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The competitive advantage that every insurance professional needs

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The insurance industry is going through tremendous change driven primarily by a new breed of consumer: the millennials. The millennials have never known a world without computers, the internet, mobile phones and other mobile devices. Their daily lives are all about being digital. They share their experiences on Facebook; read Yelp reviews before making purchases; and Tweet about the service they receive from retailers, banks, restaurants, and yes, insurers.

The term millennials has been used to describe young people (most of them born after 1980) who hold a strong influence over older generations and are paving the way for their elders to be just as digitally savvy. As a result, consumers of all ages are adopting the use of digital channels to research and review the best possible insurance options to meet their needs. According to McKinsey & Company, the insurance industry spends approximately $6 billion in marketing to attract new customers and retain existing ones. But what good is marketing if you attract a consumer — a millennial in this case — and don’t offer that consumer the fast, easy, digital experience he or she has grown accustomed to from companies such as Uber, Spotify, and eBay?

To stay competitive, insurance carriers and agents are being forced to rethink how they interact with their digitally savvy consumers and redefine customer centricity. According to a 2013 LIMRA study, 86 percent of consumers would prefer to conduct their life insurance research online, and if given the option, 23 percent would prefer to buy online as well. Globally, one in five searches for financial services is from mobile phones, and in Europe, among 78 insurers, digital sales are projected to account for 18 percent of new business in 2016, up from 11 percent in 2011.

Addressing the digital challenge is a matter of survival: insurance companies that act too late or stumble through the transition will lose customers and remain saddled with a relatively high cost base. Customer expectations and demands are growing. Consumers now require more interactive and dynamic experiences and want to feel empowered to see what they want when they want it, on the device of their choice. Today’s consumers don’t want to complete a paper application; they expect a mobile-friendly environment for comparing rates and completing an application online. In the case of health insurance, digital consumers want to see and navigate through their explanation of benefits (EOB) dynamically and to further communicate within the context of their claim — requiring insurers to be able to engage immediately via online chat or text. And millennials, being digital natives, are deeply connected socially. One bad review on Yelp or Twitter can send the masses fleeing from an insurance company in seconds. Put simply, modern consumers expect their insurer to truly know, understand and empower them.

Steps to attracting millennials while retaining their predecessors

While the concept appears straightforward and simple, catering to digital natives isn’t where the insurance industry has traditionally excelled. Today’s new landscape requires a holistic view of the customer and the deployment of innovative technology, yet insurance companies have been plagued by legacy systems for years and are less inclined to adopt new technologies as quickly as their counterparts in other industries. The thought of being forced to go digital as quickly as possible to capture this new consumer can create a series of daunting questions, such as “What strategy do we employ first?” “What is the fastest but most cost-effective path to capturing our new constituents?” and “How can we make a big impact without ‘eating the elephant all at once?’” Many life and health insurers are struggling with legacy technology and outmoded organizational structures and are playing catch-up, so it is important to see this transition as a well-planned journey that requires flexibility and agility.

Shifting to a digital world to capture the hearts and minds of the digital natives calls for taking a holistic approach to customer centricity, technology, and processes. When planning to go digital, insurers should:

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1. Develop a 360-degree view of the customer. In order to “know” their customers, insurers must understand the total relationship that the customer has, or could have, with the company and then present that back to the customer on his or her terms (for example, via mobile devices and the internet) — in real time. From a technology perspective, this requires insurers to consolidate multiple disparate systems and data into a more effective and concise system, enabling agents to better communicate with their customers. By leveraging data and analytics, life and health insurers can capture customer information and make it available to all corners of the organization that touch the customer — from sales and marketing to call-center representatives, actuaries, and claims adjusters.

2. Embrace an omnichannel approach. To empower existing and prospective customers and deliver an improved customer experience, insurers must adopt an omnichannel approach. This means enabling consumers to research, review, and interact on their terms. No longer is it sufficient to have a consumer complete a paper application and wait days or weeks for a quote. Once a quote is approved, should the customer have to print, sign, and fax the documents? Should customers have to print, fill out, sign, and fax a claim?

With the use of mobile document management and customer communication technologies, life and health insurers provide their customers with the ability to complete an online application via their mobile device, chat with a representative via online chat, and have that chat transferred to an immediate phone call if needed. They receive an insurance quote in real time, and immediate generation of the policy is available along with proof of coverage and supporting communications — all available digitally on the device of choice. Customers can initiate a claim at the time and place of occurrence with near-real-time visibility of status along with the EOB. Behind the scenes, adjusters are adjudicating claims at a more rapid pace due to improvements in processes and operational systems.

3. Reevaluate core systems and processes. Much less appealing but even more important than having a holistic customer view and multiple new digital channels on which consumers can interact with their insurers are the underlying core systems that support the business processes. To effectively support an omnichannel approach that meets the needs of millennials, insurers need to modernize their technical “spine.” This means updating legacy systems to ensure the organization can access data as necessary to present a single view of the customer across all channels and lines of business. Most large insurers operate with legacy IT architecture ill-suited to sharing or presenting data the same way on all channels. Gartner estimates that more than two-thirds of global life and P&C insurers still rely on legacy systems (some dating to the 1970s or ’80s).

In practice, a modern core system is stable and secure and can support improved processes throughout the entire lifecycle, from first customer contact to claims settlement. For example, a key technology in use by health and life insurers automates underwriting processes to deliver speedier responses to customer rate inquiries. New life or health insurance policy in 15 minutes? Absolutely possible.

How to take the leap in going digital

While these three best practices only touch on the multitude of strategies and technologies required to reach not just a new breed of consumer, but all consumers, they offer a foundation from which to leap into the digital world. It’s clear that integrating the digital and physical worlds is not a straightforward process, and doing it all at once would be enormously expensive and complex. As such, insurers should approach an implementation in phases, beginning by asking themselves several key questions:

  • Where are we experiencing the greatest pressure?
  • Which digital trends are most urgent for growth and profitability?
  • What is the scale of the implied effort?
  • Which areas do target customers most value and thus merit investment?
  • Which technology providers have the experience and enterprise capability to deliver?
  • Which technology providers understand and have the capability to execute?
  • How do you leverage legacy assets to embrace the transition more quickly and cost effectively?

Taking stock through an assessment will help senior executives understand the point of departure, their overall ambition, and what it will take to deliver results. But keep in mind that companies willing to move quickly and take calculated risks stand to gain a competitive advantage over their more sluggish rivals.