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DIGITAL TRANSFORMATION IN THE INSURANCE INDUSTRY Digital space. Conquered.

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Page 1: DIGITAL TRANSFORMATION IN THE INSURANCE INDUSTRY Transformation... · INSURANCE INDUSTRY, ACTIVELY LOOKING FOR WAYS TO REINVENT HOW INSURANCE IS SOLD AND DELIVERED, ANALOGOUS TO HOW

DIGITAL TRANSFORMATION IN THE INSURANCEINDUSTRY

Digital space. Conquered.

Page 2: DIGITAL TRANSFORMATION IN THE INSURANCE INDUSTRY Transformation... · INSURANCE INDUSTRY, ACTIVELY LOOKING FOR WAYS TO REINVENT HOW INSURANCE IS SOLD AND DELIVERED, ANALOGOUS TO HOW

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TABLE OF CONTENTS

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Executive Summary

Insurers Face Digital Disruption

New Opportunities

Mobile a Priority

Personalized Customer Experience

Capitalizing on Business Moments

360-Degree Personalization

Advanced Analytics

Analytics Inform Personalisation

Embedded Analytics

Transparency and Trust

Digital Compliance

Back-Office Benefits

Testing Is Critical to Success

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The digital revolution is disrupting all industries, including the insurance sector. Established in-surance firms face challenges from a new breed of digital competitors for whom the tradition-al barriers to entry have been lowered by cloud computing, a new generation of software appli-cations, and the move away from face-to-face to remote advice.

A HOST OF SMART, WELL-FUNDED INNOVATORS ARE TARGETING THE INSURANCE INDUSTRY, ACTIVELY LOOKING FOR WAYS TO REINVENT HOW INSURANCE IS SOLD AND DELIVERED, ANALOGOUS TO HOW UBER AND AIRBNB ARE TRANSFORMING BUSINESS MODELS IN THEIR RESPECTIVE INDUSTRIES1

.In a PWC survey, 50% of insurance CEOs saw new market entrants as a threat to growth, far more than any other financial services sector.2 However, most established insurers are lagging in their effort to innovate and realise the competitive opportunities of digital transformation.

Rather than seeing new digital technolo-gies, channels, and business models as a threat, insurers can embrace the opportu-nities that the digital transformation pres-

ents to enhance their business.

Today, most consumers only engage with their Insurers when really necessary – i.e. when first acquiring an insurance policy, when renewing it, or when making a claim – maybe only once or twice a year at most. As a result, customers tend not to build a relationship or loyalty to their In-surers.

Insurers must be able to reimagine and reinvent their business in a way that delivers valuable new services and compelling digital customer experi-ences that build a long-term digital relationship with customers.

At the same time, insurers need to digitally op-timize their labour-intensive back-office opera-tions to keep costs to a minimum so that their products can be competitively priced as well as delivering the benefits and reassurance that cus-tomers want.

At the heart of digital transformation is the customer experience. Increasingly customers are accessing insurance products directly rath-er than via an adviser, so insurance companies have to find a way to establish and then main-tain a direct relationship with their customers. To succeed, insurance firms must deliver compel-

ling and consistent customer experiences that are simple and easy to use across all channels—web, mobile, social media, email, and video.

Insurers should be looking at digital tech-nologies to drive business revenue with wider reach. They can create new touch points with consumers, which were not possible earlier. Digital can be used to create a value proposition throughout the life cycle of the insurance product and to use information to continuously refine their models.

With the mobile phone rapidly becoming the main portal through which customers engage with vendors, creating optimised mobile cus-tomer experiences is fundamental to establish-ing and maintaining a digital customer relation-ship. Insurers, for example, can give customers the ability to report a claim using a mobile phone, to photograph the incident, advise the customer about what information is required, and enable the customer to submit the claim data immedi-ately at the scene.

Insurers have the opportunity to incorporate into their business processes innovations based on the next generation of digital technologies and qualitative analytics that includes the Inter-net of Things (IoT), smart machines, advanced

analytics, virtual reality (VR), augmented reality (AR), streaming video, rich mobile communica-tions, etc.

