Preparing for Insurance Moments of Truth

Transcription

1 Sam Stuckal and Karen Pauli CEB TowerGroup Insurance September 2013 Executive Summary Insurance customers buy policies for financial security. Like all consumers, they have diverse needs that change over time. However, when insurance customers have a critical insurance need, they expect a quick and easy solution like a swift claims payment or an easily created life insurance plan for financial security. At those insurance moments of truth, insurance carriers have a chance to provide quality service, increase customer satisfaction, and differentiate from the competition. Or they can respond slowly, ignore prior customer experiences, and fulfill insurance s reputation for difficult customer service. CEB TowerGroup Insurance has been engaged in a long-standing conversation with business and IT leaders around the topic of customer centricity and sales and service excellence. We ve found that leading insurers differentiate themselves by treating each customer as an individual while recognizing that each customer case has common and solvable challenges. Opportunities for adaptive sales and service excellence include: Revenue Growth: Underwriting quality Estate planning Annuity customer retention Service Excellence: Policy loans Claims straight-through processing (STP) Contact center excellence Service excellence requires a tight integration between workflows and business process management tools. The goal is to apply what an insurer knows about a customer along with the best possible solution to their problem and reach a level of mass customization that makes each insurance moment of truth a positive customer experience, while maintaining cost-efficiencies for the insurer. Reviewing examples across different insurance lines shows how carriers can ramp up service excellence with mass customization and adaptive tools while satisfying customers and meeting cost constraints. Insurance Business Drivers All insurers share a number of business challenges that technology can help address: High customer service expectations Costly, labor-intensive workflows Efficiencies in a low rate, slow growth economy Tightening regulations Workforce retirements Content proliferation Legacy systems CEB TowerGroup Research is available on the Internet at

2 The ability to quickly and effectively respond to diverse insurance customer needs within these constraints differentiates customer service leaders from laggards. The key is to identify and categorize problems and requests, understand the impacts, and apply efficient, repeatable solutions based on prior experience. A number of external factors have raised the bar for the value that insurers provide to their stakeholders, both policyholders and agents. These business drivers are beyond insurers control, but not above their ability to respond. One critical change involves higher customer expectations for how companies, especially in financial services and insurance, deal with them. Customers Expect In-Person Contact for Complex Tasks Today s consumers have some knowledge of and understanding about life, annuity, and property and casualty insurance. Opportunities to learn about insurance online or through the feedback of others are easily accessible, detailed and useful. However, when it comes to getting purchasing advice or service specific to their needs, insurance customers still value direct contact either inperson or over the phone. That ensures that their unique needs can be heard, customer-specific solutions offered, and the right insurance product purchased. Data from CEB TowerGroup s 2013 Customer Experience Survey in Exhibit 1 below confirms this preference. IN-PERSON OR PHONE CHANNELS PREFERRED FOR COMPLEX ACTIVITIES In which channels do you prefer to purchase new insurance products and services? Percentage of Insurance Customers, % 9% In person, face-to-face (agency) 3% 3% Over the phone 35% Online Unsure 27% With a mobile device application 30% 46% 2% 16% Through the mail or postal service CEB TOWERGROUP INSURANCE. All Rights Reserved. Exhibit 1 n = 527 Source: CEB TowerGroup Insurance 2013 Customer Experience Survey That means insurers need to build a reputation for ease of use and personalization one customer interaction at a time. The goal is to have positive customer sentiment, maximizing customer promoters while minimizing detractors. With the rise of social networking, one very negative impression can cast a thousand ripples in a more permanent way than any complaint letter. CEB TowerGroup Insurance research indicates that while only 15% of insurance consumers post their opinions of their carrier on social media; over a quarter consider this information as input into their insurance purchasing decisions. 2

