Finetuning Customer Portals – Lessons from A Christmas Scrooge

Finetuning Customer Portals – Lessons from A Christmas Scrooge

The commercial craziness that is the run up to Christmas has kicked off here in Britain with the checkout tills are humming from Oxford street to Covent Garden in London. But if you listen carefully, you should also be able to hear the whirrings of transactions in the darkness of cyberspace. The English have embraced on-line shopping, and there are estimates that we will buy 15% of our Christmas goodies on-line this year.

I’m a great example of someone who uses the Internet for work and play. As if being wedded to the laptop for more hours of the day than necessary isn’t enough, I choose to shop on-line as well. And for the most part, I love it. As an industrious cyber-shopper and pedant, I pride myself in spotting website shortcomings.

What surprises me is just how many sites with shortcomings I’ve stumbled across in this last week. Have Santa’s little helpers gone on strike ahead of the rush to Christmas or is this poor planning on part of IT and operations? Here’s a few examples:-

  • A hotel booking website which couldn’t successfully take a booking via credit card – no surprise, I choose another hotel.
  • Two retail sites that send tracker notification emails without the tracker ids – annoyance factor that grates at their brand.
  • A mobile phone site requiring me to re-key all details when I move to another section – more brand erosion.
  • A retail site who’s “shopping basket” had a memory limit of 5 minutes.

Some of these shortcomings contribute to the annoyance factor. It’s like going into a brick-and-mortar store, and they don’t have the item on the shelf. You can’t sell what you don’t have in store. So you take your pounds elsewhere, and the company never knows they even lost your business.

Business should be smarter about their on-line stores. You don’t leave your high-street store unattended, or without stock? You should pay similar attention to detail in your on-line offering. The direct channel will become an increasingly important in the future, for retailers, and insurers alike. Relative to retail, insurers have been a little slow at embracing on-line commerce, but should remember that they get measured along the same factors as an on-line retail store. After all, that’s what the consumer knows.

The English are happy to buy insurance on-line, particularly motor. We have some of the better websites in Europe for doing exactly that. And there is plenty of activity. Through an aggregator site, one insurer gets 250,000 quotes between 8pm and 9pm on Monday’s – apparently, this is the time consumers look to shop for insurance. You couldn’t make it up!

The key take-away here is the importance of having a solid customer portal that behaves in the manner a customer expects. This requires continued investment to reflect changing customer behaviour, and to leverage new technologies. In conversations, we see this as one of the key areas for IT investment in 2010. (We will be writing more on the topic of B2C in insurance in January). Owning the distribution space remains an important objective for insurers looking for growth in the coming year.

The least bad decision

The least bad decision
As we have just entered the last quarter of the year, economists and business men are trying to anticipate what 2010 will be. So do policy makers and last week the Federal Reserve has published its Beige Book . For those of you, who are not familiar with the Beige Book, it is a report published 8 times a year gathering useful economic data from 12 regional districts in the United States, whose objective is to summarize the state of the US economy. The Beige Book is also an important tool upon which the Federal Reserve counts to make decisions around interest rates. The Beige Book October 2009 edition provides two important news: one good and one bad. Let’s start with the good one: the US economy seems to have reached its bottom at least it does not show signs of more degradation. However the bad news is: the US consumption is weak and when we know that consumption represents 70% of the US GDP, it means that the recovery will be slow. Overall there are two things to learn from the last edition of the Beige Book. First of all, American people seem to change their habits and behaviour. They tend to save more and I strongly believe that this change is good for the world economic system in the long run even though it is no in favour of a strong recovery in the short term. Indeed, the US people could not continue spending so much using debt. The second interesting aspect relates to how the Federal Reserve will then adapt its monetary policy going forward knowing that US consumers are spending less money. On the one hand low interest rates facilitate speculation and contribute to making the US$ weaker. To a certain extend this situation could generate a new bubble (I wonder whether it’s not already the case). On the other hand, hiking interest rates would slow down or even stop a recovery, which is already slow. In summary there is no two best alternatives to choose from. The US and world economy depend on choices between bad scenarios and the challenge will be to choose the least bad. But when we think where the world economy was last year, this is maybe not a bad situation to be in now.

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.