INSURERS ARE AMONG THE MOST EXPERIENCED USERS OF ANALYTICS: ADVANCED QUALITATIVE ANALYTICS OFFER NEW OPPORTUNITIES TO DESIGN NEW PRODUCTS, TRANSFORM BUSINESS PROCESSES AND DELIVER IMPRESSIVE NEW CUSTOMER EXPERIENCES.

But to take full advantage of these new technol-ogies, it is essential to have the information and tools that enable you to see, understand, and sup-port everything that your customers are doing on your digital channels.

The regulatory environment is becoming ever

more complex for insurers in the wake of the glob-al financial downturn and the continual increasing scope with new regulations like MiFID II and GDPR. In addition to developing new services for custom-ers, insurers can gain competitive advantages by automating compliance processes (e.g., record keeping), agent onboarding, and market conduct (e.g.,automated monitoring of all digital sessions).

In offering new services, the quality of the user experience, minimising risk exposure and ensuring compliance are critical. Insur-ers must ensure that options are presented in the clearest and most compelling manner across devices and channels, that users can easily se-lect options, and that response times are rapid. They also need to be able to record, store, search and quickly retrieve every digital session based on specific criteria (products sold, versions of terms and conditions, customer ID, etc.) or immediate-ly find a session in which the customer is “stuck”

and needs immediate help.

Insurers can gain an advantage by employing state-of-the art tools that capture and replay user digital interactions, enable analytics teams to identify the root causes of problems and fix front-end or back-end issues, help optimise customer care, and ensure they meet present and future regulatory requirements.

Key factors to consider in choosing such a solu-tion are its openness, ability to import and export data and comply with data protection regulation, ease of search and retrieval, ability to compress data, comprehensive reporting capabilities, main-tenance requirements, and ability to accommo-date changes in real time. You also want one solution that can be used across the business – by IT, customer service, compliance, and mar-keting—creating one digital truth that enables all functions to collaborate quickly and effectively.

EXECUTIVE SUMMARY

1 Deloitte, “Top regulatory trends for 2016 in insurance,” 2015.2 74 insurance CEOs polled as part of 17th Annual Global CEO Survey Fit for the future: Capitalizing on global trends, PwC, 2014 (www.pwc.com/ceosurvey).

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Established insurance firms face challenges from a new breed of digital competitors for whom the barriers to entry have been lowered. New developments in technology such as cloud computing and a new generation of application software together with reduced dependence on face-to-face advice is enabling new entrants to get up and running quickly and easily.

Complacency with the status quo and the chal-lenges faced in overhauling slow and unwieldy systems are preventing established insurers from transforming rapidly. McKinsey research showed that only one in 10 insurers has aligned its digital strategy to maximise effectiveness across the full customer journey.

INSURERS FACE DIGITAL DISRUPTION

INSURANCE HAS BECOME VERY MUCH COMMODITISED, WITH CUSTOMERS TENDING TO MAKE PURCHASES BASED ON PRICE. A LARGE PORTION OF CUSTOMERS ARE USING WEBSITES, SEARCH ENGINES, AND SOCIAL MEDIA TO RESEARCH INSURANCE POLICY OPTIONS AND QUOTES.

Having been exposed to exceptional user expe-riences from best-in-class Internet vendors in other industries, customers are expecting the same ease of use, intuitive interfaces, and al-ways-available experience from insurance pro-viders. Customers also are expecting person-alised information and service based on their

particular circumstances – as they are already getting in other sectors.

While the digital revolution is empower-ing customers and making them more de-manding, it also offers insurers the oppor-tunity to gather more intelligence, engage more deeply with customers, and tailor products to meet individual customers’ needs. While these measures can increase customers’ “stickiness,” closer customer rela-tionships can only be accomplished if they de-liver the services customers need and if they re-spond to issues quickly and effectively.

The ability to profile customers more precisely will enable insurers to fine tune their underwrit-

ing and deliver customised solutions. As PWC notes, this will enable insurers to move away from competing predominantly on price, while more effectively controlling risks and matching the experiences being offered by the new en-trants targeting their sector.3

As the services offered to customers become in-creasingly richer, broader, and more complex, insurers who can deliver these complex offer-ings, but personalised within simplified formats for each customer, will gain a competitive ad-vantage. An optimised user interface that en-ables customers to access resources, under-stand options, and perform transactions easily will be paramount.

