Three Challenges Putting Your Customer-Experience Strategy at Risk

WHITE PAPER

Three Challenges Putting Your Customer-Experience Strategy at Risk

October 31, 2018

Executive Summary

Life insurance companies are feeling the pressure of a consumer-driven market. The number of new policies being written is dropping and insurers lag in creating new revenue from existing policyholders. In an effort to catch up, many life insurers have committed to operating as digital entities and improving their customer experience. When it comes to new tools focused on customer experience, it is common to find carriers at the very beginning of their plans, which often take several years to be put in place.

When it comes to new tools focused on customer experience, it is common to find carriers at the very beginning of their plans, which often take several years to be put in place.

We are now firmly in the era of digital- and consumer-driven markets. It is a foregone conclusion that carriers must shift to digital to remain relevant in today’s market. Airlines, personal banking, and other long-standing industries have been turned upside down by the digital- and consumer-driven revolution. The biggest risks for insurers today: 

  1. Taking too long to execute on a strategy 
  2. Withholding strategies in departmental silos 
  3. Forgetting about the policyholder

For a traditionally risk-adverse industry, life insurers are facing greater risk with each passing month while they remain on the sidelines.

For a traditionally risk-adverse industry, life insurers are facing greater risk with each passing month while they remain on the sidelines. The topics covered in this whitepaper are: how life insurers can cut down on their risks and improve their internal development cycles; how they mine and leverage data; how to improve brand affinity and generate more revenue, while lowering operational and acquisition costs; how life insurers can remain relevant with a new market segment that demands more.

The answer may lie in tackling smaller initiatives through a “test-and-learn” approach, or pilot program. 

“Life insurers often shoot for business alignment within multiple departments and hold off on full implementation until they find that ‘the stars align’ and everybody is ready,” says Jon Arnold, Head of Product at Life.io. “Then they may reach the conclusion that they can’t schedule any new development for years. But pilot programs can be run in windows as little as 90 days that can prove tremendous value and advance full implementation in much less time.” 

Life insurers must be willing to change their behaviors in order to successfully adopt and succeed in transforming their business to a digitally-driven and consumer-focused product. 

Introduction

For life insurers, maintaining the current strategy of selling new policies while not meeting the changing needs of policyholders has resulted in a 30-year downward revenue trend. According to the McKinsey white paper, Harnessing the Power of Digital in Life Insurance, sales of new policies have fallen from 17 million per year in the 1980s to about 10 million today. Additionally, most insurers are struggling to benefit from their existing policyholders, product penetrations averages 1.1 policies per policyholder.

Life insurance companies have been talking about “getting into the digital space” for quite some time. Some have made progress, but as a whole, the industry lags behind other insurance products in implementing solutions. While carriers that sell and service other products have adjusted to make it simpler for consumers to buy products online, and build better relationships with their representatives, life insurance companies mostly remain rear-facing in the same space.

Through industry research and interviews, consistent themes have emerged; carriers need to implement digital solutions to accommodate new buying patterns and mine information from existing policyholders. They must gather data that helps them upsell and cross sell, and enter online spaces where newer consumers— the ones who are seeing less value in life insurance purchases—can feel comfortable buying. 

carriers need to implement digital solutions to accommodate new buying patterns and mine information from existing policyholders. They must gather data that helps them upsell and cross sell, and enter online spaces where newer consumers

But carriers run up against traditional business rules that lengthen the path of innovation all too often. The holdup usually revolves around the effort to ensure new tools and methods fit across an entire enterprise. That can extend the development timeline for such initiatives to anywhere between 18 months and 5 years, before the technology is first accepted into the business fold.

Take Too Long to Execute a Strategy

How can solutions that cut down on time-to-market from as long as five years to as little as nine months, be implemented? The answers may be simple—get the right decision makers into the room with the right mix of vendors, and keep the initiative narrow and focused. Life insurers must be open to small scale pilots to test, learn, and adapt their solution to meet their target markets needs. 

“People leading a customer-engagement project may need to overcome the skepticism that ‘any investment can’t be designated as a solution for a single department,’ says Jon Arnold, Head of Product, Life.io. “Gathering influential decision makers who can witness the success of an initiative, and advocate for its expansion across the entire enterprise, can overcome such objections.”

New tools have the ability to thrust life-insurance carriers into a real-time view of the world. These tools can capture information through multiple touch points that are welcomed by policyholders and used proactively to help them receive more value from their insurer on a daily and weekly basis. 

“The goal of any solution needs to be—how can carriers provide value back to policyholders,” 

“The goal of any solution needs to be—how can carriers provide value back to policyholders,” says Jonathan Bobalik, Vice President of Sapiens, a global provider of software solutions. “It needs to be done on a day-by-day, week-by-week basis, so they feel like it’s worth their investment and time to obtain life insurance. Any solution must enable carriers to stay responsive. That way current and potential customers can acquire new and existing products, and increase coverage as life events unfold and financial needs change over the course of a lifetime.

“One of the best things about implementing new customer-engagement solutions, is that organizations don’t always have to implement a single tool across an entire enterprise at the same time,” Bobalik says. “Pilot programs using customer-engagement solutions can help organizations get a leg up on improving their operations while staying ahead of their competitors.”