3 Also, while insurance budgets are beginning to increase, marketing budgets are still capped at many insurance carriers, so creating advocates out of customers with quality service makes sense. The challenge to winning advocates is that they have diverse needs concerning the income that they provide in an emergency, how they want to retire, and what property they wish to protect. That is why a high degree of customization is required at the first critical Moment of truth interaction when the right product is identified, priced, and purchased. Costly Labor-Intensive Problem Solving High quality service from retailers and the instant response of online internet merchants has set high expectations for financial services especially for insurers with complicated business workflows. Meeting those high expectations is difficult enough, but meeting those expectations without increasing cost-to-serve can be exceedingly challenging. When providing personalized service in insurance, the number of hand-offs between the customerfacing front office and the transaction-processing back office can be difficult to track and manage. Service excellence requires business processes that are well defined, properly coordinated, and efficiently managed so inquiries or issues are resolved as customers want and expect. CEB TowerGroup Insurance research demonstrates that those financial institutions that effectively manage processes from end-to-end increase revenues at a rate of 42% higher, and find opportunities for efficiency 28% faster than those that don t. Direct, in-person communications such as conversations with agents and calls to the contact center are still most important to customers. However, newer communication channels such as online chats, , and instant messaging have added to the complexity of providing personalized service as shown in Exhibit 2. The expansion of communication channels and intensity of talk between carriers and policyholders can challenge service representatives to respond knowledgably, especially if they lack a defined workflow template to guide them. HIGH-TOUCH, PERSONAL PROBLEM SOLVING In which channels do you prefer to receive customer support or assistance with an insurance product problem/issue? Percentage of Insurance Customers, % 2% 2% Over the phone In person, face-to-face (agency) 16% 46% Online Unsure 27% 46% 2% 27% 16% With a mobile device application Through the mail or postal service CEB TOWERGROUP INSURANCE. All Rights Reserved. Exhibit 2 n = 527 Source: CEB TowerGroup Insurance 2013 Customer Experience Survey Meeting the distinct communication preferences of so many clients requires the ability to broadly capture the needs of many and continually adjust in a mechanized, cost effective manner. That s when reusing lessons learned meets customer needs without excessive questions and multiple attempts to solve matters most. 3

4 Focusing on Efficiency in Today s Low Rate, Slow Growth Economy The good news for borrowers is that the era of historically low interest rates and easy money will last into the near future in the United States and abroad as regulators look to prime the pump of their economies. The bad news for insurers is that the era of low interest rates will last into the near future. Exhibit 3, which is based on the federal funds rate charged to banks illustrates that the exceptionally low rates post-2008 can be expected to continue into the near future. The same low-rate trend holds internationally. Federal Fund Rate LOW INTEREST RATES FORCE INSURANCE INVESTMENT EARNINGS DOWN 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 27% 1.0% 46% 16% 2% 0.0% CEB TOWERGROUP INSURANCE. All Rights Reserved. Source: Federal Reserve Bank of New York Exhibit 3 Low rates are bad news because insurers in all lines of business depend on investment income from safe and conservative investments like assets like bonds. Bond earnings provide liquidity to maintain their ability to pay claims and provide annuity payments; but low governmental lending rates and easy money policies depress the rates of bonds. So insurers will continue to be hard pressed to generate large amounts of investment income from bonds. That means insurers must retain their focus on cost efficiencies. With new sales and pricing depending on market competition and the commoditization of insurance products, driving cost out of the organization has become a constant drumbeat throughout the insurance world. Yet according to a recent CEB survey, more than 50% of institutions consider themselves ineffective at managing processes end-to-end, which adds to errors, rework, and labor costs. That explains why insurers are increasing investments in better process tools such as business process management (BPM). In fact according to CEB TowerGroup s 2013 survey of insurance spending plans, 56% of insurers will be increasing BPM investments to avoid rework and become more efficient in their sales and service processes (see exhibit 4). 4

5 INVESTING IN PROCESS EFFICIENCY Forecasted Insurance Technology Spending Business Process Management (BPM) through % 50% 56% 40% 30% 20% 22% 10% 27% 15% 0% 7% 46% 16% 2% Decrease No Change Increase Unsure CEB TOWERGROUP INSURANCE. All Rights Reserved. Source: CEB TowerGroup Insurance FSI Technology Survey Exhibit 4 Tightening Regulations and Insurance Suitability A new wave of compliance mandates is bound to significantly increase cost pressures on insurers, as well as the focus on strict regulatory compliance to avoid fines and other negative non-financial impact. One such regulation has to do with labeling non-bank financial institutions like insurance carriers as Too Big to Fail. These systemically important financial institutions (SIFIs) will have increased solvency requirements than other insurers. This will make process efficiency in risk management even more important. In fact, a recent CEB survey on the state of process management saw an 8% increase in risk management as driver of purchase interest in BPM tools from 2012 to Another new regulation comes from 2010 s Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes insurers and agents together with investment firms, banks, and stockbrokers in applying a standard of fiduciary care that that they need to provide for their customers. The fiduciary care requirement emphasizes a know your customer (KYC) standard when providing suitable insurance solutions. That requires a high degree of operational flexibility and retained knowledge of customer needs across both the sales and service components at insurers. Know your customer and suitability is especially important for carriers that provide insurance products with an investment component to stay ahead of inflation when saving for retirement. These regulations intensify the customer information burden on most carriers and increase the level of complexity of many moment of truth processes, making it even more difficult to manage both processes and customer information in an effective manner. Although the natural insurer reaction to these demands might be to simplify by eliminating exceptions and creating standard responses to most customer situations, without robust case and process management capabilities this significantly impairs the amount of personalization a carrier can deliver during these moments. 5