NEW OPPORTUNITIES

3 PWC, “Insurance 2020: The digital prize – Taking customer connection to a new level,” 2014.

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Internet usage by mobile and tablet devices has exceeded desktop use worldwide according to StatCounter.4 ComScore data shows that mobile now represents 65 percent of digital media time, while the desktop is becoming a “secondary touch point” for an increasing number of digital users.5

SURVEYS SHOW THAT CUSTOMERS INCREASING ARE ENGAGING WITH BUSINESSES ON MOBILE DEVICES, AND THE INSURANCE INDUSTRY IS NO EXCEPTION. INSURERS CAN GAIN ADVANTAGES BY ENABLING CUSTOMERS TO ADD AND ALTER COVERAGE ANYTIME, ANYWHERE THROUGH MOBILE SELF-SERVICE PORTALS.

In-app mobile streaming video or videoconferenc-ing systems could enable customers to instantly report accidents, storm damage, fires, and injuries, and enable insurers to quickly settle claims.

The combination of mobile, analytics, and sensors opens many new possibilities for insurers to pro-file customers, assess risk, and personalise offer-ings.

MOBILE A PRIORITY

6 PWC, “Insurance 2020: The digital prize – Taking customer connection to a new level,” 2014.

A PWC survey found that 50 percent of global participants would be willing to provide an insur-er with additional personal and lifestyle informa-tion to enable them to seek the best deals.6 In addition, 68 percent said they would be willing to download and use an app from their insurance provider.

INSURERS CAN GAIN AN ADVANTAGE BY PROVIDING APPS AND PORTALS WITH EASY-TO-NAVIGATE PATHS TO FIND, COMPARE, CUSTOMISE, AND BUY INSURANCE PRODUCTS, WITH OPTIONAL CHAT AND LIVE VIDEOCONFERENCING FEATURES FOR QUERIES.

Coverage could be offered for different user pro-files and lifestyles, such as plans for single parents or quality-of-life benefits for younger people. Flex-ible pay-as-you-use insurance plans could be con-ceived for particular user groups.

As an intangible product, insurers have the ability to easily change their offerings. With rich profiling and real-time analytics, insur-ers can tailor policies to each customer’s par-ticular risk profile and financial budget. Cus-tomers can decide how much risk they would like to be exposed to and how much protection they would like to pay for.

As customers’ digital identities become more com-plex, insurers have an opportunity to provide digi-tal identity manager services with built-in security.

Consumers will trust their insurer to protect their identity and insure against any compromises.

Insurers can offer similar guaranteed secure iden-tity services to consumers and businesses for fi-nancial transactions, secure communications, and deal-making. Insurers can extend their secure identity services to healthcare record exchanges, patient monitoring, and other in-the-field trans-missions.

If the insurer uses a solution like Glassbox that re-cords every interaction with the customer, exactly as seen by the customer, customers and regula-tors will have the comfort and peace of mind from knowing that if there are questions or indeed dis-putes about what happened, the insurer can im-mediately retrieve and replay the session.

PERSONALIZED CUSTOMER EXPERIENCE

4 http://gs.statcounter.com/press/mobile-and-tablet-internet-usage-exceeds-desktop-for-first-time-worldwide5 http://marketingland.com/digital-growth-now-coming-mobile-usage-comscore-171505

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With the ability to monitor activity in real time, digitally advanced insurers will be able to take advantage of business opportunities as they arise. Insurers can gain advantag-es by putting systems in place to recognise trigger points in customer journeys that sig-nal an imminent insurance purchase, such as a wedding, pregnancy, birthday, gradu-ation, or recent move. People already being used to sharing personal information on social media may become increasingly open to provid-ing richer profile information to their insurers, al-lowing them to connect and help them at critical points in their lives.

For example, a customised ad for a car insur-ance policy could be offered to a consumer who is checking a financial account. The customised ad could offer the customer an attractive rate

because of factors like low gas consumption, a clean driving record, or below-average auto use. The deal would be favourable to both the insurer and the customer.

Armed with comprehensive customer profiles, in-surers will be able to customise and personalise offers based on customer needs and preferenc-es, such as protection versus price. Insurers will be able to take advantage of state-of-the-art au-tomation and modern retargeting practices for website, session, and shopping cart abandon-ment.

