Customer centricity is clearly a resource of considerable importance for any business that wants to live up to customer expectations and, above all, that wants to be in a strategically good position regarding certain aspects that will decide market trends in the coming years.
This obviously applies to all sectors of the economy, and for some it is even more important than for others: one of these is the insurance sector, which, together with the banking sector, is facing a series of unprecedented challenges.
But let’s go in order.
It all starts with a perception
The insurance industry is a very delicate sector, from many points of view.
Talking about risk and adverse events is never easy, and not only because these are things we don’t want to think about, often for cultural reasons. It is very difficult – as always – to make one’s clients perceive the real added value that an insurance service provides in everyday life, since the benefit of such an investment often never materializes and, therefore, one has the impression of spending money for nothing.
Among other things, just like the banking sector, the insurance sector also suffers from a high level of technicalities that often make it difficult for non-experts to understand certain steps, mechanisms, and choices made by the operator of reference.
This difficulty translates into a certain stiffening of the relationship between the insurer and the insured and into a sort of mistrust on the part of the customer himself when he has to choose an insurance policy or a type of service to purchase.
And yet, if you think about it, this represents a contradiction in terms, given that it is precisely in the insurance field that there should be maximum trust, transparency, and clarity, also given the issues that usually have to be dealt with.
This perception not only needs to change, but in some ways is already changing, especially given the extraordinary events that have occurred over the last two years.
The changing environment opens a “new reality”
Recently, KPMG carried out an analysis of the insurance sector that has emerged from the pandemic and found not only that its proper functioning has been (and will continue to be) fundamental to the system’s resilience. It also emphasized how, in a situation of maximum uncertainty, correct and transparent communications and behavior are increasingly the basis for creating a new culture in the sector that conveys confidence and security to the market, to the point that “companies that know how to create a constructive dialog with their customers and learn to use new ways of relating will be able to understand ‘vulnerabilities’ and new market needs that are useful for developing innovative responses on which to build the future.”
This gives rise to the concept of the “new reality“ whereby insurance agencies must not only manage new types of risks, but must also be willing and able to intercept the needs of current and potential clients, so as to be able to respond in the most effective way possible.
The new reality also brings with it new priorities, to which all players in the category will have to adapt to the new context.
Among these priorities there will obviously be the increasing use of digital technologies to make each phase more efficient and to build a truly customer-friendly service.
Transformation is confirmed by a trend
This new reality captured by KPMG for the world of insurance is actually part of a more general trend that has rapidly taken hold in all the main sectors of the economy and which must be observed by all players moving in the market.
Among the many transformations we have witnessed recently, the pandemic and digitalization have in fact pushed companies to change their point of view and priorities in carrying out their business.
At the center of their business should no longer be (solely) profit, but also the customer, the person, with his needs and expectations.
At least this is what emerged from a 2021 report by Deloitte on the most important trends in digital marketing (source: Global Marketing Trends 2021), which showed how the development trends of each player are united by a “shift” in mentality that leads each brand to be increasingly “human-centric” in every aspect.
Even among these insights identified by Deloitte, the central position of the customer and the human component within the business returns as an important thread, as we can see from some of the titles that summarize the trends: Authentically inclusive marketing, Meeting customers in a cookieless world, and Designing a human-first data experience.
It is clear that this same approach must be followed by the insurance sector, where the human component is not only very present but also fundamental at every stage, including the most delicate ones.
But before understanding what an insurance company can actually do, a premise must be included.
What is customer centricity?
It’s easy to talk about new trends in the insurance sector and putting customers at the center of your business, but to be clear about the path and the solutions you need to implement, it’s essential to know what you’re talking about when you mention customer centric insurance.
Customer centricity refers to the “strategy that aligns the development and delivery of a company’s products and services with the current and future needs of its most important customers in order to maximize the long-term financial value of these customers to the company”.
Although the definition seems to be clear, don’t underestimate some fundamental aspects.
The first is the fact that to be truly customer centric an insurance company have to really know its customers, both in general and in light of certain factors, such as their preferences, their propensity or likelihood to be loyal to a given brand, and the potential of each customer, i.e. how the relationship may evolve in the future.
Another key aspect is foresight: a customer centric insurance company that places the consumer at the center must be able to be proactive, knowing its customers well enough to anticipate their needs.
