Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Channels

11:24 AM
Connect Directly
RSS
E-Mail
50%
50%

HOW FINANCIAL INCENTIVES CAN DRIVE E-SERVICING

A growing number of insurers have begun to recognize modest success in the realm of customer service. Gomez consumer research reveals that 14 of the top 20 issuers of personal vehicle insurance now offer policyholders online functionality for viewing or performing customer service tasks.

By Greg Davies, Gomez. Inc.

While online sales of personal vehicle insurance have so far yielded disappointing results, a growing number of insurers have begun to recognize modest success in the realm of customer service. Gomez consumer research reveals that 14 of the top 20 issuers of personal vehicle insurance now offer their policyholders online functionality for viewing or performing customer service tasks. Service-related activities include premium payments, policy inquiries, endorsement requests or claims-related tasks.

But if insurers are to approach 20-plus percent adoption rates among their online policyholders, they must devise creative strategies—beyond the promise of greater convenience and time-savings—for encouraging their policyholders to turn to the Web for their service needs. Financial incentives represent one such strategy. Firms considering such an approach should keep in mind the following approaches:

ELECTRONIC DOCUMENT DELIVERY: DISCOUNTS VS. ADDITIONAL "CHARGES."

Insurers rarely lead brokers and banks when it comes to online innovation. However, one area where insurance leads nearly every other retail financial service industry is in the online delivery of customer- and account-specific documents. In fact, 21 percent of the 19 Gomez Scorecard carriers allow policyholders to receive their policy documents electronically and discontinue receipt of mailed paper documents. Direct online auto veterans Esurance, GEICO, Progressive and GMAC are examples. To encourage adoption of this cost-savings feature, GMAC and Esurance offer online policyholders a financial incentive (or in Esurance's case, a disincentive for not adopting the service).

Unfortunately, however, the unique regulatory constraints of the insurance industry add a layer of complexity to initiatives to drive adoption through these types of financial incentives. In addition to the timely process of re-filing with state regulators, insurance commissioners in many states have been reluctant to allow insurers to position financial incentives, such as discounts, for using features such as electronic document delivery (EDD) or bill payment and presentment (EBPP).

In response to regulatory concerns, Esurance has gone forward with re-filings that apply a service "fee" of $25 per six-month policy term to policyholders who request paper copies. By comparison, GMAC Insurance Online, the direct-to-consumer division of GMAC Insurance, passes along a "discount" to policyholders who opt for online document delivery.

DRIVE ONLINE BILL PAYMENT ADOPTION VIA DISCOUNTED INSTALLMENT FEES.

Most insurers offer a reduction in installment fees to policyholders who elect to pay their premiums via monthly direct-debit. However, a number of insurers, including Allstate and GEICO, also offer installment discounts to policyholders who pay their premiums online (at their insurers' Web sites). Yet with the exception of GEICO, no insurer offering installment discounts for online bill payment promotes this savings opportunity to their policyholders.

Clearly, the economics of payment processing will vary from insurer to insurer. Some, for instance, may still find it more cost-effective to process direct-debit payments than online-initiated payments. However, driving policyholders to their carriers' Web sites regularly will encourage adoption of the online channel for future needs (endorsement requests, etc.) and provide insurers with cross- and up-sell opportunities. In most instances, filings are already set up to allow insurers to pass along cost savings associated with online payments to their customers. The challenge comes in making customers aware of this fact.

The best method for encouraging online self-servicing will depend on insurers' business process and technology issues. Yet regardless of the approach, financial incentives offer one of the most attractive means of reducing call volumes to both agencies and call centers.

Greg Davies is a senior insurance industry analyst with Gomez, Inc., an Internet quality research and advisory services firm in Waltham, MA. Please send feedback to [email protected]

Register for Insurance & Technology Newsletters
Slideshows
Video