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Customer Experience is the New Customer Retention For P&C Insurers

December 19, 2017

Competition in the P&C insurance industry is intensifying, and all too often carriers have turned to aggressive pricing to differentiate their brands in a crowded market. For many insurers, this is leading to lower profits – despite higher premiums – and the commoditization of insurance products. In strategizing for an ever more competitive future, those insurers seem to be missing the one thing that could have a serious impact on their business: offering a better customer experience.

Customers who experience poor service are simply more likely to switch carriers – and their service expectations are becoming much more sophisticated, thanks to increasingly personalized interactions with technology and the quality of service they experience elsewhere.

The need to satisfy insureds’ expectations for an excellent customer experience is urgent, and the opportunity is gigantic. In fact, so many insurers are currently falling short of customer expectations that fully a third of insurtech startups are focused on improving the customer experience, according to research by PWC.

smartphone taking picture of auto accident damageCustomer Experience Goes Beyond the Point of Sale

Digital technology is reshaping all aspects of the insurance industry, and while many have understandably focused initially on sales, it’s important for carriers to now cast a critical eye across operations and all customer touchpoints. Only then can they truly determine how to take full advantage of digital communications methods and data sources to anticipate and satisfy customers’ expectations for an excellent customer experience.

This is especially true in personal auto, where customer satisfaction is declining and rates are increasing – an unfortunate combination in terms of retention – due to the increasing frequency and severity of collisions, the number of miles driven, and extreme weather.

“As the amount of losses continues to increase for myriad reasons, premiums must go up for carriers to remain profitable,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power, in an announcement of the 2017 U.S. Auto Claims Satisfaction Study. “However, carriers that are successful in getting beyond price by clearly communicating and demonstrating value – through smooth claims processing, exceptional customer service, and a great selection of offerings – will emerge as leaders.”

The way forward for insurers, according to J.D. Power and in our own experience, is to continuously evolve the customer experience via improved communication and data access. Overall satisfaction is 33 points higher among customers who get status updates digitally compared to those who don’t, according to the report. And yet only 16% of auto insurance claimants are receiving digital status updates or using mobile appraisal apps, which allow customers to upload damage photos via smartphone rather than working with an appraiser in person.

While there are obviously many differences from one line of business to another, this is clearly instructive. Instead of focusing solely on aggressive pricing, insurers that recognize the need to continuously adapt to and enhance their customers’ experiences, and that have core systems that support that kind of agility, will be best positioned for profitable business now and in the years to come.

What Do Customers Really Want from P&C Insurers?

Insurance customers expect to be recognized, to be given options based on their preferences and attributes, and to have the ability to engage anywhere and in any way that is convenient for them. After all, these are the same sorts of customer experiences they enjoy everywhere else. The cost of not offering such an excellent customer experience will be measured in declining customer retention.

To solve this urgent problem, insurers need to step up. A good first move is to consider a customer’s journey when determining whether you’re offering the right services, and whether they can be accessed through the most desirable channels. This is particularly true during a loss event. Understandably, these situations can be stressful for customers, and they feel more comfortable and worry less when they experience fast service, connectivity, recognition, and transparency throughout the claims process.

That’s what constitutes an excellent customer experience these days, and with so few insurers fully reaching this potential, it’s an excellent time to seize this opportunity – before your competition beats you to the punch.

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Caleen Alexanderson
Caleen has more than 30 years of experience in insurance automation. While most of her career has focused on agent automation, she is passionate about efficient digital solutions and workflows for all users. Caleen is the UX Research Lead at Duck Creek Technologies. She and her team focus on unique patterns and needs of end users across the company’s suite of products and turn that knowledge into fast, intuitive, delightful experiences.