The Good and the Bad of Today's "New Normals"

The Good and the Bad of Today's "New Normals"

I’m enamored of Donald Light’s recent report about the “New Normal” for insurers. (For the summary, click here.) It does a nice job showing how the lukewarm economy is impacting insurers, and should be reflected in their IT strategies. It’s a sobering picture, in many ways.

But for those of you who make a living in some part of the insurance industry, all is not lost. There are other new normal factors in play that should help to balance out the doom and gloom scenarios being driven by the economy. For example:

We’re really getting somewhere with this Internet thing. The wry tone behind that lead stems from the fact that it has clearly taken us longer to embrace the Internet than it should have. On the other hand, every insurer I talk to now reflects Web-driven customer behaviors in their strategies. This was inevitable, because people of all ages are now Web consumers. But it also produces some efficiency opportunities, like replacing paper with emails and text messages. And replacing snail mailing of forms with guided Web sessions that create clean streams of data. This is good news for insurers, and getting better.

As consumers, we’re pretty darn reachable. I just got an email from my mother-in-law (she’s a well-intentioned email forwarder, and an example of my previous point) saying that my cell phone number is about to become fair game for telemarketers. As dreadful as that sounds, it reminds me that I can now have trusted, known providers reach out to me virtually anywhere I am, 24/7. If my auto insurer calls me, it could well be that I forgot to pay my bill, and I will be grateful. But if they want to deliver a clever product pitch at the same time, I just might say yes. Good for me, good for my insurer.

Coffee brings us together, despite the calories and the cost. I probably drink too much coffee. But I totally buy into the thinking that a simple pleasure now and then is a good thing. So imagine my surprise when I pulled into an oddly orange coffee shop in Chicago and discovered that it was a front for…ING Direct? Now, I did not buy insurance from ING that day, even though the caffeine (and a biscotti) put me in a good mood. But there were lots of people there, and someone probably did. Or will because they snagged some info while they were there. The point is that new business models are emerging, in perfect sync with changes in consumer behavior. Coffee and free wi-fi are influential, and smart insurers will leverage that fact.

So next time you’re relaxing in a cyber café, have a latte, fire up your laptop, and check out Donald’s report if you can. It’s important and interesting reading. But remember that you’re part of a number of new normals, and some of them are very good for our industry.

Measuring the value of your web sites

Measuring the value of your web sites
The Guardian newspaper in the UK reported that the UK Government is looking at closing up to 75% of it’s websites. The challenges facing the UK Government in terms of cutting costs and ensuring that they are getting value from assets are no different to the issues facing insurers in these uncertain economic times. Whilst it may not be typical to look at the approaches taken in the public sector to cost cutting there are some interesting features of the approach taken by the Government. Of particular interest was a KPI quote in the report regarding cost per visit. The article cites one website that costs £11.78 a visit versus on that costs £2.75 a visit. Such an analysis and metric would be most useful to insurers – particularly those that are operating multiple brands on different sets of technology. Of course getting to the true cost of running a web site can be difficult, but an educated estimate along with existing web site analytics data would allow a similar analysis – one that could produce the same savings in a direct insurer or any insurer with multiple Internet applications. The other point made in the report is that some government units were competing with each other in terms of marketing and search engine optimisation spend. Having two units in the same organisation bidding for the same search term in Google advertising for instance is simply not cost effective. As above, in any insurer operating multiple web sites or multiple brands this kind of activity could be prevalent but not immediately obvious, perhaps this is something insurers could review and see where savings could be made. I doubt insurers should make the kind of culling of 75% of their websites that the UK Government is discussing but the principle is sound and relevant to Insurance. Insurers should ask themselves how many websites they are running, are they all equal in cost and could any of the services be merged onto cheaper platforms. In these cost constrained times it’s key that insurers not only examine core systems for possible cost savings but also the eco-system of ancillary applications and servers running the enterprise.

Retail, D-Tail, or E-Tail? The Good Old Days Start Tomorrow

Retail, D-Tail, or E-Tail? The Good Old Days Start Tomorrow

Life was simpler when most insurance purchases were delivered through a Retail channel. Insurance agents–not brokers, bankers, affinity groups, or workplace kiosks–were the sole source of information and advice will for potential insurance buyers. If you wanted insurance, you called an agent. The agent was the driving force behind selling and delivering the product.

