(Image credit: Dollar Photo Club.)
Insurance customer satisfaction was already low but has declined alarmingly during the last year, according to the 2015 World Insurance Report (WIR), released today by Capgemini and Efma. The survey revealed a particularly sharp drop in positive customer experience levels among Generation Y insurance customers in 2014, which helped bring down overall customer experience ratings around the globe, and the decline was sharpest in developed regions, such as North America, where positive customer experience ratings for Generation Y declined by 10.9 percent, and developed areas of the Asia Pacific region which saw a decline of 5.4 percent.
The WIR reported that overall positive customer experience ratings globally dropped 3.7 percentage points from an already low 32.6 percent in 2013 to 28.9 percent in 2014. North America saw the largest overall decline (8.3 percentage points), followed by Latin America (5.3 percentage points) and Europe (3.4 percentage points). The report was based on a Voice of the Customer survey, which asked over 15,500 customers in 30 countries across five geographic regions about their general satisfaction with their insurer.
“Falling positive customer experience ratings coupled with a growing number of market disruptors–such as Big Data analytics, regulatory change and economic uncertainty–threaten to shake the stability of the industry and require insurers to become fully customer centric or risk losing their customer base to competitors and new entrants,” comments Jean Lassignardie, chief sales and marketing officer, Capgemini Global Financial Services.
The Generation Y or Millennial cohort–customers between 18 and 34 years old–comprises one-quarter to one-third of the population in many markets, making it a very important customer segment for insurance companies, according to the WIR. This generation has grown up using technology and typically has high service expectations across digital channels—representing what Capgemini calls a huge challenge. “Insurers are in danger of losing this important customer segment to more agile competitors unless they can improve their digital services and provide more personalized and fully integrated customer experiences regardless of preferred channels,” a Capgemini statement cautions.
To avoid that outcome, insurers will need to focus on social media, online, and mobile channels to engage with their customers as these channels are rated as important by more than 50 percent of Gen Y customers in most regions, according to the WIR.
Insurers Lag on Key Customer Experience Capabilities
The WIR found that insurers’ maturity levels are lagging in core capabilities that can help improve customer experiences and capitalize on opportunities presented by market disruptors. Insurers scored lowest at connecting and engaging regularly with customers, as well as having a complete view of customer data and relationships.
The report also found that most insurers connect with customers at only a very basic level. While insurers have embraced an omnichannel approach to service, the customer experience across channels was often disjointed. Insurers’ contacts with customers is often few and far between and lacks personalization, according to the WIR. Insurers continue to struggle to achieve a complete view of their customer relationships owing to deficiencies in their analytical capabilities. While most insurers are capturing and storing customer data, many are failing to capitalize on analytics to identify varying behaviors, preferences or a comprehensive and real-time view of their customers, a Capgemini statement notes.
Agent Channel Leads in Positive Customer Experience
At a time when direct insurance sales continue to grow, the WIR’s findings suggest that the consultative contribution of agents continues to be valued by customers. While the report emphasized insurers’ need to develop and improve digital channels to keep pace with the growing demands of their customers, that objective should not be pursued at the expense of the agent relationship. The WIR found that the agent channel is providing the highest levels of positive customer experiences—nearly 10 percentage points higher than those of digital channels.
That is not to say that digital channels are not vital—especially to the increasingly important Gen Y segment—but insurers must also make sure that those channels be concerted with all potential touchpoints that a customer may desire to access.
“Ongoing investments need to support all types of channels, at least for the foreseeable future,” comments Capgemini’s Lassignardie. “Insurers must strive to bring some of the qualities that define traditional channels to the newer channels and vice versa. Insurers that are able to blend traditional and digital channels in a seamless way will be the leading edge providers of the future.”
Fending Off the Disruptors
Getting customer experience right has taken on heightened urgency as the industry faces many market disruptors–including online service providers such as Google and Amazon–that have the potential to undermine the customer relationships of unprepared insurers.
The WIR reports that Big Data analytics is expected to have the biggest impact on the insurance industry with 78 percent of executives citing it as the key disruptive force, followed by regulatory change (46 percent) and economic uncertainty (42 percent). Other market disruptors include shifting demographics (35 percent), extreme environmental conditions (15 percent), new competition from non-insurers like Google and Amazon (22 percent), and advanced technologies such as the Internet of Things and telematics5 (21 percent).
“If you simply look at profit margins, you will think everything is positive for insurers,” says Patrick Desmarès, Secretary General of Efma. “But it’s clear from the lower positive customer experience ratings that insurers are failing to meet the needs of customers. This is especially concerning given the strong link between positive customer experience and customer loyalty and profitability and the game-changing impacts posed by marketplace disruptors.”