The changing world of insurance: upselling, challenges and the customer view

For most businesses, selling to existing customers is the most cost-effective way to achieve sustainable growth. This is particularly true for insurers, as their business models rely on renewal premiums for revenue. And insurance companies that have combined or bundled different policies together have seen their retention rates increase significantly. Experience shows that a customer holding two policies with the same company is much more likely to be loyal and renew than a customer holding a single policy.

Customer or product focus?

Unfortunately, most insurers continue to focus on products rather than customers. Customer data that would help identify good candidates for cross-sell and up-sell opportunities are often scattered across the organization, making it difficult to get a clear view of customer preferences and buying behaviour. Without that information, it’s difficult to find the best prospects for these opportunities.

The insurance industry is also facing an unprecedented number of business challenges brought on by a volatile economy, diminishing investment returns, increasing claims fraud and greater agent expectations. Intense competition and declining loyalty are continually eroding insurers’ profitability. New opportunities such as the Internet of Things also bring their own challenges.

With this level of turbulence, it is essential for insurance companies to acquire new customers and retain existing ones. But that alone won’t be enough. Insurers must consider customer lifetime value (CLV) when seeking to retain customers, particularly during claims handling. After all, not all customers are profitable ones.

Smart claims handling needs real time analytics built on a complete customer view.

A personal experience

A couple of years ago, I damaged my old-timer by hitting it with my new car. When I contacted my insurance broker, he told me that I was unlikely to get any reimbursement in this particular situation. Two weeks later, he came back to me with good news. Because I had several insurance policies with the company, and I had had no car accidents or domestic damage in the last few years and since some members of my (extended) family were also clients of this broker and company, they had decided to reimburse 50% of my costs. 

An unexpected bonus! Not to mention one delighted customer! I told my family, will never forget it and will probably stay loyal to the company for years as a result.

This was probably because of the strong link with my broker, and thanks to his good knowledge of my situation. Because he “built” his pitch to the company, he was able to obtain a partial reimbursement.  If direct insurance companies aim to be as relevant as brokers and have good knowledge of their clients to improve claims handling, they will need three assets.

Simulating the broker’s personal touch

First, they need a complete and cleansed customer view.  The company needs to have a complete view of each client’s situation.  A holistic view means an aggregated view on transactional data (products in the portfolio now and in the past), interaction data (via any channel including web), operational data (linked to damage), and financial data (including premium payments). It does not mean that the claims handler needs that insight. The company needs that complete and clear view to enable good analytics to run on complete, trusted and cleansed data to provide a score to guide the claims handler.

Decisions must be based on client equity and supported by analytics. The client’s lifetime value and client equity will enable the claims handler to apply the Next Best Action: changes could include the reimbursement ratio, the reimbursement delay, or even the “tone of voice”.

Last but not least, it make sense to have the most recent information about the client so that the analytical algorithm can help the company to take the right decision based on recent behavior. Suppose that a high equity client has just made a claim. The night before the file is processed, the web tracking reveals that the client has been onto the website and looked at the FAQs about conditions to break the contract.

The long view

In a data-driven world, all that information makes sense. It must be used wisely, and considered when the algorithm calculates the client’s value, taking into account propensity to move on. It is not so much about the data available, as how those data are used by companies to add value for themselves and for customers.