By FintechOS · August 04, 2021
7 minute read

Insurance Customer Experience: No Return to the Old Normal

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The pandemic is forcing insurers to digitize. But is the transition permanent? Mark McDonald, Head of Insurtech Strategy at Altus, reveals the answer 

There’s nothing like a crisis to shake things up. And the pandemic gave the insurance sector an almighty shock, as online became the only way to deliver many services.  

But how did the industry respond? And will the trends continue? 

Mark McDonald of Altus, a financial technology consultancy, delivered a remarkable thesis to the ITF, in association with FintechOS. What follows is a whirlwind tour of his presentation. It’s worth noting that the whole speech is available online and worth watching in full.  

Mark McDonald
How many questions does a customer need to answer to get a quote? We see some insurers who have got their questions down to 10, maybe 15 … What they’ve done is embrace data enrichment on their quote journey”  — Mark McDonald, Head of Insurtech Strategy at Altus

Why insurance is rushing to embrace digital  

McDonald started with the forces behind the online digitalisation of financial services. He identified three major factors behind the transformation. 

1) Customer Experience 

Insurance is following a wider trend across multiple sectors, explained McDonald: “Take retail. Amazon was founded in the mid 1990s, shortly after the birth of the internet. Everyone else is a follower in that space. In the UK, Ocado disrupted grocery markets. There is the birth of the cashless society, with the likes of PayPal and Apple Pay throughout our lives. Even travel. We can buy our flights and Airbnb online. It’s a digital lifestyle. So when it comes to insurance, one of the last industries to be digitised, consumers expect the same. This is putting immense pressure on insurers.” 

2) Operational Costs 

Digital processes can be orders of magnitude cheaper than face-to-face or over-the-phone interactions. McDonald: “In insurance, operating costs are a challenge. Particularly with the increasing complexity of systems needed to keep up with the consumer demand for digitisation of existing processes. Even if insurers aren’t redesigning services from the ground up, there is the opportunity to reduce costs and really utilise technology behind the scenes.” 

3) Employee Experience 

Great staff only want to work for the best employers. And that means the companies with the best tech. “By improving the employee experience, insurers can improve engagement amongst existing employees. They can do this with new systems requiring less laborious work. They can also open up their organisation to new sources of talent, particularly relevant as you become more digital and need to tap into other industries.” 

All of this adds up to an irresistible set of incentives for insurers to digitise. Notably, all three exist with or without the added pressure of a pandemic.  

Onerous form-filling eliminated 

Digitalisation in Personal Lines

Source: Altus

Just as compelling are the improvements to the customer journey. McDonald provided a strong set of data and insights, derived from Altus DigitalBar, an industry insight unit founded in 2015.  

This research by Altus shows that six years ago just over three-quarters of insurance Quote & Buy journeys were digitised. This rose to nine out of ten in 2017, and then a step further to 96 per cent by 2019.  

Now for the critical part. How does digital transformation actually improve the customer experience? Altus conducted deep research into the bureaucracy faced by customers. It is clear that it is important to eliminate onerous form-filling: 

“How many questions does a customer need to answer to get a quote? We see some insurers who have got their questions down to 10, maybe 15. Other insurers, like LV= and Hastings, require 60 to 70. Others are typically around 30 to 40.” 

Now the critical issue. How can insurers improve their customer journeys to reach the gold standard of doing this with just 10 questions? After all, being less thorough is not an option.  

“We looked deeper at Admiral Insurance. They offer home insurance, and have been extremely successful with that. What they’ve done is embrace data enrichment on their quote journey. They only ask you 10 key questions, which is your address, type of cover, name, and email address. They couple this with information from external sources to provide a full and valid home quote.” 

Harnessing data to create a faster online customer journey has a couple of added benefits. Pressure is taken off the contact centre – which is both labour intensive and stressful for staff. And nudging customers onto an automated, online service, engages them with the insurer’s technology. This means they are more receptive to complementary technologies which both lower quotes and accelerate claims.  

“We are seeing technologies which allow car owners to record a walk around their car to assess damage via artificial intelligence,” said McDonald. “In flooding and water damage, there is a company founded by Loughborough University alumni I’ve been following for sometime, called Previsico. This offers advanced hyperlocal forecasting for insurers, who can use the data to provide early warning to customers so they can take preventative action.” 

Even simple solutions such as chatbots can contribute to customer wellbeing after a digital transformation: “We’re seeing an uplift in technologies like AI bots and NLP [natural language processing] to enable customers to get the answers they want quickly and efficiently. I recently saw an example of a chatbot underpinned by AI managing a whole complex claim by a customer, and it kept them engaged throughout the process. It uses technology and empathy to keep the customer online.” 

A digital journey also allows insurers to implement third-party technologies across the customer journey. McDonald points to the likes of Shift Insurance, a fraud detection and claims automation insurtech based in Paris, which has raised $220m at a unicorn valuation. Digitally integrated insurers can work with the likes of Shift, or other third party AI fraud providers, to radically improve business performance. Paper-based companies are excluded from the revolution. 

 A glimpse of the future 

The future is tying all of these elements together, to create a single interface able to sell, upsell, and engage, in an automated and streamlined manner. “This means everything from buying insurance on a high value product, through to pay-per-mile car insurance.” 

Thus, it seems impossible to imagine going back to the old ways of doing things. Insurance has too much to gain from accelerating the shift to digital, automated, AI-enhanced services.  

Naturally, insurers want to know how to get there. McDonald has strong advice.  

“The first area of transformation is to improve the way the insurer uses data. It is no good to collect data without knowing why. The value is in interpreting the data and this requires significant investment in the way data and analytics are orchestrated.” 

And he ended with a word of caution. Digitalisation is the future. But there remains a large segment of consumers, and a sub-set of tasks for which automation isn’t quite right.  

“Will we get to where 99 per cent of insurance is sold direct and digitally. Personally I don’t think we want to go that extreme. I think we need consumer choice. Trends will continue, but I think there will always be some journeys, some products, and some customers who will always want to speak face-to-face with brokers. Insurers cannot be blind. They can’t just go down a route of digitising everything. They need to offer the best channel of choice.” 

So no return to the old methods. But a bold new world where consumers get to use the channel they want, with streamlined journey times, supported by AI. The benefits for consumers, and insurers, will be immense. 

The insurance industry has been one of the last to embrace the full potential of these technologies. It is also one of the markets with the most to gain.  

Watch the full presentation and panel discussion of the webinar “Insurance 2022 Onwards: No Old Normal” here. 

 

 

 

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