Customer acquisition and retention primarily fall on sales and marketing teams. But every department within an insurance company has a role to play in these activities.
Claims handling is a great example. Any insurer's performance at this emotionally charged time is their litmus test. It can determine whether customers renew their policy and recommend the firm to others.
The ‘Deliveroo effect’
The ‘Deliveroo effect’ has put insurers under pressure to ensure claims experiences are fast, convenient, accurate and transparent. With regular updates on how the case is progressing.
Optimising the claims experience helps to drive long-term customer engagement and a high Net Promoter Score (NPS). NPS has been on top of many insurers’ minds for a while now.
Customer acquisition is expensive because of the high marketing cost and price comparison site. Furthermore, the new FCA rules, designed to protect people from the so-called ‘loyalty penalty’, reduce firms’ incentive to pursue new customers relentlessly.
Instead, it makes sense to identify and retain the most valuable customer segments. Those people are less likely to claim, commit fraud or miss payments. And encourage additional spending by cross-selling and upselling products.
The key to success
Service is a key differentiator, and insurtech companies use analytics, artificial intelligence (AI) and other advanced technologies to transform claims. As far back as 2016, US-based Lemonade appeared to have broken the record for the fastest time to resolve a claim (just three seconds). Customers, seeing what’s possible not just in insurtech, but in banking, retail and other sectors, are adjusting their expectations accordingly.
Speed isn’t everything. As one commentator pointed out earlier this year, growth among the disruptors is slowing, and losses have increased faster. He says that traditional insurers are now better-placed to compete with the challengers ‘by combining the latest technology with a deep understanding and experience of underwriting [risks].’
This is an outlook we share. The mature firms have more data, and by taking the same approach to innovation as the challengers, they’re in a strong position to grow their customer base.
There are still several barriers to overcome, however. Large insurers might have the veneer of being digital, but legacy systems often beset them. And while they might succeed in resolving cases quickly and fairly, an inefficient claims process is costly to them.
How to optimise the claims experience
By applying automation, AI, machine learning and advanced analytics to first and third-party data, claims teams can optimise the claims experience in the following ways:
- Be more responsive: In a fast-moving world, insurers need to respond quickly to events like Covid-19 or the cost-of-living crisis, leading to a rise in fraudulent or inflated claims. Detecting fraudulent activity earlier and reducing false positives can help make sure genuine claims are processed without causing customer distress.
- Improve operational efficiency: Automation speeds up straightforward claims, helping to reduce human error and costs. It allows staffing resources to concentrate on complex cases and value-added activities such as monitoring trends. Hyperautomation – the convergence of digital operating systems, workflows, robotic process automation (RPA), and artificial intelligence (AI), to deliver high-value autonomous processes through intelligent decisions – is set to improve efficiency and productivity even further. Read more here.
- Deliver value for customers – and insurers: A fast and convenient claims process is a point of difference for insurers, something that will encourage people to stay, spend more and talk positively about the firm. Brand advocates like this can add considerable value beyond what they pay for their policies.
- Reduce claims expenses: Using data to anticipate events that could lead to more claims proactively allows you to take appropriate steps beforehand – for example advising customers on how to mitigate the impact of adverse weather. A long-standing relationship based on regular but targeted communications is a valuable way to prevent damage in the first place and cut down claims costs.
Change is inevitable; growth is optional
Many insurers today find themselves at a tipping point. They need to remain relevant and profitable in the face of growing competition, not just from tech start-ups but car manufacturers like Volvo and Tesla.
As cars become more competent, manufacturers can use their cloud capabilities and data from telematics boxes, cameras and other linked devices to enhance customer experiences. Furthermore, since electric and hybrid cars require more specialist parts, the days of going to a local garage for vehicle repairs might soon be a thing of the past. Tesla CEO Elon Musk has pledged to turn claims from a ‘nightmare’ to a ‘dream’ by ‘fixing’ the car quickly after an accident.
In the future, manufacturers will source parts through their supply chain instead of selling policies as part of a sale, which should simplify the claims process. Mercedes has gone one step further, agreeing to accept liability when its vehicles crash in semi-autonomous mode.
Finally, lack of trust is another issue across the industry because, as one expert puts it, there are still too many ‘unknowns’ for consumers. Claims are one of the biggest; it’s a leap of faith that the insurer will pay out whenever anyone buys a new policy.
Customers' long-term relationships can be built by empowering claims teams with analytics tools that automate and improve decision-making, ensuring faster, fairer resolutions for everyone and reducing inefficiencies.
Read out more about our insurance analytics software.