In my previous blog, I began to outline the business case for insurance companies to adopt a more customer-centric approach by describing the pressure from customers and competitors. Now, I’d like to explore in more detail some of the other pressing business value drivers for undertaking this shift:
- Poor customer experience fosters switching. Ourresearch shows that poor customer experience is the primary reason for switching providers. Just by the bye, the primary reason behind a switching decision is service that does not live up to the initial promise. Our research also shows that switching is on the rise in insurance.
- Failing to fix the problem and deliver a better, more consistent customer experience will obviously reduce insurers’ ability to retain customers. Retaining customers, as any undergraduate business science will tell you, is much cheaper than having to find new ones.
- In addition, delivering a poor or inadequate customer experience creates the threat of extra costs associated with increased customer complaints, the resolution of complex problems, and brand/ reputational damage.
- More positively, superior, personalized customer service and experience is becoming a major decision factor when consumers are choosing an insurance company, or when existing customers are deciding on additional cover.
- Becoming customer-centric doesn’t just reduce costs and customer churn—it’s a recipe for increasing cross- and up-sell, and thus of enhancing profits. Looking outside the insurance industry, consider the case of a telecommunications company that reduced churn in its high-value customer segment to gain $120 million in revenues, the government agency that used customer-experience initiatives to triple its sales and halve its costs over three years, or the bank that grew sales revenue by $9.7 million within four months while boosting average revenue per sale.
Startlingly, only 26 percent of chief marketing officers (across industries) believe they are building rich, long-lasting customer relationships. I would argue that insurance chief marketing officers would mirror that trend.
In the main, few insurance executives would question the need to enhance their ability to deliver a better customer experience, but many would question how it should be done, especially given the challenges they face. Next time, I’ll conclude by proposing an approach.