Only 32% of insurance customers globally reported having positive customer experiences with their insurer in 2013, according to the World Insurance Report 2014 (WIR) released by Capgemini and Efma2.
As a result, the report says nearly 70% of insurance customers are at risk of changing carriers, highlighting the need for insurers to focus on improving customer experiences, minimize customer defections, and secure profits.
What’s more, the report finds that digital channels (especially mobile) are the most likely to drive profitable customer behaviors such as referrals or purchasing additional products. According to customers and insurers surveyed, digital improvements are needed in the areas of claims payouts and policy acquisition.
The demand for digital channels has grown at a rapid pace with insurers reporting that, within five years, they expect nearly one-third of their businesses to occur over digital channels–projecting about 20% to come from online channels and nearly 11% to come from mobile channels, according to the WIR.
“Our research finds insurers’ profits can be driven by improving positive customer experience and responding to customers’ increasing preference for both Internet and mobile digital channels,” Jean Lassignardie, Chief Sales and Marketing Officer, Capgemini Global Financial Services, said in the report. “Insurers who master both digital delivery capabilities and online services across different stages of insurance life-cycle, especially claims payouts or policy acquisition where customers expressed needs for improvement, will gain the greatest competitive advantages.”
The report’s Customer Experience Index (CEI), which analyzes responses from over 15,500 insurance customers through the Voice of the Customer survey3, found a clear link between improved customer experiences and customer behaviors that lead to greater profitability such as additional purchases and customer referrals.
What’s more, the CEI finds that customers who have a positive experience are nearly twice as likely to make a referral and 50% are more likely to make additional purchases. This is especially true in emerging markets where customer experiences with insurance companies are relatively new. In contrast, negative customer experiences can be detrimental. The percentage of customers who have expressed intent to leave their insurer is double for those with negative or neutral experiences.
“Insurers need to deliver a positive experience to their customers each and every time they interact with the company,” Patrick Desmarès, Secretary General of Efma, said in the report. “This consistent, positive experience will help create a customer base that is loyal and ultimately more profitable.”
The report finds that agents remain the dominant channel for driving positive customer experience (39% for life, 47% for non-life), followed by Internet (32% life, 41% non-life) and mobile (26% life, 31% non-life). The Netherlands had the largest increase in positive customer experience at 18.2% primarily due to digital and broker channels. Younger customers (ages 18 to 34) are showing preferences for digital channels over traditional. In the emerging markets of Developing Asia-Pacific and Latin America, the importance of digital channels is very high among younger customers.
While mobile is currently the least likely channel to give a positive customer experience, when it does, it has a heightened impact on profitable customer behaviors, the report says. Positive customer experiences through the mobile channel are most likely to drive customers to refer friends (48% for life and 47% for non-life) and buy additional products (40% for both life and non-life).
“Of all the digital channels, mobile is the most effective at giving customers immediate access to insurers and simplifying tasks to a few easy steps,” Lassignardie added. “Our findings indicate mobile holds the greatest potential to move customers toward more profitable behavior. Insurers dedicated to providing a positive customer experience via mobile will position themselves well to improve business performance.”
Firms with a strong digital presence and a customer focus are, on average, 26% more profitable than other firms. To meet customer demand for digital and improve customer experience, insurers need to fully embrace a top-to-bottom approach to digital transformation, while also driving operational excellence at the back-end to ensure profitability. Key areas for insurer focus this year include multichannel integration, maximizing social media, and taking advantage of predictive analytics techniques.