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No one wakes up in the morning and says ‘Today is a good day to buy insurance’. And even if someone did buy an insurance product that day, he or she would probably not enthuse about it to friends in the evening. So while most everyone within and outside the industry is aware of this, the real question is: Why is this so, and what can we do about it? Steffen Krotsch, head of global sales to Allianz Insurance Entities in Allianz Partners SAS, shares with us his thoughts. 

Why is this so – 4 reasons:

  1. High product complexity: during the purchasing process, potential customers do not want to be confronted with too many product options and a wide range of advantages so  disadvantages. At times, even trained insurance brokers and agents cannot master the entire product spectrum. As a result, they focus on selling a few product variants instead.
  2. Low perceived value and slow value realization: the concept ‘speed to value’ is when customers concretely ‘feel’ the value of a purchased good or service immediately following their purchase, which makes them very happy, even euphoric, about their decision. Think about how you feel when you purchase something and take it home right away vs. being told the product needs to be ordered and cannot be delivered for two weeks. Traditional insurance products usually carry very ‘low speed to value’ because their benefits (an eventual cash reimbursement) are dependent on future events which may or may not happen. Even in the case of a customer claim, it sometimes takes time to deliver the promised compensation.
  3.  High transaction complexity: in the case of a claim or damage, customers often dread having to deal with insurance companies. This is especially disconcerting as insurance companies are supposed to be ‘the good guys’ – the ones that are there to help, support and solve issues in times of need. The problem often stems from overly complex, non-customer-centric processes, which require that customers complete multiple tasks on their own, and/or leave them in the dark as to the status of their claim. As a result, customers are often unhappy just because their expectations are not managed.
  4. Low perceived trust and certainty that value can be fully realized. Customers have a deeply rooted perception that when they file a claim, they might not recover the full compensation amount for fixing the damage. Sometimes this perception is paired with a ‘savings account’ logic: ‘I have paid so much for my insurance over the last several years, that I deserve to get at least this money back’.

Often, this trust gap is caused by overly-complex communication with the customer about the coverage, the specific conditions and exclusions, etc. combined with an insufficient customer-centric claims process whereby customers are not adequately or proactively informed as to the status of their claim.

So, this sounds familiar, right? There’s nothing new here – in fact this knowledge has been around for decades, and as you read these words, product and process designers are probably hard at work over trying to improve these customer journeys.  But what is really needed is a more holistic approach including product setup and positioning, marketing and customer interaction design – not just a few improvements to the process manuals.

What can we do about it – 4 ways to customer-centric insurance products:

  1. Reduce product complexity: ‘Less is more’. This is the most challenging realisation because it means ‘killing’ certain products and variants, and perhaps also losing some revenue. The efforts, however, are worthwhile. A simple, modular product offer is easy to communicate and customers, brokers and agents can easily understand it. This “less is more” brings some fun and satisfaction back into the sales conversation. Take Apple vs. Samsung, for example. Which brand’s product portfolio do you think customers (both Apple and Samsung users) are more informed about and can engage easier into a purchase, provided they have the money?
  2. Strive for ‘speed to value’ in sales and claims. This can be as simple as offering a welcome gift voucher or an electronic wallet card associated with the policy as soon as the policy is sold. Speed here is critical. During the policy’s lifetime ‘speed to value’ can be realized with additional services based on different triggers from the primary policy. For instance, in several life insurance policy markets, we include rich support services for both positive and negative life changing events. The ultimate speed to value in claims is achieved when pay-outs are instantaneous and automatic. We already do this for a few travel-related events such as train or flight delays. In these cases customer satisfaction and purchase propensity is very high. However, pay-outs do not need to be instantaneous all the time. If customer communication at the start of the claims process is clear and straightforward, and customers receive regular status updates and assurance that the problem will be taken care of and the money will be paid, they’re happy!
  3. Embed services to improve the product experience and ease the customer’s ‘pain points’.  Consider a ‘Home Repair’ product that promises to quickly repair major and minor damages to your home by a vetted, quality craftsman without the need to advance cash. This product is easy to explain, everyone needs it at some point in time, and speed to value is fast. We are already offering this product in certain markets; it comprises both service and risk elements, but the service, not the insurance, is emphasized – and customers love it! This product provides another benefit; when a service (or claim) is requested, we tell our customers that a craftsman will be at their home on a specific day at a specific time to assess the damage and make the repairs, and that we will update them per SMS if there are any changes. All the customer pain points around organizing the damage repair and payment are transferred to the insurance company. The issue of trust regarding full reimbursement is a non-issue because there is no reimbursement transaction. By the way, this is not only applicable to home insurance, but also for motor, health, accident/ disability and life insurance!
  4. Increase the number of customer touchpoints: it is a fact that frequent customer interaction drives brand satisfaction. If you do not interact with customers they will tend to forget not only your brand but also the value your product provides.  Services such as regular maintenance of the insured asset, help and support for certain life circumstances, or direct access to provider networks (e.g. craftsmen, garages, medical specialists) embedded in the main policy or into riders can help bridge this time gap and generate more touchpoints. Touchpoints can also help with data collection. They help to improve understanding of the customer’s specific situation and offer additional products based on these insights. Beyond embedded services, it’s possible to generate touchpoints by linking the products to ecosystems with high customer interaction frequencies such as retail or banking (check out Allianz Prime as an example for this). Obviously, working in ecosystem-mode is very familiar to us as it requires a partnering and often a B2B2C sales approach.

It is clear that none of the four principles involves ‘core insurance’ processes; instead they focus products and processes on the customer needs. This is both a relief, because it’s easier to do this than to change the core, and a concern, because there are many companies out there who excel in customer-centric product and process design and might like to start doing it for insurance. But let’s stay optimistic: by applying the four principles, it’s far more likely that your customers will wake up one morning and say ‘Today is a good day to buy this cool damage repair product’ and then in the evening spread the good news to their friends!

 

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