In my previous blog post titled ‘Insurers’ need for Consumer-Focused Innovation’ I discussed that traditionally conservative insurers are having to come to terms with two powerful, inter-related trends: ‘Changes in consumer attitudes, perceptions & behavior regarding insurance’ and ‘The rapid emergence & adoption of new technologies which affect insurance’. Together these are forcing insurers to develop new approaches to growth – in particular, to customer acquisition & retention.

Recently the second part of Accenture’s Consumer-Driven Innovation Insurance Survey 2011 was conducted and confirms that many insurers are already experiencing that loyalty has weakened, expectations have risen, and growing numbers of customers expect to switch provider to find what they are looking for.

A meaningful customer experience
The disaffection of insurance customers and the extent by which insurers are failing to satisfy them explains why so many customers regard themselves on the look-out for a provider that can meet their expectations. Added to these trends are powerful and permanent shifts in the ways consumers prefer to manage their affairs and interact with organizations that matter to them. New tools and channels have rapidly become influential, giving rise to entirely new forms of interaction. In insurance, the trend is not so much a transition from traditional to new channels such as the Internet and mobile, but rather a growing reliance on a diversity of channels—different channels for different purposes. The use of mobile devices to engage with insurance companies is likely to increase by roughly 25 percent over the next two years.

At a time when customers are clamoring for something special, most insurers recognize the need to provide a more meaningful customer experience—more than 90 percent regard rising customer expectations as an important or critical challenge as they strive for organic growth.

So what is the insurance customer looking for? There is no single answer, because customer needs cannot be homogenized into convenient categories that correspond to particular channels. Certainly, price-sensitivity is increasing—84 percent of insurers rate this as an important or critical challenge. At the same time as wanting to pay less, most customers are calling for more innovation and more choice. Some may wish to conduct transactions without having to speak to another human being, while others may require personal service and advice. Which is why the focus must shift to a tailored, branded, scalable multichannel experience.

Predictive analytics enables Growth
Insurers have always had large amounts of demographic and transactional data about their customers, as well as the analytics to make sense of it. Access to new sources of data, both internal and external, and improvements in data consistency and distribution, allow for much richer insights. Predictive analytics allows providers to segment their customers into homogenous groups sharing similar traits, needs and expectations. This in turn enables them to develop different strategies, or “treatments”, optimized for specific customer needs, attitudes and intentions. Predictive analytics is particularly valuable in determining which customer characteristics are most significant and represent the best opportunities for differentiated treatment.

Despite the fact that 95 percent of executives believe growth will be elusive if they fail to provide a special experience, only a small minority of insurers rate themselves as front-runners in the provision of a differentiated, tailored customer experience.

Insurers have to move from a conventional product-centricity toward customer-centricity and this will not be easy. Most organizations are still structured around product silo’s reinforced in their operating models, processes, governance and IT. One of the first challenges in changing the operating model is the need to separate product manufacturing and distribution, as the former is measured in terms of optimized unit costs while distribution seeks to maximize the value of the relationship for both the customer and the company. Technology also needs to be reviewed because many insurers, overly reliant on face-to-face distribution, have allowed their front-office and end-user delivery capabilities to lag those of innovators in their own and other service industries.

In the current situation insurers lack the flexibility in their business models to be innovative, flexible and able to react quickly to changing market conditions. Now is the time to act or insurers will lose their game to new entrants.