As they transform their businesses, insurers will be challenged to create user interfaces that are consistent and optimised across a number of key channels, including websites, mobile, social me-dia, email, video, audio, and live videoconferenc-

ing. Competitive advantages can be gained by in-surers who deploy state-of-the-art user-interface optimisation solutions.

Insurers can gain advantages by providing user interfaces that make it easy for customers to un-derstand their products, conduct research, en-gage with knowledgeable reps for information or advice, and perform transactions.

Although Information of Things (IoT) technology is often applied to mechanical processes, it is also being used for processes related to consumers. SAS, for example, has released an Event Stream Processing solution that can be used to access and analyze IoT data streams to identify signifi-cant events. Insurers can configure the solution to determine the best offer to present to the cus-tomer as an offering, cross-sell, or up-sell deal.

CAPITALIZING ON BUSINESS MOMENTS

As Aberdeen Research points out, customer jour-neys are complex and dynamic, buyer expecta-tions and preferences evolve over time, and con-sumers may frequently change channels when interacting with a business.7 Aberdeen’s research showed that 58% of businesses use at least eight channels to interact with consumers, which is twice as many channels as they were using four years ago.8

Insurers, as part of their digital transforma-tion, must be able to deliver personalised content to customers across every channel, at each stage of their customer journeys. To create omnichannel personalised customer expe-riences, insurers must be able to create 360-de-gree customer profile views, which are compre-hensive profiles based on aggregated information and personal data, including customers’ buying history, tailored to their personal circumstances, and intelligence gathered from customers’ activi-ties across the venues they visit.

Insurers can combine the data they collect with demographic and psychographic data available from companies like TowerData, Experian, and Mellissa Data. Third-party data brokers like Acxi-om, Datalogix, Epsilon, and BlueKai also make data available to marketers, including user data from Facebook, Google, and other major services.

360-DEGREE PERSONALIZATION

7 Aberdeen Research, “Getting Ahead In Customer Analytics: Which Technologies Do You Need To Succeed?” June 2016.8 Aberdeen Research, “CEM Executive’s Agenda 2016: Aligning the Business Around the Customer,” May 2016.

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INSURERS ARE AMONG THE MOST EXPERIENCED USERS OF ANALYTICS, EMPLOYING ACTUARIAL SCIENCE FOR MORE THAN TWO CENTURIES TO CALCULATE RISK AND PREPARE ACTUARIAL TABLES. ADVANCED ANALYTICS OFFER A HOST OF NEW OPPORTUNITIES FOR INSURANCE FIRMS TO EMBRACE.

For example, Direct Seguros, a seller of motor in-surance policies in Spain, was facing a decrease in web sales and was not able to identify where and why in the online web underwriting process the drop was occurring.

Using Glassbox to analyze the problem, Direct Se-guros within five months was able to understand what clients were doing on its website. Based on the findings, the company was able to provide

customized offerings to clients based on their on-line behavior. By using the replay functions, Direct Seguros was able to see what was working online and what was not, which enabled the company to manage operations more efficiently. This not only led to increased sales, but also helped mitigate fraud and security issues on their website.

As Gartner notes, “ As advanced analytics capa-bilities such as predictive modeling become more widely adopted, organisations will be looking for the next step in analytics maturity to gain compet-itive advantage and improve decision making.”9

Advanced analytics like machine learning and predictive analytics can be leveraged by insurers to gain a number of competitive advantages, including generating valuable intelligence that can be used to create cus-tomer profiles and incorporated in customer experiences.

Machine learning algorithms have been devel-oped for building extended comprehensive cus-tomer profiles, while event processing systems can analyse a visitor’s clickstream to determine whether a concrete action should be invoked once a particular interest was detected.

Many life insurance companies are interested in using big data and predictive analytics to write policies and set rates based on lifestyle factors such as diet, exercise habits, daily activity, pur-chase history, and television watching.

Advanced replay and analytics solutions such as Glassbox can help insurers proactively identify is-sues and customer struggles. They can pinpoint problematic digital sessions by using automated journey mapping, journey filters and clickmaps and help improve conversions by viewing cus-tomer struggles with visual replay.

