I have been talking about the customer-centric insurer for a long time now. In my previous blog, I discussed what being a truly customer-centric organization really means. To succeed in today’s insurance industry, it’s imperative to know and understand what the customer requires in order to make appropriate decisions. As consumer expectations rise, insurers are forced to rethink the role the customer takes when creating pricing strategies and making decisions.
Yet, despite the willingness to change, some insurers are still at a loss as to how to adopt a more customer-centric approach. In this blog, I will discuss where insurers need to start their customer-centric journey and how analytics can add tremendous value in this area.
But first a little background:
Managing Customer Relationships is Complex
Customers are increasingly expecting consistency and continuity across all channels and products. Because they have more choices and are more informed than ever before, customers expect to be recognized for the value of their relationships with a financial services provider.
But managing customer relationships is more complex than it used to be. Let’s mention two elements that are contributing to this challenge.
- Unique customer development path
Because each customer has his own customer development path, their product life cycle progression or mode of engagement could be very different with their insurer. Different customers will have different insurance needs under different circumstances. For example, one customer could start a relationship with an insurer by getting car insurance, moving on to home insurance and then maybe pet/travel insurance. For another customer, such as a young student, the path may be completely different whereby they start out with attaining rental insurance and then moving onto health coverage.
- Multiple channels of engagement.
Things get even more complex when considering the multiple channels through which a customer could engage with the company. Different types of customers might choose different types of channels or decide to do business with multiple companies.
So what are the tips?
1) A Change in Mindset is Needed
Understanding customer decisions and behavior is still key to anticipating their needs and exceeding their expectations. However, today it is becoming more challenging as customer portfolios are often made up of multiple policies and at the same time, customers are expecting their insurer to have a holistic view of their portfolio.
For insurers to meet these expectations, they will have to start by switching the way they think in the following two areas:
- Recognize that a customer-centric framework requires a holistic management of the customer relationship across products, channels, and the customer lifecycle. This will require financial services providers to remove the silos that dominate the product-based approach.
- Realize that data and analytics play a prominent role in understanding customer behavior. They will have to learn how to harness the power of analytics to achieve a holistic customer view.
2) Building An Analytical Framework
As part of our work at Earnix, we have built an analytical framework that leads to customer-centric decision making capabilities and can be useful for financial services organizations in dealing with this new reality. The framework includes several key steps that form the building blocks of this framework. As can be seen in the diagram below, these steps include data analysis, behavior models, profitability models and decision-making.
Although the building blocks remain the same for any analytical framework, the degree of sophistication and complexity of the analysis performed within each step could vary between different insurers.
Any analytical framework relies on the availability of reliable data, a modeling framework of customer behavior and a clear definition of the metric of interests. Behavioral models are used to understand the reaction of a segment of customers to any type of change made to either the product or service, while profitability models are used to understand loss cost, operational expenses and customer value. By combining all these elements, the insurer will be able to make more informed decisions regarding the right type of products that should be offered to any particular segment of customers. Ultimately, this will allow a more complete management of customer relationships.
Where does the Customer-Centric Journey Begin?
There are other factors to consider when starting out on this journey that we have not touched on in this blog, such as the expected life time value of the customer/prospect and others; however the following three elements are crucial and important to bear in mind:
- Customer-centric decision-making
Customers are taking center stage and for insurers to prosper, they need to adapt accordingly. Throughout the organization, there has to be a conscious effort to put the customer at the heart of the organizations decision-making process. Using analytical reinforcements to make decisions will strengthen this resolve and bring new opportunities for growth.
- Integrated analytical capabilities
In terms of analytical capabilities, it is essential that insurers are able to analyze the ever growing amounts of data they have at their disposal. Data and analytics should be used at every customer interaction point to improve the overall customer experience. This means no longer relying on spreadsheets or other antiquated tools. Furthermore, insurers must make it a priority to be able to act quickly and scale up or down, as the pace of change continues to accelerate.
- Path to customer-centricity: the time to start is now
Finally, it is crucial to recognize that this is not a one-time effort but a journey. Change takes time and this is just the tip of the iceberg; there is no need to wait until every department is on board to start implementing analytics to improve customer-centric decision-making. It is necessary to start building capabilities that allow incremental moves towards more holistic customer relationships, loyalty management, and insurance product personalization while delivering value to customers in the process.