capturing hearts, minds and market share - the digital insurer · capturing hearts, minds and...
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©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
©2015 IBM Corporation 6 July 20153
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
©2015 IBM Corporation 6 July 20154
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
©2015 IBM Corporation 6 July 20156
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
©2015 IBM Corporation 6 July 20157
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
©2015 IBM Corporation 6 July 20158
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
©2015 IBM Corporation 6 July 20159
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
The three dimensions of retention
Getting it done
Agenda
©2015 IBM Corporation 6 July 201511
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
©2015 IBM Corporation 6 July 201512
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
©2015 IBM Corporation 6 July 201513
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
©2015 IBM Corporation 6 July 201514
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
©2015 IBM Corporation 6 July 201515
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)
©2015 IBM Corporation 6 July 201516
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.
©2015 IBM Corporation 6 July 201517
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.
©2015 IBM Corporation 6 July 201518
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
©2015 IBM Corporation 6 July 201519
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
©2015 IBM Corporation 6 July 201520
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
©2015 IBM Corporation 6 July 201521
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 IBV survey data 2014, n=12,210
©2015 IBM Corporation 6 July 201522
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
©2015 IBM Corporation 6 July 201523
Recommendations: Offer value
What to do How to get started
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.
©2015 IBM Corporation 6 July 201524
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
©2015 IBM Corporation 6 July 201525
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)
©2015 IBM Corporation 6 July 201526
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)
©2015 IBM Corporation 6 July 201527
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
©2015 IBM Corporation 6 July 201528
Recommendations: Fully engage
What to do How to get started
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.
©2015 IBM Corporation 6 July 201529
The churn challenge
The three dimensions of retention
Getting it done
Agenda
©2015 IBM Corporation 6 July 201530
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
©2015 IBM Corporation 6 July 201531
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
©2015 IBM Corporation 6 July 201532
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
©2015 IBM Corporation 6 July 201533
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
©2015 IBM Corporation 6 July 201534
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?
©2015 IBM Corporation
Additional slides
©2015 IBM Corporation 6 July 201537
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
Source IBV survey data 2014, n=12,210
©2015 IBM Corporation 6 July 201538
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
©2015 IBM Corporation 6 July 201539
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?
Source IBV survey data 2014, n=12,210
©2015 IBM Corporation 6 July 201540
… 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?
Source IBV survey data 2014, n=12,210
74%
60%
36%
33%
32%
Quality of service
Price
Past experience
Relationship withinsurance advisor
Personal interaction
71%
59%
42%
30%
29%
Quality of service
Price
Past experience
Personal interaction
Relationship withinsurance advisor
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
Relationship withinsurance advisor
Personal interaction
71%
61%
29%
22%
21%
Price
Quality of service
Past experience
Personalinteraction
Reputation
Price-oriented minimalist Support-seeking skeptic Informed optimizer
©2015 IBM Corporation 6 July 201541
Payment Equity: If the insurance premium isn’t fair, people tend tobe less loyal?
...too high ...fair ...too low
premium is...
©2015 IBM Corporation 6 July 201542
Price consciousness has very little loyalty effect, whereas quality consciousness does