An IBM (NYSE: IBM) study of over 3,000 Property and Casualty (P&C) insurance policyholders reveals that less than half of all policyholders are informed about new products and services by their provider. Additionally, only 43 percent of policyholders said their insurance company tailors policies to meet their specific needs. It stands to reason these policyholders have a lower products-per-customer ratio when compared to other industries such as banking.
The study, "Surviving climate change in the property and casualty industry by growing customer advocacy," also demonstrates a widening gap between insurance customer demographics, product offerings and distribution channels. Younger policyholders are increasingly price sensitive and technology-savvy, and are more likely than other demographics to access a variety of distribution channels including the internet and Web 2.0 technologies such as mobile text and instant messaging. Baby boomers are accustomed to more traditional insurance channels and exploring price options on the internet as they redefine the market as they age, forcing insurance companies to accommodate their varied needs and develop tailored products that can be offered across multiple channels.
"Insurance providers can no longer follow the 'one-size-fits-all' approach to product offerings and channel distribution and expect to remain competitive," said Bill Busby, Partner, IBM's Global Business Services, Americas Insurance Leader. "Younger customers want fast and easy transactions with little or no human interaction, while older customers continue to value a high touch experience and demand higher levels of service and quality. Meanwhile, customers across the board want their providers to offer more flexible products and deliver a greater degree of personalized service."
A new view: Advocacy and Antagonism
As part of the study, IBM tested a new measure of customer loyalty, the Customer Focused Insight Quotient (CFiq) to drive the quantification of key interactions on policyholders' perspectives and attitudes. Unlike other satisfaction or promoter measures, the CFiq goes beyond a single measure of satisfaction by combining policyholders' ratings of three statements to obtain a more predictive and commercially viable view of advocacy:
1. I would recommend their insurance company to others 2. I would consider my insurance company first for future insurance products 3. I would stay with my insurer if offered competitive insurance products from other insurers
Over half of insurance policy holders (51 percent) surveyed strongly agreed with these statements and are considered advocates. This number is relatively healthy compared to other industries, such as banking or retail where only one in four customers is an advocate. Beyond their clear value as referrers and credible promoters, they deliver better financially. For example, advocates have 22 percent more products and trust their insurance companies 98 percent greater than low value policyholders or antagonists. Advocates also tend to be long-time policyholders, with more of them staying over ten years with their insurance companies, nearly double the amount of antagonists. This result means more premiums are collected and sales investments can be more effectively managed.
Future success in the insurance industry will depend upon creating and delivering a compelling customer experience. Insurers need to begin to build a basic foundation that enables them to move to a more customer focused enterprise that increases the relevance and attractiveness of products and services to policyholders. Specifically, insurers need to focus resources on five key areas:
1. Build a deeper understanding of the policyholder -- Create or repurpose customer research to capture and analyze customer data from key interactions across the policyholder experience. 2. Design customer experiences based on customer expectations and perceptions of operational performance -- Use policyholder advocacy data to drive improvements to key interactions and assess customer metrics to measure targeted improvements. 3. Communicate and transact with customers intelligently during key interactions, on a customer-by-customer basis -- Encourage customers to provide feedback and reward them for sharing information through personalized service, relevant offers and recognition. 4. Improve the coordination and key activities across the delivery channels to improve effectiveness and quality of the overall policyholder experience -- Provide agent and direct based channels with real-time access to key customer data to increase visibility into customer needs and wants. 5. Increase policyholder involvement in the development and tailoring of insurance products -- Collaborate with both advocates and antagonists (i.e., internet surveys, blogs, "Customer Jams" etc.) in the development and testing of products and services.
Insurers must find ways to intelligently evolve and differentiate their business by understanding and incorporating advocacy to enhance the policyholder's experiences. Continued reliance on traditional competitive levers will contribute to a slow erosion of business value and contribution for today's leading insurance providers. -IBM