Insurance companies, which face decreasing levels of customer satisfaction and increased competition from non-traditional insurers, should leverage Big Data to regain their piece of the pie, research by Capgemini shows. To accomplish this, insurers should focus away from the product-centric’ view to a ‘customer centric’ view, invest in building a data management infrastructure and develop transparent data privacy policies, among others.
In a recently released report, titled ‘Fixing the Insurance Industry: How Big Data can Transform Customer Satisfaction’, consulting firm Capgemini Consulting examines how insurers can effectively leverage customer data to improve customer satisfaction. The research shows that customer satisfaction in the industry has hit “worryingly low levels”, with less than a third (29%) of customers globally satisfied with the services of their insurance providers.
Capgemini Consulting points out that satisfaction levels in 2014 have declined across nearly all stages of the insurance life cycle compared to 2013. The biggest decrease in satisfaction is seen in relation to policy acquisition, at -1.8% for life and -5.1% for non-life insurers. Other stages that caused more dissatisfaction are policy serving and quote gathering. While satisfaction with non-life insurances declined at all stages, customer satisfaction of claim servicing of life insurance increased slightly with 0.7%.
According to the researchers, insurers have more to be worried about as they face increasing competition from new entrants in the industry that are determined to meet customer expectations. These non-traditional insurance providers use (Big) Data and data-rich customer interactions to define and fulfil these expectations. Almost half of insurers admit to face increased competition from these data-enabled companies, with two-thirds feeling that Big Data is enabling the new entrants to move into their industry.
Although insurers realise that Big Data is helping non-traditional players enter the insurance industry, upping the competition, almost half (46%) admit not doing enough to embrace Big Data. In the past two years, the overall amount and variety of data, as well as the speed at which the data is generated, have increased significantly, providing insurers with loads of information to be used.
The use of this data to enhance customer experiences, as done by the non-traditionals, is especially overlooked, Capgemini stresses. The majority of traditional insurers use their data to detect fraudulent claims and improving underwriting profitability, cited by 33% of insurers, only 12% see the enhancement of customer experience as a top Big Data priority.
Using Big Data
The use of Big Data could improve customer experiences in a number of ways, Capgemini explains. Using customer analytics will allow insurers to:
- Offer personalised pricing and reward customers for positive behaviour and value-added services,
- Boost customer service by increasing agent effectiveness and enhance the online experience of customers,
- And Identify new customer segments.
So what is holding insurers back in using Big Data to enhance customer experiences? The research shows that a ‘product-centric’ view prevents them from gaining a deeper understanding of customer needs across products lines and lifetime value. Furthermore, a lack of adequate data infrastructure is inhibiting them to make effective use of the available customer data, with 14% having introduced data management systems that will help them to predict future patterns in customer behaviour. Insurers are also held back by their limited set of data sources, only one in five (20%) use social media interaction data and 10% sensor data. Another issue highlighted is the lack of IT agility that impedes them from developing insights from analytics initiatives, seen as a constraint by more than half (51%) of insurers. A final issue is the lack of mechanisms to manage data security and privacy.
Insurers that wish to improve customer experience through Big Data and analytics should, according to Capgemini, take six key measures:
In conclusion, the report notes: “The bar for customer service is being continually raised, which is an extremely worrying development if your customer satisfaction levels are heading in precisely the opposite direction, as they are in the insurance industry. Insurers cannot ignore the opportunity that data offers to reverse this situation and put themselves back on the path to improved customer satisfaction.”