By Mohit Manchanda, Senior Vice President and Head of Insurance UK & Europe at EXL
What’s left is a growing concern across the insurance sector that the ‘insurance gap’ we’ve seen emerge over recent months is at risk of becoming an ‘insurance gulf’.
It's clear consumers are already starting to tighten the purse strings. Research from Consumer Intelligence has found that of those looking to save on their insurance, 66% have swapped to a cheaper policy, and 43% have cancelled a policy. Customers are also becoming less patient with how long they have to wait for claims to be paid, with a recent Chartered Insurance Institute Public Trust Index finding the speed of claims being paid is now a top-three customer priority. As a result, swathes of consumers and businesses are either now unprotected completely or don’t have comprehensive enough cover for their needs.
The FCA steps in
Against this tricky economic backdrop and falling demand, the Financial Conduct Authority has stepped in to warn insurers of the dangers of not treating customers fairly.
In recent weeks, the regulator has urged insurers to prioritise customer needs – calling on the sector to avoid selling unnecessary products or add-ons; not charge unfair penalties if people are struggling to pay; provide clear information on policies; and properly assess customer needs to ensure the cover being provided is suitable and affordable.
On top of this, new FCA rules that outlaw attracting new customers with competitive pricing demonstrate that fostering loyalty amongst existing customers has never been so important.
All this points to the need for insurers to propel investment in customer management and support right to the top of the ‘must-do’ list.
Offsetting falling demand by managing costs
With demand falling from consumers and businesses, insurers are likely to see revenues dip. But prices will need to remain low to keep protection affordable. At the same time, insurers need to invest more in customer management to ensure they are not only protecting and supporting consumers but are also meeting regulatory obligations. And with an increasing number of agile and data-driven insurtechs entering the market, the market’s biggest players can’t afford to deprioritise investment in innovation if they are to remain competitive.
This ‘catch 2022’ sees insurers with no choice but to adopt cost reduction strategies that insulate them against these market headwinds. But it’s critical that any efforts to reduce costs do not compromise quality and affordable services for loyal customers.
So how can insurers rationalise operational costs without impacting quality of service?
Digitisation holds the key to unlocking cost savings at the same time as enhancing customer service and support.
The three ‘As’ – AI, automation and analytics are win-wins for insurers. Intelligent and data-led technologies like these allow them to remove costs whilst simultaneously removing friction and enhancing the customer experience. And quality data analytics can lead to considerably more accurate pricing models which help to reduce incorrect over-payment on claims.
These data-driven approaches help supercharge operational efficiency. For example, conversational AI tools can reduce cost to serve by sorting and filtering claims and authorising simple pay-outs more efficiently. This can significantly improve efficiency and customer experience, at the same time as lowering staff costs.
Meanwhile, sophisticated customer segmentation tools that identify different customer characteristics are crucial if insurers are to properly understand their customers and their needs. Being able to answer questions like whether millennials really prefer conversational AI to real people, or if boomers are quicker to complain about customer service means insurers have the insight to create customisable management solutions that can be adapted to fit the needs of different customer segments – especially important if a customer’s changing circumstances mean they need additional support.
Using customer data effectively is also critical if insurers are to properly evaluate and measure customer satisfaction – only then can they really be held accountable for the quality of their service, and remain on the right side of the regulator as a result.
Digitise – and quickly
The challenges facing the industry today mean that its time insurers put digitisation at the very top of their agenda. Unless they urgently prioritise AI, automation and analytics at scale, they risk the triple whammy of compromising customer service, falling foul of the regulator, and failing to keep costs down.
But with the right, targeted investment, creating a virtuous circle isn’t impossible – greater efficiencies that result in improved profits can be reinvested to drive growth and further improve the customer experience. As inflation tightens its grips on the nation, the potential cost-savings from greater operational efficiency could even be passed onto consumers – a move that could prove crucial in maintaining customer loyalty and a competitive advantage.
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