Personal lines insurance has always been at the forefront of technology adoption. The characteristics of high transaction volumes and low price make it the perfect candidate to drive efficiency savings in volume and squeeze out one more percentage point of margin. It has seen a steady progress from face-to-face, to telephone, on-line and now mobile.
The sad thing is that during this time, levels of service have steadily declined as the concentration on price has become all consuming. We are bombarded almost every hour with a plethora of TV, paper and digital advertising telling us we are being ripped off and can get insurance cheaper from the next company - a perfect tautology!
In the end, nobody makes a profit, with the exception of niche players who charge for better service. The UK motor market, one of the most competitive and technologically advanced in the world, has scarcely broken even this century and has to be subsidised by other lines of business. Given Combined Operating Ratios of more than 100%, everything from advice and service to quality of coverage has been sacrificed on the altar of lower premiums, with the resulting high levels of churn. Because most of the costs of a policy are in the first year, this ends up raising the costs and therefore the premiums for everyone. How to break out of this vicious spiral of decline has exercised some of the best brains in the industry.
Big Data has been put forward as the answer, but the way it is being used in insurance only marginally helps refine underwriters’ insight into product development. However, now a new breed of technology, exploiting data, is coming to the fore, which for the first time in years will allow us reverse the trend and restore service in personal lines insurance.
Next-Best-Action (NBA) analytics and decisioning creates a customer experience which currently most insurers can only dream of. Let me describe how it works – it takes place right at the point of contact with the customer. Imagine that a customer interaction could suddenly be frozen in time and your very best staff could have unlimited time, resources and data to create the perfect outcome for that customer, based on what the customer is asking for and everything you know about them. That is what NBA does, using fast and intelligent software. It constantly analyses the interaction in real time, adapting and learning as it goes, popping up messages that guide the operator (call centre or customer self-service) to the optimum possible result, efficiently and effectively.
"By building the rules of engagement into software, no two customer interactions will be the same because no two customers are the same."
By building the rules of engagement into software, no two customer interactions will be the same because no two customers are the same. By building unique interactions tailored to that one customer and deploying 100% best practice from the insurer side, they ensure soaring levels of retention and customers who endorse their brand.
The leading-edge insurance organisations are starting to leverage this technology today. They are using the experience they gain from customer interactions to refine and perfect the body of rules which make the client say, “Yes please, where do I sign?” and, “No, I don’t want to move my insurance”. And they are simultaneously improving their reputation and adding millions to their bottom lines. As the commercial advantages and customer experience improvement from using this technology is felt, all insurers will have no choice but to follow suit. When they do, they will fast become a digital enterprise.