Firms need to make it simple for customers to manage their insurance needs via the medium that suits them best. But with many insurers running on outdated legacy systems, is this easier said than done?
Customers are getting more demanding. As smartphones and tablets become the norm, consumers expect to be able to use these platforms for everything from booking a holiday to altering the policy details on their car insurance policy.
This presents a significant challenge for the insurance industry. With the public accustomed to slick service from the retail and travel sectors, there is pressure on insurers to develop their digital channels.
“Customer expectations are changing,” says Dan Huddart, head of web development at RSA Group. “Their experience with other sectors means they expect to be able to contact us easily and receive the same level of service. They’ll move between channels too – so it’s essential you have a consistent brand message and a service [that is recognisable across different media].”
While it can seem daunting, the benefits of getting a handle on digital channels are huge. “If you hold all your customer data in a way that is easy to access, you can provide a better level of service,” says Paul Wishman, group ecommerce director at LV. “This could be something as simple as recognising they already have a relationship with your organisation and offering them a discount, which helps build reputation and loyalty.”
It also enables insurers to segment their customer base and develop more tailored solutions. Catherine Barton, partner at EY, explains: “Some customers will only want to deal with an insurer through a digital channel. If an insurer recognises this, it can build systems that appeal specifically to each customer.”
There are also financial benefits to going digital. According to Dan White, partner for insurance at strategic digital consultancy Ninety, the cost of servicing a policy can be cut by as much as 50% if an insurer switches from phone to multichannel.
“When an insurer spends tens of millions of pounds on [phone-based] customer service, [going multichannel] is a significant saving. It could be used to buy a telematics system, upgrade technology or reduce pricing,” he explains.
But while other sectors are already enjoying these benefits, there are fears that the insurance industry is being hamstrung by its technology. Although some firms have toyed with apps, many point to their legacy systems as preventing them from enjoying the opportunities offered by customer-facing digital channels. “Legacy systems can and do cause problems,” says Huddart. “It would have been really hard to build some of our digital [offerings] on a legacy system.”
The inflexibility of these systems – many of which were built in the 1980s and 1990s when mobiles were the size of bricks and the internet was a university messaging tool – means the problems are only likely to increase.
Wishman says the increasing availability of data will be a major challenge for insurers relying on legacy systems. “Introduce new data sets such as telematics and big data, and you really put pressure on the spaghetti code of legacy systems,” he says. “This will make it very difficult to benefit from the insight this data gives.”
But while legacy systems can be a stumbling block, White says something more fundamental often stands in the way of insurers developing their digital channels: “A legacy culture is a greater barrier to change than legacy systems. Insurance is a very old industry, with many companies led at board level by people who grew up with mainframe systems. Legacy systems are often used as an excuse for paralysis, when the real barrier to change is in mindset and culture.”
To illustrate the difference between digital and more traditional IT systems, he points to one of the insurers that is successfully developing new customer channels, More Than. When its ‘Name Your Price’ proposition went live, there were multiple releases of the software each day to ensure it met customer requirements. “This is completely alien to a more traditional insurer, which might be used to one release every quarter,” White adds. “I’ve even had one old-school IT director question why you’d need so many releases a day.”
Given these obstacles, Wishman says insurers face some difficult decisions: “You can either keep existing policy administration systems and build separate solutions for your digital channels outside of this, or you can take the more expensive decision that your legacy system isn’t fit for purpose and you have to replace it. A tipping point will come when customers expect you to offer digital channels.”
While some insurers are looking to start again with hefty investments in new systems, others are already successfully overcoming the challenges, either by building new processes on existing systems or by introducing software to support new initiatives.
A good example of this is Aviva’s Quote Me Happy, which was launched in August 2011 for customers who want to self-serve online. “We knew there were customers who were happy to interact with us in this way,” says Steve Treloar, UK direct director at Aviva. “As we were just dipping our toe into the digital space, we decided to build [our self-service proposition] on a separate system. This meant we were able to develop it faster than if it had been built on existing systems.”
RSA is also developing its digital channels, with More Than’s Name Your Price a good example of this. RSA’s Huddart says enabling this success has taken a change not only in technology but also in the way the company plans. “We used to build technology to suit channels, but now it’s much more about developing the service the customer wants and then making it work for the channel,” he explains.
Another firm that has already taken charge of its digital strategy is the BGL Group, although it has taken the decision to build on existing technology, rather than developing totally new software. David Knowles, director of commercial delivery and technology, intermediated businesses at BGL Group, says the company started to really look at this a few years ago, developing an integration strategy and introducing a new service platform to support digital.
“There’s still a lot of value in our legacy system so we look to innovate around it,” he says. “If we find something is starting to slow the business down or affecting our competitiveness, we’ll introduce a best-of-breed platform to change this.”
Another key element when developing digital channels is to focus on the customer. White says failure to do this has resulted in some very misguided initiatives, pointing to claims apps – once widely seen as the way customers would report losses in the future – as an example. “It’s an emotional time, and the fear of loss or being accused of lying is significant [for customers]. At the first notification of loss, customers don’t want to input their details; they want the reassurance of speaking to a person,” he explains.
But insurers are learning from their mistakes. For example, when it is developing new services or apps, Aviva ensures it gathers customer feedback first. “I take my cue from some of the more digitally influenced companies,” says Treloar. “Google releases a beta version of new software to customers and lets them test it. We do the same, with small groups of customers and our employees giving us feedback before we launch.”
White would like to see more of this lab culture across the insurance industry.
“Insurers need to view the digital channels differently,” he says. “Whenever they come up with an idea, they should look to test it with customers lightly, cheaply and quickly. If it doesn’t work in this two-week period, move on. Accepting that it’s OK to fail will help change the culture in the market.”
While many insurers may already feel a little behind the curve, the pace of technological change is only likely to accelerate. Some of the developments currently in the pipeline give an indication of how the market is likely to shape up.
As an example, a solution is being developed that enables call handlers to know as much as possible about a person before the first ring of an incoming call has finished. This could include information about the products they hold and their recent interactions with the insurer – as well as more general information such as how they shop for insurance and their views on price.
“Integrating data in this way in real time would ensure the customer receives the most appropriate service,” explains White. “The call handler will know instantly whether it’s best to speak to them in person, put them through to India or play a message suggesting they use self-service online. It’s a few years off but we are already helping some companies make a start.”
Also making digital channels more of a hygiene factor will be changes in insurance products. Innovations such as driverless cars and smart homes will reshape cover – and, in turn, how people purchase and renew it. “Insurance could move away from annual premiums, with customers using digital channels to select the coverage they want and pay for it as they need it,” adds Barton.
As these innovations start to become standard, the importance of customer-focused digital channels will grow. For Knowles, it’s a simple choice. “Evolve or die,” he says. “Companies that embrace digital will benefit, but those that fail to do so will struggle over the next few years.”
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