Digitalization is everywhere, including in the insurance sector. It is an important development for insurers and distributors, as the digitalization of customer contact and internal processes contributes to increasing customer satisfaction and saving costs on the performance of internal processes. In the past few years, insurers, service providers, and proxies alike have invested in the development of online quotation, acceptance, and claim processes. In practice, however, having a digital environment doesn’t necessarily mean the customer or intermediary uses it.
The digital channel and Straight-Through-Processing (STP) are not yet the standard for a variety of reasons – customers are accustomed to the usual, analog process. They have little experience with, for example, submitting a claim or surrender request, and they are uncertain about it. People want to communicate with their insurer in a pleasant way rather than engage in business-like and transactional reporting. It is also necessary to build quite some emotional intelligence into a process to eliminate the need for human contact in the event of a claim.
To allow customers and intermediaries to increasingly arrange their own insurance matters online, we should understand the complexity of human behavior. Why do they make certain (financial) decisions? What impedes them from finding the online channel and successfully completing a process there? What emotions does a customer feel at the moment of injury (agitation, irritation, anger)? What affects their behavior in terms of emotions, motivation, attitudes, beliefs, perception, or the interaction with others? Based on this knowledge, customer communication and processes can be adapted to achieve a higher acceptance rate of digital processes. Ultimately, this results in happier customers, because they are served in a personal, relevant manner.
The interplay of three factors determines the extent to which customers are able to find and use the online channel:
- Improved customer journey
- Behavior within the organization
- Data & technology
1) Improved customer journey
Many of the barriers customers experience to using the online channel can be eliminated if we delve into the underlying cause. By applying insights from the various behavioral sciences, we can respond to the conscious and the rational as well as map out a customer’s irrational behavior. For example, people disproportionately place higher value on their own possessions, solely because these are their property (endowment effect). Therefore, a customer might be insufficiently satisfied with full financial compensation.
We should focus on encouraging and rewarding the behavior we wish to see – for example, by offering an exceptionally good customer journey. When it comes to this, most of us agree that there’s still a lot to be gained in the insurance sector. Incidentally, who said interactions with your insurer should be emotionless and incomprehensible? Why does a letter announcing the payment of a life insurance claim only contain a request to provide information? Why not have confetti pop out, or use another means to show it’s a celebratory moment? The amount to be paid out is often a lot bigger than what most of us will ever win in a lottery. Simple lessons can be learned from companies that take their customer journey very seriously and therefore ensure it is as pleasant as possible. If ordering a vacuum cleaner online can be turned into a small celebratory event, we surely can create more experience and interaction around an expiration or claim process, can’t we?
2) Behavior within the organization
It is not just the customer’s behavior that should be changed to realize a shift to digital processes. Employees, too, need to be taken along on this journey. The organization should travel down this digital road from start to finish. It’s necessary for employees to embrace and encourage digital processes and interaction, actively contributing to the offline-to-online shift of work. Here, we can use techniques from behavioral economics as well. Research shows that people want to maintain the status quo, regardless of whether the change would produce results which would be desirable or better from a rational point of view. The choice architecture should be designed in a way that faciliates the choice for the new option. Examples include a form of gamification or a default option to actively encourage the desired behavior while retaining the positive motivation of employees. There are practical examples of companies that have established a digital environment but whose payback potential has been destroyed due to its employees’ strong belief that an offline process is actually better than an online version. Several interests and beliefs are at play in the background, either consciously or unconsciously (justification of one’s own role in the process and a preference for direct, personal contact, but also employment).
3) Data & technology
Data and technology are the main prerequisites for creating a seamless and measurable digital customer journey. It is important that the (online) process goes smoothly and offers room to make adjustments based on data-driven insights into the behavior of customers and intermediaries gained during the customer journey. Not only does the online process need to exist, it should also generate the data required to make adjustments.
Having these three factors work together intensively ensures digital processes can demonstrate their full potential and insurers and other chain parties can realize a much more positive experience of their services. This results in higher customer satisfaction and lower operational costs, and it provides valuable insights into the customer population.
In the past three years, foreign insurers have managed to increase their premium volume to more than 10% of the Dutch non-life market, according to a study conducted by IG&H. More and more foreign risk bearers enter the Dutch insurance market without reporting to DNB, helped by a mismatch between customer demand and offer, rising premiums, harmonizing legislation, and consultants who professionalize.
This paper maps out the drivers, scope and impact for this development.
If you want to read the full paper in Dutch, please find it here.