying abreast of the ways they prefer to communicate, now and in the future?

In what ways are you engaging millennials? And how will you stay updated to address the customers of the future, such as Generation Z and beyond?

Ready or not – are you capturing the hearts and minds of your customers?

Additional slides


We found no significant loyalty difference between customers with opt-in and opt-out renewal schemes

4%

4%

63%

62%

33%

34%

opt-in

opt-out

Loyalty index

low medium high

A significant number of respondentsdon‘t even know their renewal scheme

... and even if they do, it is irrelevantfor loyalty

36%

54%

10%

opt-in opt-out don't know



The younger generation prefers the bias from information sources to be overt – they want to do their own comparisons

Search by biased/independent means(% of respondents)

Source: IBM Institute for Business Value data 2013, n=17,594

57

36

34

25

46

41

42

37

direct web

aggregators

tied agents

independentagents

MillenialsBoomers


The major retention factor are quality of service, premium, and pastexperience…

63%

61%

33%

24%

22%

21%

17%

15%

14%

12%

10%

5%

Price

Quality of service

Past experience

Personal interaction

Relationship with insurance advisor

Reputation

Claims handling process

Agent/Broker recommendation

Switching cost

Time constraints

Lack of alternatives

Other

Which factors make you stay with your insurer?



… but retention factors vary strongly by customer type

63%

63%

34%

24%

21%

Quality of service

Price

Past experience

Personalinteraction

Reputation

Which factors make you stay with your insurer?


74%

60%

36%

33%

32%

Quality of service

Price

Past experience

Relationship withinsurance advisor


71%

59%

42%

30%

29%

Quality of service

Price

Past experience



Security-oriented individualist Demanding support-seeker Loyal quality-seeker

67%

44%

28%

15%

15%

Price

Quality of service

Past experience

Switching cost

Time constraints

59%

54%

29%

23%

23%

Price

Quality of service

Past experience



71%

61%

29%

22%

21%

Price

Quality of service

Past experience

Personalinteraction

Reputation

Price-oriented minimalist Support-seeking skeptic Informed optimizer


Payment Equity: If the insurance premium isn’t fair, people tend tobe less loyal?

...too high ...fair ...too low

premium is...


Price consciousness has very little loyalty effect, whereas quality consciousness does

capturing hearts, minds and market share - the digital insurer · capturing hearts, minds and...

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