6 Service Continuity as the Baby Boomers Retire Perhaps the biggest challenge to achieving service excellence is the limited supply of insurance brainpower, experience, and specialized skills. Many talented insurance knowledge workers from the baby boom years are approaching retirement or have already moved on from their insurance jobs. That means the remaining insurance knowledge workers must do a better job working together, handling large volumes of content and dealing with critical, but aging core administration system. Teamwork and collaboration are the underlying themes of all successful insurance service organizations. With knowledge workers who may move from role to role or even retire, the need to store and share the institutional knowledge about products and customers becomes critical to satisfying customers. Having a full view of all communications, artifacts, and handoffs in each customer s case ensures excellence in meeting a customer s needs at an insurance moment of truth like a claim or the start of a retirement annuity payout. In complicated service organizations like an insurance contact center, there are many handoffs and touch points. Orchestrating so many moving parts requires a careful blend of processes and tools. Content Proliferation One of major back-office challenges that insurers face is managing the large data stores of meaningful documents that accrue over the life of a policy. This trend will only intensify as regulation increases customer information requirements. Because insurance processing and customer service is information-intensive, storing and accessing these large content volumes needs to be highly organized and quickly available. Although content management tools help, they do not merge into complex processing that needs to adjust and inform. Ideally the history of each individual insurance case should be available, open, and readily apparent to the customer service representative who happens to field a call with an unusual problem. Processing New Products on Legacy Systems Most insurers rely on core policy administration systems that worked well in the past, but present challenges today. These legacy systems often lack the flexibility for new products or require extensive customization for minor changes. There s also a baby boomer resource issue as many of the IT staff who have expertise in older systems approach retirement. However, the effort to replace legacy systems is often too risky and expensive due to complicated integration requirements, the high cost of data migration, and retraining. That s why so many insurers look for ways to balance old core systems with new capabilities without resorting to shoeboxes and erasers. Ideally there should be organized process solution that can be customized to bridge old core systems with new processing requirements. The challenge is to eliminate manual noise and build automated instruments supporting products without manual cut and paste. 6

7 Dynamic Case Management at Insurance Moments of Truth What does a solution look like that can provide mass customization of insurance services to meet the diverse needs of many customers? At its best, an insurance case management solution to manage processes will have the following components: A complete and well-organized electronic case folder Document services to access many content repositories Management of case functions, handoffs and ad-hoc assignments Coordination across core systems, data warehouses and communication hubs Auditability To better understand of how these come together usefully let s look at some insurance examples focusing on revenue generation and after-sales customer service. Leveraging Smart Business Processes to Grow Revenue With low interest rates limiting investment income and most of the easy and obvious cost cutting completed, insurers continue to stress organic growth and customer retention. Although that s always been how insurers operate, what s new is the way in which insurers have begun to customize sales workflows to meet the higher expectations of today s agents and consumers. A popular tool that insurers use to apply a mass customization strategy across a wide range of distributor and customer needs is business process management (BPM) software. With a BPM tool, insurers can create and monitor sales processes that are both repeatable and flexible to diverse needs. Examples of insurance functions that can benefit from the use of BPM include underwriting, life insurance planning and customer retention. Connecting Art and Science in Underwriting It takes years to become an accomplished underwriter. Unfortunately, many insurers do not have the luxury of slowly grooming underwriters and lack of experienced underwriting talent is a challenge for many insurers. This trend means that insurers must support the experienced underwriters they do have. Technology that removes routine tasks through automated decisioning or routes tasks to less technical staff is essential to retaining experienced underwriters. Integrated data and analytics are elemental in executing against these strategies. Because art will always be important in underwriting, particularly for complex lines of business, informing human-based decisions with external information and expert collaboration through process automation means that critical decision points are not lost. Commercial lines underwriting executives are experiencing unprecedented competitive pressure to write business and the difference between winning and losing starts during the quoting process. Leading distributors are choosing not to work with insurers that are difficult to do business with. The quoting process, which historically used to take multiple weeks, even a month or more, is now expected in hours. Obtaining data and information, and then bringing all parties needed for a decision to work on the quote simultaneously or in pre-set order, is critical to meeting distributor expectations and competitive demands. Once the quote is accepted, insurers with leading case management technology will then be able to issue requested policies faster because quote information, the base for full policy issuance, will be immediately available. This is a win-win for the consumer, distributor, and insurer. 7

