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How innovative digital could transform the insurance industry

Majid Shabir Wednesday, 13 May 2015.

The insurance industry in general has been slow to embrace digital. If you compare the customer experience you get from other areas - such as retail and travel - there's no doubt the insurance sector lags behind and is ready for change. Home and motor insurers are missing a trick – digital can be used to improve the perceptions that customers have about these 'grudge purchases'. Used well, digital can help to create happier and more informed customers, which in turn increases customer loyalty and advocacy – traditionally a problem area for the insurance arena.

shutterstock 223933966How? It's all in the big data

Insurance companies already hold vast amounts of data about their customers, and their actuarial and underwriting teams use it brilliantly to analyse customers and set premiums. But companies could also use this data to improve the customer experience and really engage their customers by tailoring, humanising and personalising the entire process.

There are opportunities for improvement at every stage of the customer journey – pre-sales, sign-up and retention.

Attracting customers

The first area to look at is attracting customers – the pre-sales process. It's vital that insurers focus on the customer, and insurers could – and should – use the data they already hold to tailor communications, raise brand awareness and drive customer engagement.

For instance, many people think about buying new cars in March or September. So insurers could run campaigns to generate interest at that time – by using the data they already hold to tailor and target that marketing. For example, using their breakdown cover data to identify the nations' most unreliable cars, or by listing the most common reasons for customers making a claim having just bought a new car.

With the Financial Conduct Authority (FCA) pushing for greater transparency, it would also make sense for insurers to be more open and share some of their data with potential customers. Take someone who parks at a local railway station and commutes to work by train. Does the station's car park have a good safety record? Is there a statistically safer place to park close by? Companies will already know this, so why not share this knowledge. This not only makes life easier for the potential customer, it's also likely to impress and engage them.

Signing up

The sales process could also be greatly enhanced by better use of data through digital means. Nowadays, customers expect feedback, interaction and a more humanised process when they buy something. Virgin Atlantic, for instance, is excellent at adding friendly, personal touches throughout its sales process. This will become the norm – and the insurance industry needs to get on board and recognise such trends sooner rather than later.

When looking at optional extras such as breakdown cover (known as add-ons), it's more helpful and personal to tailor the promoted add-ons to a customer's particular needs. Did a customer recently have an accident where they could have benefited from legal cover and a courtesy car? A gentle reminder makes an insurer look like it cares – and also ensures the customer gets the appropriate cover. If a customer tells a company they don't have children, they shouldn't be offered a child car seat cover option. And if they have a brand new car, they're unlikely to need breakdown cover.

Another important aspect of today's online shopping experience is the shopping basket. Today's online consumers expect to be able to add an additional item to their basket, have it show immediately and see the total price update dynamically. This gives a much more helpful, transparent experience.

The online shopping basket experience is now completely normal in other areas, like travel and retail, so when it's missing from an insurer's sales process, the experience seems old-fashioned and alien. It can lead to a lack of confidence from consumers and leave them wondering if the experience of being a customer of this insurer will be just as clunky and behind the times.

Some large insurers, such as Direct Line, AXA, Churchill and Aviva, are starting to go down the shopping basket route. This isn't the norm, though, and other major players such as Tesco and esure don't offer this at all.

The insurance industry could also learn from online retailers like Amazon, and offer suggestions based on data they hold, for example: 'Based on the information you've given us, you might like this' or 'People like you also bought this'. All this adds up to a more helpful, easier and warmer experience.

Keeping customers

So there's plenty of scope for improvement in the pre-sale market and during the sales process. But the real opportunity for significant, transformational change lies in the post-sale arena. It's not easy to build relationships and loyalty with consumers in the motor insurance industry, and this is an area of key concern for providers. Embracing digital could hold the key.

Other industries and companies use the data they collect from their customers to provide customers with rewards, benefits and useful information, for example the Tesco Club card or Sainsbury's Nectar card. Telematics can provide a way for the motor insurance industry to do this, too.

Telematics is in its infancy, but it could be a huge driver for change. A tracking device is installed in a car to track the driver's every move and monitor how well they drive. At the moment, insurers are using this data to determine premiums – particularly for younger, newer drivers. They can prove they drive safely (or not!) and premiums are set based on that.

But the industry could also use this data to engage and reward customers. Customers could save points and earn rewards for good driving. For example, an insurer could partner with a major fuel provider and offer money off fuel when a customer reaches a certain number of points.

The health insurance space is already seeing this kind of partnership, with PruHealth offering a chance to earn points and rewards for customers leading a healthy lifestyle, measured using a variety of health and fitness apps and devices. Rewards include weekly cinema tickets, free Starbucks drinks and a range of retail and travel discounts. Telematics data could easily be used to reward a motor insurer's customers in a similar way.

Telematics data could also be used to deliver even more value. Insurers could provide reports to customers to help them become better, safer drivers, with a smoother, cheaper driving style. Over time, customers will build up valuable data with the company, and will be far more reluctant to leave.

Thinking customer

These changes all start with the customer. When insurance companies understand their customers' motivations, needs and desires, they can then revisit their data to discover how to best use it to enhance customers' lifestyles and experience.

It's vital, too, that when companies present information back to the customer, it's visual, transparent and engaging. It also needs to be accessible on the device of their choice, at the time of their choosing. People increasingly want to access this type of information on the move, for example during a train journey on the way home from work.

Essentially, this is about humanising processes and services, and providing a more tailored, personal experience. Insurers can learn from other industries and look to connect-up customer data and partnership opportunities to create a new digital eco-system, which rewards customers.

For this to take place, there needs to be a significant change in culture, attitude and mindset, and this needs to come from the top. Someone at the highest level has to really believe in and understand the benefits digital can bring, and be willing to invest the significant resource, time and commitment into it. It's not a quick fix – it's a long-term programme of work that will take time to pay off.

But the benefits of customer loyalty and retention are huge. Those insurers that don't invest or look to new ideas in this crucial area, could quickly find themselves being left behind.

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Majid Shabir

Majid Shabir

Founder of Instinct Studios

In 2003, following a Multimedia Computing Degree, Majid was invited to join his University's programme for young entrepreneurs. Two years later, at the age of 26, Majid had grown Instinct Studios to 25 employees. He's driven by a burning desire to make a difference and is always looking for people with raw talent and ambition to join the team.

Majid is married with two young children and enjoys animated movies, computer games, sport, travel and eating out.


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