As insurers move down the path to customer-centricity, they will need to address a number of conceptual and execution challenges. This week, I’ll look at the conceptual challenges.
The distribution model and the customer
The operational implications of customer-centricity will depend on the insurer’s business models and distribution channels. In some cases, insurers might define their customers as their intermediaries; in others, as the end consumers. Depending on the business model, insurers might need to take a customer-centric approach where they have direct distribution to brokers and consumers, and a distribution-centric approach where they don’t control distribution.
Customer ownership and customer data
The issue of who owns customer data when an insurer works with banks, brokers and other distribution partners must be resolved in a pragmatic manner. The goal should be to build on the brand values of all parties involved and ensure smooth interfaces that develop and enhance the customer experience. Above all, the value that each party gains from aggregation of customer data must outweigh the perceived costs and risks of sharing the data.
Channel conflicts, interoperability, optimization and remuneration
Many insurers consider their large tied-agent networks as the cornerstone of their customer-centric strategy, and build the new customer experience around them. But this model might not be sustainable for all product lines and channels without adjusting the sharing of value between the insurer and its agents. What happens, for example, when an insurer owns competing channels under different brands?
The strategic questions then become:
- Which are the target-customer micro-segments?
- What products and services do they require?
- What is the best channel mix to serve them?
- How should a customer-centric insurer organize itself to maximize value creation, considering the costs and profit margins associated with different products, channels and target segments?
Accountability for customer-centricity
Everyone in an insurer’s workforce and agent network is accountable for customer-centricity – there should be a seamless process to serve the customer’s needs, from enquiring to purchasing, from claiming to renewing, and from complaining to advocating, across all channels and products. This is achieved by orchestration of all stakeholders toward common goals measured in terms of a set of customer-centric KPIs and rewarded with coherent, carefully directed incentives.
Customer-centricity and ecosystems
Customer-centricity is rooted in a deep understanding of the customer’s situation, needs and preferences, based on the analysis of a rich set of internal and external data. Mobility enables the accumulation of geo-localized data in real time, as well as an exponential growth in the number of interactions between the insurer and its customers.
It also supports the emergence of new business opportunities for insurers to create new ecosystems of value, as depicted in the diagram below. Insurers should be thinking about how they can leverage their data, relationships and channels to take a more central role in customers’ lives.
Please return next week to read my take on the challenges insurers may face in executing their strategies for customer-centricity.