Insurance companies find it difficult to interact with their customers, with few opportunities outside moments of cause. Digital channels are, however, expanding the channels through which insurers can connect with customers – and therewith – their ability to affect customer loyalty. Aside from improved contact, cross-selling remains a strong pathway to reducing churn and increasing value.
Customer loyalty to a brand or provider generates a host of benefits, from reduced churn to word of mouth advertising and lower service costs. One industry that has faced considerable hurdles with customer loyalty is the insurance industry. Unlike banking, customers have little call to interact with an insurer outside of bad-case scenarios. Digital channels are, however, transforming customer expectations as well as the channels through which they can be served by insurers.
In a new report from Bain & Company, the global management consultancy firm explores the results of a Research Now survey of around 164,000 consumers in 19 countries relating to their relationship with their property insurance and casualty insurance (P&C) companies and life carriers. The research aims to disclose ways of boosting customer loyalty, as well as ways of improving returns from that loyalty.
Consumers across the globe have taken to smartphone, in the UK for instance, 81% of consumers have access to such a device, while globally most countries have around 60% of their population digitally active.
One of the benefits of the medium is that it provides a host of opportunities to interact with customers for P&C companies. The channel, when leveraged by the market leader, has a high tendency to delight and a low propensity to annoy. Considerably outperforming online. Against the market average, mobile is less likely to annoy than in-person interactions, although in-person is slightly more likely to induce customer delight.
The research finds however that, while digital customer interactions can be beneficial to customer service and loyalty, customers, in many countries, prefer a well-tailored mix of digital and in-person services as part of their wider interactions with their insurer.
In China for instance, the digital-only generates a net promoter score of 5, while in-person or phone only has a score of -5 – the multichannel approach generates considerable synergies, jumping the score to 10. In France, digital only is relatively poorly received, while multichannel offerings outperform in-person or phone only by one at six. In the US too, multichannel offerings slightly beat out in-person or phone only. Only in Australia is there little difference between multi-channel and in-person or phone only offerings.
One of the benefits of multichannel interactions with customers is that digital platforms offer new pathways through which to engage with customers. Having an interaction with customers in the past 12 months, the survey finds, has the potential to significantly boost NPS relative to those which had not had an interaction.
The contrast was the starkest in China, at 63% higher for P&C firms, this is followed by Indonesia, at 42%. Malaysia has the third largest bump from interaction, at 32%, followed by Singapore on 26% and Mexico on 28%. Western European and Northern American countries tend to see lower benefits from contact in the P&C sector, at around 15.
While increasing contact through digital channels is one way of improving NPS from customers, the study also highlights that cross-selling insurance policies to customers has the potential to significantly reduce churn. Even the cross-sale of two contract to customers drops churn from almost 20% in the first year to around 8%, while by year five it falls to 5% for 2 contract and 15% for one.
Harshveer Singh, a Partner in Bain’s Financial Services practice in Asia-Pacific and a co-author of the report, says, “Mobile offers huge potential to create satisfied insurance customers, but companies have to get it right to reap huge benefits in terms of customer loyalty and retention,” said. “Customers want more than just a flashy tool. In our research, some of the best apps are those that also excel at the basics – accuracy, reliability and ease of use.”