Insurance Customer Diversity Means Increased Expectations, Opportunities

Denise Garth, Innovation Group

Traditionally, insurers have seen customers as homogenous groups within broad risk categories. Yet today’s customers are far more heterogeneous—and particular. They expect more personalized options. In order for insurers to remain competitive within the industry and appealing to customers, they must strategically identify new and unique products and services, as well as provide the quality experiences customers expect.

Growing Diversity

To determine growth opportunities, insurers need to gain customer insight on the varying heterogeneous segments within existing and new markets. According to 2010 U.S. Census data, the US saw a 43 percent increase in Hispanics between 2000 and 2010, as well as a 43 percent increase in Asians—the fastest-growing race group in the US. This insight highlights the need for personalized, multi-lingual solutions.

Another example is related to the “Net Generation,” or the 88 million offspring produced by 85 million Baby Boomers. Members of the Net Generation are the first to grow up surrounded by digital media, which superimposes their expectations. Going forward, this group will require online, real-time interaction via any device.

Perhaps surprisingly, new services are not always accompanied by demands for cheaper options. Recent research shows that 76 percent of insurance customers are willing to pay more for higher levels of trust, greater access, exchange of information, and more personalized products to meet their specific needs.

Finding the Data

By leveraging customer data through analytics, insurers can find the right information needed to enhance and expand offerings to existing customers in a targeted way. Insurers should review their policy management system to determine if it is customer-centric. Does it manage all relevant customer information, including household data, relationships to other individuals, entities like social media sites and blogs, and transactions? Does it provide a 360° view?

It’s important for systems to capture behavior and preference data about customers to identify potential growth opportunities. Solutions with integrated analytics and built-in insurance-specific key performance indicators (KPIs), such as customer, underwriting, product profitability, retention, market segmentation, service, and customer lifetime value, are essential.

Customer Satisfaction

Despite a continually segmented customer base, one thing remains the same: high expectations for service and satisfaction, regardless of the platform. Customers are less willing to endure old business models that are stagnant and reactive. Instead, they expect a business to be engaging, responsive, proactive, and capable of adding significant value.

To respond, insurers need policy management and underwriting solutions that provide:

• Real-time, web-based portals for quoting, submission, and service;

• Service reminders, renewals, bills, claims updates, notifications or cat alerts would be provided via SMS, phone call, e-mail/social media, or any mobile device;

• Discounts based on a variety of factors, such as devices used and social media groups referenced

Insurer Protection

Along with an increased focus in customer-centricity, insurers must protect themselves through improved accuracy in reporting. Quality Planning released in 2010 that the U.S. auto insurance industry lost $15.9 billion in 2009 due to premium rating errors for private passenger autos. A portion of this loss was directly attributed to fraudulent activity.

This report noted, "...drivers are five times more likely to report mid-term mileage changes that reduce auto premiums than changes that increase premiums." Other disturbing trends, seen more often in urban areas, included misreporting garaging addresses and vehicle usage to fraudulently reduce insurance costs.

To allow for both enhanced services and increased protection, the sales, rating, underwriting, issue, and services processes must be enabled by straight-through processing (STP). Integration with third-party data providers will enhance the underwriting decision process, eliminate fraud, and automate processes to improve speed, quality, and operating efficiencies—all the while boosting profitability margins.

Insurers also need solutions that offer:

• Greater ability to integrate internal and third-party data to automate underwriting that can “immediately issue” more lines of business, assess underwriting fraud, and make the purchasing process fast and easy;

• Extensive business rules that can be configured quickly to meet new data, as well as regulatory and business requirements;

• Integrated analytics to enable further underwriting analysis, automation, and better risk management;

• Proactive/risk prevention services from annual auto or home maintenance check, integration of telematics to monitor auto use, micro-sensors to monitor structural changes in homes, and catastrophe planning services

By providing customer-centric services, insurers can become more user-friendly and competitive. At the same time, the proper systems must be in place to allow for data collection, efficient processing, and protection from fraud in order for insurers to thrive in today’s evolving marketplace.

About the Author:Denise Garth is the senior vice president of strategic marketing and industry relations for Innovation Group. She can be reached at [email protected].