8 Estate Planning for Small Family Businesses Preparing for Insurance Moments of Truth Over time life insurance s tax advantages have become a valuable tool for high-net-worth individuals and families, especially in managing estate taxes for small business owners who may not seem wealthy, but are treated as such by the I.R.S. Of course each small business is different and the needs of inheriting family members can vary widely. That s why financial advisors who support small businesses are often challenged when creating estate plans for their clients. Often they turn to a life insurer with products that can be designed to ensure family needs are satisfied when small businesses suffer the loss of a founder or key person. Once a claim is filed under the life insurance policies in an estate plan, a moment of customer service truth has been reached. There s much more than just a loss of income, there may be a need to quickly fund ongoing business expenses as well as family needs such as mortgages and college tuition. Of course each small business has different needs but all need the same level of attentive services both when setting up an estate plan and executing one. Often, the use of a life insurance estate plan is years after the setup when the insurance knowledge workers who set up a plan may have moved to another firm or retired. So there is a real need for insurers to support a wide variety of estate planning needs with a high level of service continuity. Annuity 1035 SWAT Teams Policy preservation is an important challenge for both life insurers and annuity providers. Although policy loans are the issue with life insurance, annuity policy leakage is more a function of fees and tax laws. Annuities make sense for clients with patience and long-term financial goals such as retirement. That s why many policies contain a schedule of charges to ensure that each customer gets the value as intended. Yet these schedules decline over time and once finished, there is no guarantee that a customer cannot move the policy to another insurer with an additional commission, fees, and possible decline in value. Often an independent agent or broker will suggest moving the policy in order to capture an additional commission in a process called churning, which taxes advantage of section 1035 in the US tax law. Of course none of this is to the benefit of the customer or to the original insurer. So handling a 1035 exchange becomes a moment of truth instance between an annuity provider and its customer. That is why annuity providers have developed specialized SWAT teams that provide triage when a 1035 exchange request comes in with the goal of retaining a policy and the customer s value. Of course each situation differs and requires a personalized approach that may include more generous product features, fee reductions, or additional earnings guarantees. There s a high degree of customization applied to each case by annuity SWAT teams. The need for supporting tools and processes that retain what works and identify what does not is critical for these teams to succeed. 8

9 Smart Processing for Personalized Insurance Service Consumers and distributors continue to push for a more intuitive and personalized insurance experience. In fact, there is growing intolerance for a lack of individualized preference in sales and service channels. Know your customer is more than a compliance theme, it s a service standard. However, with insurers awash in content and adding new communications channels like instant messaging and social media, creating a better insurance experience is difficult as insurers strive to improve operational efficiency and reduce costs. For instance filing an insurance claim is often an intense and even emotional experience. Whether due to a retirement, a family loss, or damage to a home or auto, a fast and personally customized the claims experience is essential to customer satisfaction. Policy loans from life insurance with cash values are another opportunity for insurers to provide personalized customer service. Often policy loans are requested during times of emergency or financial stress. Providing policyholders with access to their funds easily as promised always generates satisfied customers; but making the policy loan process both customizable and repeatable is a true challenge. Finally, quality customer communications is an imperative capability that separates leading insurers from their competitors. That s why insurance contact centers are now an integral part of meeting customer satisfaction targets, goals for service levels and competitive objectives. Managing Complexity in Claims Operations Settling claims is a very complicated business. Internal processes have many moving parts and a whole host of individuals must execute tasks toward the ultimate goal of paying and closing the claim. CEB TowerGroup research shows that claims executives believe that operational efficiency and customer satisfaction are almost equal in importance so finding technology solutions that can drive both outcomes is critical. Data capture from multiple sources, and aggregating the data for application of analytics and process management technology is elemental in driving straight-through processing. A claims environment that can eliminate human intervention for routine claims handling meets both cost containment and customer satisfaction goals. While STP is important, claims executives need technology support to improve outcomes for more complex claims. Case management technology permits multiple claims disciplines to work on a claim simultaneously, in a fully informed environment. Because complex claims can frequently involve experts from liability, physical damage, property damage, and litigation, to mention a few claims specialties, a collaboration environment is essential for speed of response and to reduce costly decision errors. Complex claims frequently involve external participants, e.g., appraisers, outside council, exposure experts, or third-party administrators. Leading case management technology facilitates efficient and timely participation in the claim life cycle of both internal and external participants. Process management joins internal and external experts at the right time for maximum financial and customer satisfaction benefits. Catastrophic events are the true test of a claims organization s ability to provide superior service. Leading insurers support catastrophe response with mobile capabilities. In a mobile catastrophe response environment, immediate access to critical policy and customer information, across multiple products, is essential. Frequently, field claims adjustors need to collaborate with home office experts and case management technology facilitate rapid decisioning. When a customer has 9

