TLDR What to do, what to do, in the InsurTech, innovation insurance world? Insurance remains a ‘sold, not bought’, product. Virtual service is not only becoming a demand of customers, but carriers are embracing the concept based on expectations of efficiency and economy. Will there be a disconnect between service efforts and how customers perceive it? As customers change their habits, can insurance change theirs? What is the common thread?
How an insurance carrier performs is typically known only when an adverse situation occurs, i.e., a claim, and service is triggered for the customer, a customer who doesn’t really know what to expect during a claim experience. So of course the industry knows this and has devised many ways of gauging service performance: from internal surveys, JD Power ratings (Customer Service Index), and most recently, by asking claim customers how they would rate the service they received in terms of one question,
“How likely is it that you would recommend this company to a friend or colleague?”
The answers to that clever question are the basis of the calculations for a ‘Net Promoter Score’ (NPS), a service (loyalty) measure devised by Fred Reichheld and other clever minds at Bain and Co. How does this tie in with InsurTech principles? Seemingly through another three-letter acronym, IoT (Internet of Things).
What are you talking about, you say- NPS is a survey administered measure made available to but a fraction of insurance customers, is but one question, and disregards the experience of the majority of the customers. IoT speaks to connected devices, ostensibly meant (to many in the insurance world) to detect adverse conditions, track adverse conditions, determine behaviors that might predict adverse circumstances, and by extension reduce carriers’ exposure to claims. One measures experience, and one works to predict experience.
Well, I’m here to say that the two concepts couldn’t be more intertwined, and as innovation within the insurance industry becomes more practical, and as IoT becomes more ubiquitous, the interplay of NPS and IoT will become clearer.
At its root NPS was developed as a means to measure what the folks at Bain found as the key driver of business growth and success- customer loyalty. Loyalty has been a proven factor in business growth and businesses who foster customer loyalty not only retain those customers’ business, but those same customers are motivated to bring other business along. Enhancing customer loyalty, adding value to the customers’ lives, and refuting the contention that “loyalty is dead” (see Mr. Reichheld discussing that here ) is the foundation of NPS. And everyone touts their NPS results, don’t they?
So along comes IoT principles as part of the InsurTech wave, and its primary advocate in the InsurTech world, Matteo Carbone. (In an odd coincidence as with Mr. Reichheld, Mr. Carbone is also a Bain alumnus.) Mr. Carbone has espoused the concept that “all insurers will be InsurTech”, but in addition to that his IoT Observatory has become a central authority regarding insurance effects of connected devices in autos, houses, and to some extent, wearables. And a main principle he covers within his recent article, “Smart Home Insurance Strategy 101”, is loyalty :
“This way of enhancing proximity and interaction frequency with policyholders (connected devices and value addition) – while creating new customer experience and expanding relationships – is one of the reasons for adopting IoT in home insurance. These interactions with customers are one proven way to earn higher loyalty and allow the differentiation from competitors.”
There’s that word- loyalty. In an insurance world where virtual service is becoming the holy grail for carriers, how will loyalty remain a factor that can be influenced by carrier service? Even the InsurTech poster child, Lemonade, has to have concerns that as long as NPS remains an important measure of customer service (Clearsurance may have ideas about that), interactions with insureds must remain focused on maintaining or building loyalty. Can a bot do that?
IoT programs have that opportunity to integrate technology, virtual service, and value addition that can build customer loyalty, for example, value-added services as noted by Mr. Carbone. “But the real opportunity is to solve customer problems by delivering enlarged value propositions for their homes. (Some) services enabled by home IoT are:
- Safety/Security: remote monitoring and emergency services to provide peace-of-mind to the homeowner;
- Efficiency: tracking and optimization tools to contain the expenditures (energy and water) at home;
- Property services: concierge with a platform of certified service providers (such as plumbers, metal workers, carpenters, construction workers or electricians) for home administration;
Seems any or all of those points would serve to build customer loyalty in the absence of direct service from claim staff. And what of agents? Insurance sales and servicing of policies remain a predominantly agency-driven proposition in the US and Europe- agents/brokers are beginning to recognize the need for provision of more to customers than just quotes. In markets where ecosystems and smart device access are the primary entry for customers to insurance, loyalty may be even more fragile as ecosystem change is simply an app away. In all matters the focus must remain on enriching customers’ lives, on #innovatingfromthecustomerbackwards.
NPS and IoT- the concepts can’t make insurance a more ‘bought, not sold’ proposition, but effectively focusing on IoT in an increasingly virtual insurance world can help maintain or build loyalty, and as the architects of NPS found, that is the foundation of an effective growth strategy. The two principles have previously marked different paths but are now on intersecting courses.
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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