There is a third aspect to this: above we talk about “most important customers.” This means that customers are not all the same, and when placing them at the center, this must be taken into account, since some customers may have a different weight than others or need to receive specific stimuli and treatment.
All of this obviously means two things: on the one hand, insurance companies need to sharpen their data analytics and leverage it to build profiles that are as accurate as possible and capture the less obvious but more human aspects of their customers.
On the other hand, it means that an insurance company that wants to implement a customer centric strategy must be able to personalize the products and services it offers, but also the customer experience provided for each customer, as much as possible.
After all, it is precisely by working on the customer experience that every insurance company can become concretely “customer centric,” designing an experience that is able to meet the expectations of customers and adapt perfectly to their characteristics.
Four characteristics for a successful customer experience
For an experience to be truly capable of making the customer feel valued and central to the business, it should have four specific characteristics.
First and foremost, the experience must be reliable, meaning it must ensure the least amount of unresolved cases or issues that the insurance company has failed to address.
In this sense, it is important to maximize the area of customer service, so as to be responsive and efficient as soon as a customer raises a need or problem.
The second characteristic is to be of value, in the sense that the customer must be able to perceive that the product or service is capable of generating a benefit, a real value precisely at a reasonable price: only in this way can there be true reciprocity in the performance between customer and company.
The experience offered by the insurance company must also be relevant, that is, it must be able to differentiate itself from any other experience that the client may find in the market. This relevance will push the customer to prefer it over all others, beyond the mere functional characteristics of the product.
Lastly, a truly effective customer experience must create trust in the customer, who must be able to trust the operator, since the same is capable of demonstrating not only a high level of competence, but also a certain sense of empathy.
After all, empathy, in today’s context where the human element becomes central as a factor in business development, is an essential element to pursue with every available tool, especially digital.
The importance of empathy has been emphasized on several occasions, including recently during the third edition of the Insurance Festival in Milan, where industry experts agreed that this is the element on which to focus most to ensure the “centrality of the consumer, and to show themselves capable of “listening to the voice of the customer both in moments of contact with the insurer and afterwards, with controls that can ensure even greater quality in subsequent interactions.”
From here we understand that customer centricity cannot be a simple programmatic expression, it must be a concrete and constant commitment that is applied to every phase of the relationship.
But does this effort really benefit the insurance companies that put it into practice?
Customer centricity is best for those who apply it
The answer is obviously yes.
In the insurance sector, investing in the customer experience to make it as customer centric as possible is what distinguishes a leading company with a long-term vision and a future of significant economic growth from the competition.
In fact, it’s only by placing the customer at the center that you can build a stable and lasting relationship with them.
A solid company-client relationship based on mutual trust also makes it possible to increase portfolio retention at maturity, while at the same time improving advocacy and facilitating cross-selling development opportunities.
This will also guarantee a growing involvement of the distribution network, which will be able to generate greater revenues and strengthen the loyalty process.
In the light of all of this, it’s no coincidence to note that the most customer-centric companies are able to distribute an average of twice the dividends, seeing an increase in their ROI.
The benefits of having a customer centric insurance company aren’t just financial
Customer centricity in the insurance sector also has a very positive impact in terms of branding, since it guarantees a modern, digital positioning and a certain ability to stand out from other competitors.
From a strategic point of view, on the other hand, customer centricity is a key tool for opening up new markets and intercepting younger customers who are also important in terms of future relationships.
This was noted by Capgemini in a report from a few years ago (but still relevant), which underlined how only a third of millennials were truly satisfied with their experience with their insurance provider due to a CX that was too rigid and not very receptive to the expectations – especially digital – of younger generations.
It’s no coincidence that insurtechs base their fortunes precisely on this, providing a digital-native service that effectively puts the customer at the center.
After all, it almost goes without saying (or repeating) that there can be no customer-centric experience without implementing a series of digital solutions that are capable of making it relevant and fluid at every stage.
From interactive videos with which to engage the customer, to personalized newsletters with which to intercept specific categories of consumers at specific times, video automation platforms that allow you to cross-reference information in databases to create new content to be used immediately: each of these solutions (and many others) contributes in part to building a customer-centric experience.
And it’s no exaggeration to think that it will be the implementation of these solutions, rather than the type of products, that will decide the fate of the entire sector.