By Graham Newman, European Product Marketing Manager, FINEOS
This is my second post on The Insurance Network’s 6th Annual Congress in London on the 28th of November whose theme was “Driving Profitable Growth in Turbulent Times”.
During the second panel discussion I attended we explored the themes of standardisation versus bespoke and profitability and efficiency in the commercial sector. An interesting theme emerged early on as to which strategies would result in the best improvement. Reference was made to the highly successful British cycling team and how their coach’s strategy was to take a reasonably good team who hadn’t won many trophies and by making small improvements to many different elements of their set-up they created the world’s top cycling team. So the analogy was drawn with insurers and the question inevitably asked, “Should insurers prioritise their list of needs and focus solely on the top one or two – or disregard the ranking of needs and ensure that all of them are advanced, even if only a little?” This encouraged some interesting discussion but I did not feel we reached a consensus. If anyone out there has any experience of the success or otherwise of the differing strategies I’d be delighted to hear from you.
When looking at the mid-market commercial sector the point was made and well received that retention of existing clients is a highly important and oft-overlooked element in profitability. The point was made that whereas everyone has a sales strategy a quick show of hands from the delegates revealed that barely one quarter of insurers have a coherent retention strategy. Not, perhaps, a scientific method of appraisal but revealing nonetheless.
The focus is, quite rightly, on improved customer service. Back in the mid-90s working on low-volume-high-value inbound call centre business in the life and investments market I was quoting a figure of 7:1 in terms of how much more it cost to acquire a new customer than it did to retain an existing one. Recent research from Cap Gemini shows that this ratio still holds, pretty much across the insurance industry. A bad claims experience drives clients to competitors, a dynamic that is simply unaffordable. It’s so much easier and cheaper now to switch, you do not want to be encouraging such behaviour.
It seems that the practice of “exit interviews” is either not widely followed or, when it is done superficially does not reveal the truth. Most commercial clients will cite price as the reason for moving to an alternative insurer, but dig a little closer and a poor claims experience or other dissatisfaction with service most often underlies the defection. The customer will say they had a better offer, one they could not refuse, and they will say this simply because they have built up a good relationship with the broker or insurer’s representative and don’t want to hurt their feelings by telling them the bad news that their company has let them down or annoyed them in some way.
Excellent customer service is a component of the insurer’s persona that they must strive to achieve; small losses have a tendency to add up to big losses. Insurers should have a clear strategy for creating a client experience that is consistent with what their target clients actually want and value. Remember also that there is no such thing as “best practice”, only “better practice”. Once you start thinking that what you provide is best practice then there is no incentive to improve on it.
In the plenary panel discussion that closed the day we looked at the changing dynamics between insurers, brokers and customers. The point was made early on that there were a huge range of pressures affecting the market: interest rates so low that money is no longer being made on invested capital, Solvency II, the Bribery Act, debt. It was thought that disintermediation is not really having a huge impact on commercial lines, at least not yet and brokers remain dominant with about 80% of the market reliant on them. The largest influences being Solvency II and catastrophes. Several elements were mentioned as being critical to effective strategies, among the most prominent being specialisation and the battle for distribution, and also effective use of reinsurance capital. I was very glad to see the much-talked of issue of talent retention being raised and – obviously close to my heart – efficient use of the right technology.
The rise of Price Comparison Websites – PCWs – was brought up and how they are now dominating personal lines. In the morning session I was chairing one insurer noted that each day they process 500,000 internet quotes involving over 900,000 premium calculations. As I doubt that they are actually selling 500,000 new policies each day that is a lot of activity to get the sales that do happen. Apparently over 70% of consumers use the internet to find insurance and many will use it to try several variations on their quotations – another area where the industry needs to be alert for potential fraud.
The point was quite strongly made that in a high quality service environment both sides should win – customers get better levels of service and insurers get higher retention rates and better conversions.
I leave you with one final comment from the panel in the final session with which all present seemed to agree – paying valid claims quickly and without hassle remains the way the industry is judged.