But let’s resist the temptation to refer to the past as the “good old days.” I believe those days perpetually start tomorrow.

The direct model is now thriving. Inspired (!) to buy insurance by postcards, TV, radio, and print, consumers access their carriers over the telephone, or via the mail or Web. To differentiate this from the Retail model, I call it the D-tail model. It is based on the premise that if you reach out to enough consumers in a low-cost manner, some proportion will be motivated to buy. The traditional agent’s role may be limited or nonexistent, because buyers are channeled into a new business process that is handled by back office staff.

Take the Web interactions one step further and you get E-tail. In its purest form, E-Tail business is highly automated, channeled through a Web interaction, and replaces both the agent as advice giver and the “push” activities used to get consumers thinking about insurance. E-tail buyers are self-directed, and typically want to make purchases with limited or no human intervention. Some carriers, even for complex products like life insurance, are supporting a true STP model via their E-tail channel.

It is tempting to look at these three delivery models and say that one or the other is the future of our industry. In fact, all three models have a purpose. In some markets, notably the UK, they are all mature.

Retail, D-tail, and E-tail exist because each serves a distinctly different need today. But I believe that all three needs will persist into the future, and will continue to morph with consumer attitudes and technology. That is why carriers must support all three models in combination. Ideally, using a common tool set that brings a sense of cohesiveness and flexibility, while driving down costs considerably from where they are today. Carriers that let themselves become one-trick ponies in terms of sales and delivery are at risk of becoming obsolete.

What Customers Really Want

What Customers Really Want

I saw some consumer data recently which suggested that insurers have weathered the financial crisis better than banks and capital markets firms. Not in terms of finances—although that may be true in many cases—but in terms of consumer opinions.

As an industry, before this period of uncertainty we were viewed on par with used car dealers and cell phone companies. Now we are viewed, well, about the same. But at least we didn’t lose ground, or the trust of our customers. Thank the regulators, or maybe a culture of conservatism, for keeping us mostly out of trouble.

Of course the battle for consumer mindshare is never ending. That’s why the current crop of TV commercials being aired by insurers concerns me. Some national companies are positioning themselves as feeling their customers’ pain. Call me a cynic, but I have trouble imagining a set of consumers who get a warm, fuzzy feeling as they think about their insurers. As a consumer myself, I don’t care whether my insurers feel my pain. I just want good service, good value, and integrity. Besides, recession kvetching is already out of fashion.

Other insurers are making hard price comparisons. Their claims are in close parallel: They all talk about how much their customers saved when they switched. Assuming the stats are true (and I do), the obvious conclusion is that switching carriers can make sense, no matter which carrier you start with and which one you end up with. Do we really want to encourage consumers to constantly spreadsheet their providers? Is all that churn good for the industry?

I’d prefer to see insurers focusing on attracting and retaining customers for longer relationships. That means understanding the risks, pricing accordingly, and delivering great service. And by eliminating switching costs, carriers ought to be able to reward customer longevity, and still improve their margins.

Twitter, meet "specialised" insurance

Twitter, meet "specialised" insurance
Social networking was in the headlines again this week with an Insurance Times article on the marketing angle of this nascent phenomenon. I was interested to read that Direct Line plans to use Twitter to communicate with customers, and the process was deemed useful as it had a potential to enhance brand image. As many of you know, I take a curmudgeonly attitude towards the short and medium term impact of social networking in insurance. And you can extend that attitude to my experiences in insurer customer communications, and so the idea of Twitter playing a role in communications intrigues me. Personal experience as a weary consumer shows that customer service in the UK for personal lines has been homogenized and streamlined. It’s at a point where if I have to talk to an insurer staff member (and yes, brokers aren’t any better), I spend more time on hold accompanied with muzak than I ever do talking to staff at an insurer. I wish I had better things to do than play games with a complicated call centre, but I have the misfortune of a “difficult” house that has a dark history of possible subsidence. Reports now show this is not the case, but the question is raised in every quote, which puts me in the “special underwriting” bracket. I’m now up for renewal on my house insurance, and now have further supporting surveyor documentation to support the point of no subsidence, I am forced to “communicate” with my insurer. I call, wait 5 minutes whilst “all advisers are busy” and appreciate that I am “a valued customer” and hold on for a further 5 minutes as I have no alternative. Listening to the tinny voice that tells me to “use our website” increases my blood pressure as I sarcastically snap back at the phone “I would if I could!”. Eventually, I speak to someone who tells me to send in the documents, and expect a response in 3-5 days. No awards for speedy response there. Don’t get me wrong – shopping for personal lines in the UK is a breeze as long as you aren’t a specialised risk. Direct and aggregator options really put the buying power in the hands of the consumer. And fair play to the insurers — they’ve responded to the challenge of low cost channels with aplomb. Being a specialised risk means you get stuck with one insurer, as if you are like me, you become overwhelmed with going out to the market for new quotes each year and having to deal with all those call centres again. Can Twitter save the day in specialised risk? I’d like to think it could play a role, but then I’d also like to think I could pick up the phone and talk to my insurer. We all have dreams. If the call centre model is challenging, which insurer staff is behind the twitter responses? This grumpy old woman remains unconvinced.

