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The Impact of Changing Customer Expectations

Posted By Nick Frankland, Monday, February 4, 2019

from PropertyCasualty360.com

Most people who’ve worked a lifetime in the insurance industry may not see a direct parallel with how Amazon’s aggregator model is reaching into virtually every aspect of consumer life, casting its shadow across an ever-lengthening list of industries, and channeling the direction in which technology is nudging insurance and financial services.

Yet, this is exactly the mindset our industry needs to become aware of and acknowledge, so as to adopt strategies to leapfrog the challenges we face. This means addressing evolving customer expectations by offering comparison pricing and transparency, new products and innovative services.

Further, it’s aspiring to make the customer’s experience truly frictionless, whether through quick delivery of quotes based on a minimum number of questions asked, but powered on the back end by big data; or on the banking side, by being able to speed underwrite a mortgage that’s no less rigorously risk-assessed but with the prospective borrower not having to jump through hoops because through open data, the necessary information on the borrower already exists and doesn’t have to be re-ascertained for the hundredth time. 

While the financial industry is unlikely to have the broad reach into consumers’ lives as sectors such as retail, consumer technology, telecom, entertainment and grocery, the digitization of these other industries have set up an expectation that the financial industry must also quickly move in this direction.

Progress in our industry has been incremental rather than of a disruptive, “Big Bang” nature. Consider for example that in insurance, it’s taken us a couple of decades to get to a more advanced phase of online comparison, to evolve insurance aggregation from clunky to streamlined, from sites that were hard to navigate and finally arriving at apps that are frictionless and consumer-friendly.

But clearly, when you think about Amazon’s recent opening gambit into insurance and healthcare, there’s far more potential to shake things up, well beyond comparison apps. In the past six months, this industry outsider has purchased an InsurTech company in India, announced with two other major employers, Berkshire Hathaway and JPMorgan Chase that it’s  looking for ways to make employee healthcare more affordable, and announced its acquisition of Pillpack. Where next?

How can the industry begin to respond to these developments? First, by recognizing how easily a non-incumbent could steal away its customers. Then by looking at where money can actually be made, and who is powering that shift.

Data is central to digital transformation
 
For our industry to start thinking like an Amazon, it would look first at ways to show their customers that they are valued. Understanding customer pain points, and delivering life-improving solutions to those pain points to as many people as possible, is where the solution lies, and where technology plays a role in solving this primary challenge.

Data is clearly the fuel that will power this endeavor by suggesting consumer-driven solutions. Data is allowing for a new form of transacting based on consumer habits, preferences, demographics and financial wherewithal — in short, their needs — supplanting traditional means of purchasing..

In a larger societal sense, these platforms offer a way to help and empower massive and under-served sectors of the population, for example young millennials and the elderly, giving them access to more choice, more availability of products and services, at a more reasonable price. A relentless pursuit of technological innovation to realize this goal can play a role in replacing retreating social safety nets. 

The role of open data

Between aggregation and comparison shopping and the trend toward the open data models, some patterns are emerging that should start coming into crisp focus for the insurance industry.

With open data, consumers consent to making their financial data available to third parties. In exchange, they expect and demand a seller-as-bidder approach to transactions such as buying insurance and getting mortgages. Empowered consumers can thus gain the advantage by “putting themselves out there” — they can have their pick of the best priced, easiest, and highest value offers in insurance and other financial services.

Simultaneously, we’re seeing a concept that has driven insurance and financial services since its inception doing a 180. Generally, we have relied on making most of our revenue from a few, low-risk customers. Now, we are looking at the more sustainable value proposition of getting a small amount of revenue from masses of customers. Today’s successful organizations understand that the model has to change in order to thrive. 

Disruptors in insurance
 
Innovators from within our industry are also taking slices of our pizza. Consider that there are one-month insurance policies available online. How did this happen? It’s a disruption of the long-held industry standard that the minimum period for a household insurance policy is one year.
 
Now these companies are competing for your customers, who want insurance for a month, and making it possible to provide coverage for a policy period previously thought not worth the underwriting. Compare this to short term contracts for mobile phone or utility bills… the customer’s mantra seems to be: “Provide me only what I need and exactly when I need it — no more and no less.”

We have no choice but to engage in this manner. Insurance’s legacy model of minimal interaction with customers — think of life insurers interacting with their policyholders only at the time of underwriting, and then with their families after their death — is no longer relevant, in light of current consumer demands for convenience, transparency and interaction.

Our industry needs to start thinking like those competitors that have launched themselves headlong at our world with their digital models. After all, we have the key advantage: we know insurance. Now, we simply have to learn to reinvent the industry around the way consumers want to interact, before the industry is reinvented for us. 

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