Additionally, by gathering early data points and keeping key influencers informed on successes, insurers may see a bigger shift in senior leadership buy-in. A telling statistic, as measured by research group Strategy Meets Action (“SMA”), finds that among companies with a commitment to adopting innovation and/or emerging technologies, only five percent of those initiatives are driven by senior leadership. That may indicate a core problem—are the right people hearing about tools and solutions that can advance innovation and business opportunities, or are they simply delegating it to others?

Withholding Strategies in Departmental Silos

Life insurers are typically organized into silos—technology, products, and marketing—and adhere to processes that were put in place over the course of decades. This structure presents a number of challenges: 

  1. Projects that are naturally cross-functional are difficult to execute effectively. 
  2. Breaking through departmental barriers early enough in a buying cycle to keep information and strategies from being impacted by new people or leaders late in the buying cycle, often fails. 
  3. These divisions create a condition where a carrier may not see the data that accompanies a person as he/she becomes, and remains, a policyholder. 
  4. Most carriers’ have made cases for technology investments based on expense reduction, but many technology programs do not deliver the expected benefit because the resulting tools are not coupled with the organization’s changes to roles and responsibilities.

One problem among companies that are committed to adopting innovation and/or emerging technologies is that members of senior leadership drive only five percent of new tech initiatives. Unfortunately, shifting that responsibility may have unintended consequences.

senior leadership drive only five percent of new tech initiatives. Unfortunately, shifting that responsibility may have unintended consequences.

“Increasingly,” says Bobalik, “Senior leaders, who have vision into organizational strategy, push decision making down their chain of command to team members who only see their department’s level of strategy. By default, this means that their scope of assessment often focuses only on their area of responsibility.”

The result of such an alignment is that several departments can be working on a digital strategy in parallel, fighting for funds, and driving a lot of redundant work.

To break this trend, insurers must realize how cross functional a true digital strategy is. Gathering influencers across departments and product lines is a best practice that few insurers employ when evaluating early solutions. This approach can save time, improve project visibility, better socialize success stories, and funding allocation. 

Forgetting about the Policyholder

“We’ve been tracking business drivers that influence where carriers designate funds for in-house initiatives,” says Mark Breading, an insurance strategic advisor and industry analyst with SMA, who was named one of the top 50 influencers in the life insurance industry by Insurtech News. “As recently as just five years ago, spending on projects that meet customer demand was not even in the top-five concerns. Now, what agents and producers are experiencing with customer engagement is helping to influence senior leadership and strategies. We have to focus on customer engagement. That’s what has to drive us.”

Whether building a tool from scratch or choosing a vendor to deliver one, it’s best to strive for a solution that provides value to your policyholders, establishes a relationship with them, understands their online habits, and in what stage of life they reside. In order to accomplish this, carriers must gather, integrate, and leverage real–time data with an experience that is truly engaging and personal. 

A system should exist to break the cycle of sparse interaction with policyholders; it should be the fulcrum of building relationships, fortified by effective data management that benefits policyholders and carriers. 

In a group case, the focus should be on the employees to drive maximum value for the employer, broker, and insurer. In a broker market, the policyholder should be the forefront of the digital strategy to create value for agents and the insurer. Lastly, in the direct space, the emphasis is obvious and carriers must put all of their energy into not just attracting and converting a policyholder, but building and establishing a relationship to derive value for a lifetime.

A customer-engagement tool should have the capability of: 

  • Working with actuaries and underwriters, with a goal of understanding products and a customer base. 
  • Determining opportunities and triggers to integrate with policy-administration systems. 
  • Creating opportunities to keep customers happy and offer the correct product to the person at the correct time. 
  • Being able to back up an offer with real supporting information. 
  • Create brand awareness and loyalty.

All of this should be thought about from the perspective of the policyholder, not from the view of a department within an insurer.

Conclusion

Life insurers have much work to do to catch up in the digital space. Most will need to fully embrace robust digital strategies and put the changing needs of their policyholders first, especially those in a younger demographic who are comfortable with researching and purchasing policies online.

Life insurers have much work to do to catch up in the digital space. Most will need to fully embrace robust digital strategies and put the changing needs of their policyholders first, especially those in a younger demographic who are comfortable with researching and purchasing policies online.

Carriers will need to: 

  • Find ways to cut down on timelines for implementation of digital strategies. 
  • Work across departmental lines to employ effective customer- engagement tools. 
  • Consider pilot programs that demonstrate value on a smaller scale that can be replicated across the enterprise. 

Life-insurance carriers can gain a leg up on their competitors by performing due diligence on new customer-engagement systems, whether built from scratch or obtained through a vendor. These effective customer-engagement solutions will leverage their ability to invest in new markets, and mine data from current policyholders to encourage revenue generation. 

effective customer-engagement solutions will leverage their ability to invest in new markets

Carriers large and small can attain success more quickly by implementing a customer-engagement system using pilot programs that have little impact on resources, and measure the system’s success. Pilot programs can speed up an enterprise-wide-implementation timeline by 2-to-3 years and, above all, improve their organization’s health. 

It is time for carriers to become more agile in how they manage a strategy for customer-experience solutions. Those who adopt this shift quickly will reap the benefits of gaining traction in the untapped millennial market, which is rapidly aging into life-event stages that require insurance needs. For those that do not adopt the shift, they stand to feel the impact of shrinking revenue and dissatisfied policyholders who are likely to lapse for a more valuable life insurer.

Three Challenges Putting Your Customer-Experience Strategy at Risk

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