6 Ways Customer-Centricity Can Give Insurers a Competitive Advantage According to Industry Experts
How much does customer experience influence the insurance market? We’ve gathered the opinion of various experts and data from research on the importance and impact of customer centricity for insurers.
The insurance industry is currently facing a paradigm shift. The emergence of disruptive digital innovations has given consumers more choices and information about their insurance options, while the increasing market concentration leaves insurers with less pricing power.
With this in mind, customer centricity should be the main objective for insurers to gain a competitive advantage.
In this article, we round up opinions from various experts and findings from research papers that proves why it’s important for insurers to provide a customer centric experience across the entire value chain.
#1 Customized Packages to Increase Customer Satisfaction
In the past, insurance companies would create packages for the average user based on estimated calculations. The problem with this approach is that a significant number of customers wouldn’t fall into the average bracket. This leaves many customers frustrated at the high premiums they pay despite hardly utilising the package they’re insured for.
Usage-based insurance (UBI) transforms this approach by putting the customer’s needs at the centre of the experience. By leveraging artificial intelligence (AI) to analyse data collected from wearables, social media, and other IoT solutions, insurers can offer customised and tailored packages to meet the client's needs or reward their behaviour.
For example, insurers can offer discounts or incentives for drivers who drive less or drive safer. Similarly, those who exercise regularly or achieve certain health milestones can enjoy rewards or lower premiums.
By leveraging AI to create customer-centric packages, insurers gain a competitive intelligence that helps them to stand out from other providers and increase customer satisfaction.
#2 Satisfied Customers Become Loyal Customers & Referrers
“Putting the customer at the centre of the organization (customer centricity) is a crucial approach for the insurance management, as satisfied customers are the ones who create value for the company (they remain with you, they refer the company to their friends and families and they are usually prepared to buy new products).”
~ “The Need to Monitor Customer Loyalty and Business Risk in the European Insurance Industry”, The Geneva Papers on Risk and Insurance - Issues and Practice, Volume 33 (2008)
It's common knowledge that satisfied customers are the cornerstone of any successful business. Those satisfied with their insurance companies are less likely to switch over to another insurance company and more likely to renew packages, sign up for additional packages, and recommend the insurance company to their friends and family.
According to a 2008 National Auto Insurance Study:
- 59% of highly satisfied customers are less likely to switch to a competitor offering a lower-price package compared to 9% of less satisfied customers.
- 90% of highly satisfied customers said they will “definitely renew” their policies compared to 14% of less satisfied customers.
- 90% of highly satisfied customers are more likely to recommend their insurance company to friends and family compared to 9% of less satisfied customers.
#3 Customers Value a Customer-Centric Digital Experience
Compared to other industries, the insurance market is a latecomer to digitization. This is largely due to the lack of specialised solutions customised specifically for the insurance market. All of this changed when insurtech transformed the industry.
This means today’s consumers have become accustomed to the speed and customization that digitisation has delivered from other industries. This doesn’t just raise the bar of customer expectations for the insurance market, but it also makes it nearly impossible for insurers to pull the wool over the customer’s eyes.
For example, slapping on a digital veneer that allows customers to submit for claims via an app or website, yet still requiring analog processes that require manual phone calls or follow ups will be a red flag for the customer.
Customers will notice how claims processing is much slower than it needs to be compared to the services they get from other industries. This can break the trust customers have with their insurer, making them less likely to stay loyal.
#4 Integrating Insurance into Multiple Aspects of Customer’s Daily Lives
“Successful insurers will create an ecosystem that seamlessly integrates with partners. Some firms have already created an ecosystem manager role.”
~ Carlos Rodriguez Garcia Head of L&H Innovation, Cooperation Models, Underwriting and Claims,Southern Europe and Latin America, Munich RE, Spain
Insurtech has become indispensable for forward-thinking insurers who recognise the importance of customising the insurance experience to fit multiple aspects of their customer’s daily lives. Integrating with multiple partners across various industries is critical to provide this customer-centric customization.
For example, partnering with a travel airline or e-hailing service can allow insurers to offer microinsurance packages for both long-distance travel and short-distance commuting. A partnership with wearables can lead to customised health insurance packages with incentivised premium discounts and rewards. While another partnership with nurseries can offer customers incentives for child health insurance integrated with child education plans, where funds that are unclaimed can be converted into a college fund when the child turns 18.
By partnering with multiple partners to create a customer-centric ecosystem, insurers will develop a holistic presence in the daily lives of their customers. This will shift their relationship with customers from being an isolated bubble to being a life partner in almost every aspect of their life.
#5 Customers Want Seamless Communication
Nothing frustrates customers more than not getting the service or answers they need, when they need it. This is why communication is a critical component of any customer-centric experience.
Seamless communication is not restricted to customer service. It also includes how easy it is for customers to find the information they need from your communication channels, such as your website, social media, or app.
Even if you had the best array of customized product offers, if your customers have to sift through pages of documents to understand the basics of what they’re getting, then this isn’t a great experience.
Unsatisfactory communication can even break a customer’s trust. For example, a contract may have so much fine print that it makes it difficult for customers to make a successful claim. According to Sanfoka Insurance Brokers, “claims repudiation [is] reported to be the source of the majority of customer complaints in the insurance industry.”
Thus, communication that gives customers false assumptions about being able to make a claim will quickly break their trust.
#6 Customer Centricity is a Key Driver of Insurer’s Growth
If we had to summarise one sentence that pulls together all the different ways a customer-centric approach can benefit insurers, it’s this: customer centricity will drive business growth.
This applies to any industry. Customers are the most important stakeholder in any business because they are the one who provides the revenue for firms. If companies want to be successful in today's world, they need to focus on pleasing the customer.
Customer centricity should not be confused with the mantra, “the customer is always right”. This mantra expects business to bend over backwards for even the most unreasonable customer. Trying to do this will place a lot of stress and pressure on your employees that will eventually lead to burnout, low retention rates, and slow business growth.
Rather, customer centricity is about developing a relationship of mutual respect, where products, services, and communication are tailored to giving customers the best insurance experience that meets their personal needs.
How Insurers Can Embrace a Customer-Centric Approach
The first prerequisite to a customer-centric approach is the right mindset. Insurers need to shift from, “How can I make customers buy my services?” to “How can I provide an experience that solves the customers problem?”
Making this shift requires a deep understanding of the customer. To do this, insurers could leverage traditional research methods such as surveying customers, conducting interviews, or implementing focus groups.
For deeper insights and faster impact, tapping into insurtech and the numerous possibilities it offers can provide insurers with the customer data they need to provide an exceptional, end-to-end customer-centric experience.
About Cloud Insurance
Cloud Insurance is a seamless SaaS solution made by insurance experts for insurers since 2016. We feature all the aspects of the daily work of insurance providers, and help to reduce time on managing policies, claims, financials, and reports through APIs, AI, and rule-based technology. Learn more about us here>>.