ADVANCED ANALYTICS

9 Gartner, “Predicts 2016: Advanced Analytics Are at the Beating Heart of Algorithmic Business,” Alan D. Duncan, Alexander Linden, Lisa Kart, Nick Heudecker, Jim Hare, November 6, 2015.

Advanced analytics enable insurers to ag-gregate and analyse customer data to cre-ate 360-degree profiles in order to person-alise interactions and offerings. By analysing data streams, for example, insurers will be able to recognise the features that customers value most and offer dynamic pricing according to de-mand. Claims could be reported using a mobile app and processed automatically by an analytic decision engine.

As personalisation levels increase, it’s crucial to be able to understand and analyse both overall digital trends and drill down to the level of sin-gle interactions while at the same time remaining compliant. Being able to capture, keep tamper- proof records, replay, and drive insights from ev-ery digital session in real time and across web and mobile will enable wealth managers to opti-mize the services they offer to gain a competitive advantage.

The ability to drive insights from customer be-haviours should ideally be combined with the ability to take personalised operational actions. For example, being able to trigger real-time per-sonalised marketing campaigns based on visitor u, or being able to filter specific digital custom-er sessions based on various attributes (location, demographics, journey) and proactively reach out to the associated customers with outbound cam-paigns or messages will have a significant impact on wealth managers’ business.

ANALYTICS INFORM PERSONALISATION

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For a growing number of customers, transparency and trust is an important issue. A way to encour-age customers to use an insurer’s digital channels is to give them the confidence that interactions are smooth and secured, that their transactions and money are not at risk even if something goes wrong during the interaction.

Full transparency ensures that customers have ac-cess to all relevant information, including portfolio data, performance reporting, and fee structures. It is important for insurers to be able to resolve dis-putes quickly by showing exactly what the user was

presented on screen and with a digitally signed re-cord.

In the highly regulated insurance industry, it will be crucial to protect customers and make sure they are not misled, especially when ad-vising and selling a regulated product.

In an industry in which transaction values are high, informing visitors that digital sessions are being re-corded for quality and monitoring purposes could be a significant competitive advantage and a big step forward in winning customers’ trust and on-

going business.

Testing and monitoring online channels’ perfor-mance, while understanding the impact perfor-mance has on customer behaviours, will ensure that the user experience is optimised for each step in the customer journey.

Understanding across all digital channels and de-vices, how visitors engage with different types of content, which processes are causing abandon-ments and why struggles occur, will help insurers provide superior customer experiences.

TRANSPARENCY AND TRUST

Embedded analytics are being incorpo-rated in applications to make analytics accessible to nontechnical business us-ers. Nucleus predicts that in the next seven years, 90 percent of business us-ers will interact with analytics at least once per day but only 15 percent will re-alise they are doing so.

Insurers can gain advantages by em-ploying leading-edge tools – such as vi-sual replay of digital sessions – to em-bed analytics in their daily processes. Moreover, they can benefit from easy-to-deploy and open analytics systems that can integrate with other solutions, pour data into data lakes and significantly en-rich the overall customer understanding.

What is certain is that the number of digital channels and the amount of con-tent and data is going to explode. There-fore, insurers can only benefit from im-plementing today enterprise-grade analytics solutions that will be able to cope with infinite data in the future. This includes the ability to search every bit of data you have – because you don’t know what you are going to want to analyse in the future, whilst at the same time being able to efficiently compress data, to mi-nimise total cost of ownership. In such a dynamic and fast paced economy, they also need to choose systems that do not require endless configurations and high maintenance, if they want their opera-tions to be agile.

EMBEDDED ANALYTICS

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FOR MANY INSURERS, ONE OF TODAY’S BIGGEST CHALLENGES IS TRYING TO COMPLY WITH NEW CAPITAL REGULATIONS THAT WERE ORIGINALLY DESIGNED FOR BANKS BUT DO NOT FIT THE INSURANCE BUSINESS MODEL, SUCH AS HOLDING MORE CAPITAL IN RESERVE.

Digital transformation offers opportunities for in-surers to gain advantages in managing compli-ance, including lower risk and compliance costs,

fewer litigation cases, and reduced reputational risk.

As propertycaualty360.com points out, most of the fines levied by insurance regulators in a given year are for issues with agent licensing.10 In most instances, the onboarding process is a labouri-ous process conducted by “snail mail” or email. Insurers can gain advantages by automating this and other compliance processes.