Where's My Junk Mail?

Where's My Junk Mail?

My wife and I had our first baby one month ago. The excitement and awe are slowly giving way to pragmatic concerns. Like, what’s the downside of using a pacifier? Is it really necessary for Baby Weber to live in organic cotton clothing? Isn’t it time to start a college funding plan? And where are we going to buy the extra life insurance that we ought to have?

While random thoughts on pacifiers and baby clothing are now—somewhat incredibly—interesting to me, the issues most relevant to this audience are the latter two. And my perspective on them in Week 4 of my newborn’s life is that insurers are strangely absent in helping me to think about financial products.

While the insurers sit idly by, my wife and I have received direct mail offers from photographers, clothing stores, umbilical cord blood banks, and even a local private school. (He’s a month old, and I’m supposed to enroll him in private school already!?) Babies R Us emails me weekly specials. I’ve put myself on some of these mailing lists, so I’m not mad. I appreciate the attention, for once.

I’m thinking insurers must be able to access the same databases as everyone else, in which my name now has a checkbox in the NEW PARENT columns. But if they do, they aren’t working those databases very well.

Come to think of it, I didn’t even get any insurance material in the baby welcome kit from the hospital where he was born. Formula and diapers yes, insurance no. The story on life events marketing in insurance is age-old, but at least in my home town no one seems to be acting on it.

The good news is that many carriers appear to be building out infrastructure in a way that supports life events marketing. For example, needs analysis solutions are getting very good at teasing out the customer’s story. Web-based self service is generating tons of data that can be mined for relevance. “Practice management” tools are integrating the workflows and data across front and back offices. Now if someone aim those tools at the thousands of birth announcements appearing in newspapers every day, I might get the offers for financial products that every new parent needs.

In the Comfort of Your Own Home

In the Comfort of Your Own Home

So, here is something you can do in the comfort of your very own home.

The next time you are watching TV for a couple of hours, watch the commercials. Don’t leave the room, or channel flip, or check your email—just watch the commercials.

And as you’re watching, keep track of the number of commercials that feature a person who is physically unattractive, or not very bright, or doing something ridiculous, or often all three. Oddly enough, this person is usually in cast in the role of an actual or prospective buyer of the good or service the commercial is advertising.

I’ll bet a shiny new quarter that you’ll be surprised at the number of times you spot this character. Not in a majority of commercials by any means, but in a noticeable portion.

I’m not a big expert on advertising, but I do remember from business school that the general idea is to get people to try, buy, and continue to use whatever is being promoted.

So why would a commercial show a buyer/user of its product in such an unflattering light? I don’t know. Strikes me as quite weird. Maybe it is a triumph of the need of the people making the commercial (and the people who are sponsoring the commercial) to demonstrate that they are much more cool than the poor schlubs who actually might buy the thing begin advertised. (See my earlier post, “The Meaning of Cool.”)

I would be happy to say that these kinds of commercials are never, ever run by insurance companies. There are certainly many counter-examples: the commercials run by State Farm, or Allstate, or Liberty Mutual, and others.

But, it pains me to say, there are a few insurers whose commercials do view their policyholders and prospects as rather unattractive folks.

Two words to the insurers running those commercials: please stop.