A recent McKinsey study states that 70% of buying experiences are based on how customers feel during their buyer journey. In other words, a majority of your business is tied to how you make your customers feel – stressing on the importance of curating customer-centric experiences to gain a competitive edge in the market. For the same reason, forward-thinking brands in every sector are harnessing emerging technologies like artificial intelligence and predictive analytics to learn more about their customers and create frictionless touchpoints that meet their users’ evolving demands.
But what does good customer experience mean?
A Salesforce survey on Customer Expectations reveals that customers don’t want to be treated like numbers but as individuals, highlighting the importance of personalization. Stats also indicate that customers prefer to work with innovative companies that consistently introduce new products and services.
Changing customer expectations demand innovation, and firms that understand this tend to create more satisfied customers and boost their profits. According to McKinsey & Company, US auto insurance companies that offered the best customer experience were 30 percent more profitable and experienced two to four times more growth than slow-to-adapt competitors with an inconsistent customer focus. They also reported that satisfied customers are 80 percent more likely to renew their policies.
This brings us to the insurance industry. Customers expect more convenience and personalization in the insurance sector from start to finish, starting from customized product recommendations and easy sign-ups to quick claim resolution. Unsurprisingly, insurers that fail to innovate and give users what they need, risk being left behind by insurtech firms that are focused on digitizing the insurance customer experience from end-to-end.
The Present State of the Insurance Industry
Insurtech startups and firms like Lemonade are leveraging technology to turn around the traditional insurance model. Unfortunately, older firms continue to remain technology-agnostic due to legacy infrastructure and age-old partnerships. This attitude, coupled with a slow pace of digital transformation, does not match the expectations of the millennials who are used to instant gratification and the convenience of digital transactions that they find in the B2C world.
In addition to evolving customer expectations, there’s increased competition in the sector, and insurers with a robust digital presence tend to be preferred by users. Increased competition also means reduced market share for smaller players, which stresses the need for cost optimization via automation to reduce hiring and training costs and improve existing staff’s efficiency. The ongoing pandemic has also seen a rise in cybersecurity threats that can be thwarted with AI-based security measures.
Analytics in the Insurance Industry
According to the McKinsey report on auto insurers in the US that I quoted above, some of the key factors for customer experience in the insurance industry include ease of communicating with the insurer, transparency, and ease of the process, as well as timely claims resolution. However, identifying what drives customer satisfaction is only a start. Collecting data is never enough to transform important customer journeys. It is also important to crunch this data methodically to determine where the real problem sits and then identify how it can be solved.
In particular, data analytics can prove to be exceptionally useful in drawing actionable insights and help insurers tailor their products to customer needs and contact them with relevant and personalized messages. In addition, analytics can help in timely claim settlement and also predict new customer risk and fraud. Below, I have listed some use cases of analytics in the insurance industry:
1. Product Optimization
Predictive modeling makes it possible to build products better suited to dynamic market conditions and risk patterns. For example, in property insurance, construction costs, weather patterns, and claim history are some variables that need to be regularly monitored to optimize the premium and protection offered in an area. Besides, analytics make it possible to analyze customer preferences, buying patterns, and pricing sensitivity to continually fine-tune insurance products for relevancy.
2. Claims Resolution
Automating insurance claims processing ensures that users don’t have to jump through hoops to get their claims cleared. It also helps insurers prevent fraud by using analytics to determine a claim’s authenticity based on similar requests that were processed in the past.
Helping to streamline the entire process are AI-based chatbots that ensure 24/7 connectivity while instantly reviewing claims and verifying the policy details. Bots also pass every claim through fraud detection algorithms before sending out instructions for claim settlement. Suppose a user uploads some images of his or her damaged car. In that case, the bot will compare these images to a database of similar claims processed in the past to make a quick and efficient payout decision.
AI in insurance also helps prevent fraud through predictive risk scoring with behavioral analytics that can be exceptionally useful in eliminating employee fraud and approving new customer applications.
3. Better Customer Experience
Today, customer experience and retention are becoming an important KPI, and organizations are investing in user experience heavily to drive stellar results. Analytics can help firms transform their user experience by reading customers’ digital body language to offer pro-active service, send tailored recommendations, and identify and engage users dynamically based on their on-site behavior. Besides optimizing user experience, insurers can use data analytics to tailor policies and premiums based on the analysis of thousands of data points generated by a customer.
What I have shared above are just a few examples of how analytics can benefit the insurance industry. Overall, AI and data analytics can streamline the entire gamut of customer interactions from start to finish, which falls in line with the modern marketing principle of a unified customer journey view.
Unfortunately, many companies slip into focusing on individual segments like marketing, onboarding, renewals, or claims. However, it must be understood that insurance is one big journey for customers, and it is pertinent to link all these aspects together for a seamless customer experience.
Data analytics can not only help insurers find pain points in the customer journey but also streamline the entire journey from start to finish. An example of this use is in the rating of Insurance for Drones. Insurtech startup, Flock, is using analytics to improve both profitability and customer experience. Drone flights are generally unpredictable and not well understood by users, leading to overpriced policies with compulsory protections that may not even be fit for a user. Flock cuts through the clutter by crunching factors like local weather data, population density, and proximity to dangers to assess each flight’s risk. Lower-risk pilots thus benefit from an affordable pay-as-you-go policy price and receive continuous feedback on flight risk to reduce the chances of accidents and associated claims.Like every other industry, I see substantial benefits of integrating analytics in the insurance industry, including but not limited to what I have identified above. In addition, analytics can also help insurers expand their footprint by identifying potential markets for faster growth, which can be crucial for success in a competitive landscape. I recommend that you partner with a reliable technology firm like Suyati Technologies to identify your customer pain points and unleash the power of analytics to transform your business.
Wess Schuyler works with Suyati as a Strategic Insurance IT Advisor. He is the Vice-President for Agency Network of Kentucky/Energy Insurance and has a broad insurance background with roles as an Agency Producer, Director of Marketing, Sales Representative with a National Carrier, and since 2013 with Agency Network of Kentucky (ANK) as Vice President. He has had the opportunity to work with hundreds of independent agencies in a variety of roles assisting them in agency growth, target marketing, strategic planning, producer development, and pipeline management.