Market conduct is another compliance headache because it is difficult to manage and can carry

significant financial penalties and significant risk to an insurance company’s reputation. Here too, automated systems and dashboards can enable mangers to more easily monitor and manage market conduct.

Digital risk management systems will be able to track, record, and document all user activity and data entry for as long as needed (similar to voice recording for call centres in financial institutions). Insurers will be able to generate ad-hoc reports and quickly search across the data to support au-dits and compliance.

DIGITAL COMPLIANCE

10 Property Casualty 360, “The story of compliance in the insurance industry: modern regulation,” John Sarich, June 30, 2016.

Insurers can improve efficiency and reduce costs by deploying digital enterprise con-tent management (ECM) and workflow sys-tems for a number of business processes, including member enrollment, policy man-agement, and claims processing. Back-of-fice business processes that benefit from ECM automation include financial accounting, ac-counts payable, vendor procurement, and con-tract management. The more you automate, the greater the benefits. Adding workflow and inte-gration with existing business systems enhances the capability of the business system and brings more efficiency, productivity, and information sharing.

Improvements in OCR reading and extraction rates can add an order of magnitude greater speed and efficiency to back-office processes. With an au-tomated OCR system, as much as 75 percent of the time spent using conventional methods of ac-counts payable processing are saved, resulting in fewer errors, reduced costs, quicker invoice pro-cessing cycles, visibility, workflow, improved com-pliance and reporting.

Mobile capture brings new capabilities, enabling forms and documents to be captured by workers and customers in the field using smartphones. Dig-ital signatures enable documents and forms to be signed on a screen and captured without a physi-

cal trip to a branch office.

Insurers also can use digital channels should to make the underwriting process to more transpar-ent to customers (similar to the way you can track a parcel that is being delivered to you, customers should be able to track the status of a claim.)

Business process management (BPM) dashboards can be added to an ECM system to monitor busi-ness processes and improve performance. Finan-cial and market intelligence insights also can be gained by installing BPM dashboards. Using replay and analytics solutions will help insurers identify and amend bottlenecks and broken processes.

BACK-OFFICE BENEFITS

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IN CHOOSING A CUSTOMER EXPERIENCE OPTIMISATION TOOL, INSURERS SHOULD LOOK FOR A SOLUTION THAT CAN HANDLE THE EVER GROWING AMOUNT OF TOUCH-POINTS AND DATA INVOLVED IN CUSTOMER

JOURNEYS. KEY FACTORS TO CONSIDER IN CHOOSING A TOOL INCLUDE:

Armed with the right strategy, organisation, and analytical tools, insurers will be able to reinvent their businesses, future-proof their operations, and flourish in the ever-changing digital economy

as it continues to evolve.

Openness (can be used as digital hubs supporting bi-directional data flows to import and export of data).

Ability to compress high volumes of data efficiently.

Ability to easily search and retrieve data.

Ability to easily create reports based on free text.

Ability to accommodate content changes in real-time.

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Because the customer experience is at the heart of digital transformation, user ex-periences must be optimised to yield the best results. As McKinsey & Co. reports, insur-ers can use digital tools to see which user in-teractions are frustrating for policyholders or insurance shoppers, and where an improved experience will have the most impact.11 Ad-dressing suboptimal performance in this way, says McKinsey, can lead to dramatic increases in growth.

Besides customer interfaces, internal user and partner interfaces must be optimised to achieve the best results. A number of key user experience factors must be optimised, including ease of use, performance, visual appeal, and overall enjoyment of the experience.

Fortunately, digital customer experience op-timisation solutions are available from com-panies like Glassbox. These solutions will en-able insurers to capture user sessions and

pinpoint design flaws, bottlenecks, and dif-ficulties users are having with an interface.

The best interface optimisation tools enable or-ganizations to record, automatically index, re-play, and analyse every web and mobile app ses-sions in real time—including every click, tap, and swipe—to understand what does and doesn’t work. Designers can see the paths users are tak-ing and understand why abandonment is occur-ring at any particular points.

TESTING IS CRITICAL TO SUCCESS

11 Property Casualty 360, “The story of compliance in the insurance industry: modern regulation,” John Sarich, June 30, 2016.

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Digital space. Conquered.