10 lost everything, being able to respond with assistance in minutes and hours, versus days and weeks, is imperative. Preservation: Keeping Policy Loans Above Water A useful feature of some life insurance policies is the ability to maintain a cash value, similar to a private bank account. Often the cash value will build over time based on interest rates like in universal life products or vary with stock markets like variable life policies. Over time these cash value bank accounts grow and become a source of liquidity for policyholders. That s when a policy loan feature comes into play. There are many reasons why a family may tap into a cash value policy through a policy loan, but often it s a financial emergency. When a policy loan is requested, it creates a customer service moment of truth between an insurer and an insured. That occurs when there are problems repaying a loan. That s when smart business processes can be applied as a way of understanding and saving a policy loan before it goes under water and a policy is lost. Sometimes reductions in cash value or new payment schedules can be applied. Regardless, each policyholder has different needs and options so the process of saving a policy becomes both an art and a science with many customization options. All of the support knowledge workers in an insurance contact center need access to an organized and up to date case file for each policy with a loan. That s where intelligent policy loan processes start. Creating Strategic and Operational Advantage in Contact Centers Historically, call centers were built in siloes one for billing, one for policy support, and one for claims. This environment led to significant distributor and consumer dissatisfaction, and was expensive for insurers. At leading insurers, call centers have evolved into contact centers so that complex inquiries can be addressed without hand-offs or callbacks. This is an almost impossible business outcome to execute against without aggregated policyholder information and sophisticated process management. Because modern contact centers field inquiries from multiple channels, not just the phone, and also respond via multiple channels, an agile case view of the customer is imperative. Given the need to include field and home office experts in responses, collaboration from a point of unified information is essential. On the receiving end of advice and service, the consumer wants to be acknowledged as a unique and valued customer. Personalized communications is a must to assure customers that they are not just an anonymous financial statistic. The trick in today s multi-channel world is that communications must shift between channels seamlessly, which requires leading technology to support this outcome. At many insurers, contact centers are an integral part of the above-identified underwriting and claims scenarios. As insurers consider underwriting and claims technology support, contact centers must be a part of the technology road map. If contact centers are a secondary area for technology support then underwriting and claims expectations for delivering superior distributor and customer service will not be realized. 10

11 Conclusions Insurance customers expect an easy and personalized sales experience from building a financial security plan through underwriting to the point at which they may cancel a policy and move it elsewhere. They also demand high quality service regardless of the line of business, insurance product, or the type of request or issue to be resolved. Part of the service challenge involves the pressing constraints such as rising customer service expectations, an aging workforce, and the commoditization of insurance products. Add in the ability of the internet and social networking to spread a complaint like wildfire, and insurers need to manage each case as if their reputation depended on it. It does. More importantly, customized selling and personalized service can prevent the problem of those who would not normally complain, but rather walk away and complain online later. The most challenging problem customer is the silent one. But insurers are taking note and turning to better tools to manage their sales and service operations. That s why 56% of insurers surveyed by CEB TowerGroup Insurance will be investing more in BPM solutions in the next two years. With these tools, insurers can store customer preferences and retain lessons learned to create layers of mass customization that can be accessed by agents, brokers, and customer service representatives to provide a high quality sales and service experience. If an insurer can successfully apply mass customization tools to create more personalized workflows, then BPM technology will help build higher levels of satisfaction among both agents and policyholders. OpenText commissioned CEB TowerGroup to conduct independent research and analysis of case and process management practices and trends in financial services. The content of this report is the product of CEB TowerGroup and is based on independent, unbiased research not tied to any vendor product or solution. Although every effort has been taken to verify the accuracy of this information, neither CEB TowerGroup nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this research or any of the information, opinions, or conclusions set out in the report. 11