Some considerations around innovation

Some considerations around innovation
Innovation! What does it really mean to be innovative for an insurer? Does innovation deal mainly with insurance products or does it concern also processes? Are there external elements or factors that contribute to facilitate innovation? According to me, innovation relates to both products and processes: Product innovation: In European life insurance for instance, as the market for asset protection and retirement planning grows, insurers are increasingly adopting an aggressive strategy of product innovation. They plan to maintain control over customer acquisition and distribution by managing the distribution lifecycle. While variable annuities may not be the shining star in the next few years, insurers remain under pressure from consumers and professional intermediaries to continue to innovate. Process innovation: One of the business frustrations has been that IT constrains business agility. Adding new products, new channels, making process changes or responding to new regulation must happen on a critical path determined by the technology assets and infrastructure. In this context process innovation can be an important source of competitive advantage for an insurer. In both cases, product or process innovation, IT is not necessarily a “must have”. IT is only an enabler that can help companies give birth to an innovation. But are there other factors to be considered that help innovations succeed or contribute to change the insurance competitive landscape? Past examples in other industries tend to prove that at least two parameters have a direct impact on innovations’ success or failure: Timing: to be visionary is very important but to implement a new idea or a concept too early can lead to bad results. Successful innovations are the ones that have an impact on a large mass of people and not only a handful of passionate thinkers. Insurers should carefully consider timing and analyse carefully the readiness of the market when thinking to initiate innovations. Dynamic view: some innovations are self-imposed through changes of market conditions. For instance as Web 2.0 technologies push people behaviour to change, insurance players have to understand that even in their own industry the Schumpeter “creative destruction” theory can apply. Blogs, chats, social networking are currently changing the way insurers interact with their customers and diminishing the importance of face-to-face meetings with agents especially in the general insurance sector. Celent’s mission is to keep an eye on how the insurance industry apprehends innovations, analyses and evaluates them as well as how insurers decide to implement them. Our goal is to help insurers identify initiatives that will help them gain competitive advantages in the long run and to do so it is important they understand what the term “innovation” really means and what factors can play a crucial role in making an innovation succeed or fail.

Why social networking can be bad for your house premiums

Why social networking can be bad for your house premiums
As reported in the press today, Legal & General here is the UK is considering adding the usage of social network sites in deciding on premiums. On the back of their own commissioned research, the company believes that burglars are increasingly using sites such as Facebook to identify targets. I can understand the logic of this approach, but it seems a little heavy handed. The idea is to penalise homeowners who has anyone in the family using a social network site. Given the prevalence of these sites, a very high number of people will be caught in this net (given the insurer plans include any family member). I know of people who are very careful about what they put up on these sites, never declaring holidays until they are complete, and “friending” their children so as to be aware of what information the offspring might put into cyberspace. Are these people to be cast into the group of “higher” risk? Being aware of the evolution of criminal behaviour is important and educating your policy holders seems a more positive way to approach this problem.

So what are you doing in this recession?

So what are you doing in this recession?

So what are you doing in this recession?

In August, much to the surprise of their own governments, economic data suggested that France, Germany and Japan had exited the recession. Similar good news has yet to be heard in the other major economies, but Celent’s recent research about perceptions and attitudes of insurers in this recession does show that there is increased optimism in the world of insurance.

Over the course of the first half of the year, insurers have made more progress in implementing tactical responses to the current recession. Around 80% have already or are in process of freezing discretionary spend and travel. Two-thirds have are in the process or have already cut staff salaries. But these tactical responses dont inspire.

In our new upcoming report on the impact of the recession, we added a new question trying to get at the strategic response of insurers. In quarter one, the outlier was a change in strategy, with only a quarter of respondents having done this — a clear reflection of the severity of this measure both on long-term capacity and the difficulty to execute. By mid-year, almost half had undertaken this difficult task. The other area with the most noticeable change was that of budgets. By the end of the second quarter, almost two-thirds of insurers had undertaken or were in the process of revising budgets.

Streamlining of processes is the top area of focus and is already underway or completed in 77% of respondents. The second area with a high level of activity is divestment of assets. A return to the focus on core business is a response to be expected in difficult times, and 70% of respondents had undertaken this option.

Outsourcing is also on the agenda. Responses indicate a higher frequency of business process outsourcing to IT process outsourcing. This is probably attributed to the already high level of IT process outsourcing in the industry. Almost half of respondents have already outsourced business processes and another fifth are taking this under consideration.

There are a large number of insurers considering or undertaking the launch of a new product or a new channel. Over 50% of respondents are in discussions or already doing so. Launching into a new geography and acquiring new company assets are strategies that appear fairly low on the list of priorities.

So the question to your business is what are you doing in this recession? Many insurers clearly see some opportunities in these difficult times and such innovative and progressive strategies are clearly going to put them ahead of the pack when time improves.

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.

Eco-centric insurers can cut costs

Eco-centric insurers can cut costs

Our data is now in on greening IT in the insurer and the results will probably not surprise you. For more than half the respondents, green initiatives still poses some question mark and initiatives vary tremendously by company. Mostly, they appear ad-hoc and occur in small pockets in the organisation.

In this time a recession, one might ask why this topic is on anyone’s agenda. The point is that having eco-centric policies make financial sense. Especially in a turbulent economy, an insurance company doesn’t need to see the building of a green organization as counter to its mission of financial responsibility; rather, it is part of that mission.

Celent believes that it’s a convergence of several factors that will ensure interest in this topic in the coming months:

  • Increased customer awareness:– customers are becoming more aware at a local level (composting, recycling, food miles) of the impact of climate change, and this is changing their own perceptions. Customers are also employees of the insurance company, and so overtime, these increased expectations shift to companies they work at and from whom they buy.
  • Energy costs on the rise – watching the price of a barrel of oil is becoming a hobby… The sharp increases last year brought into focus our reliance on this fossil fuel, for both consumers and businesses.
  • Recession pressures have seen a real focus on reducing costs in the business. Initiatives such as reducing paper, reducing a data center’s carbon footprint through more modern, energy-efficient systems helps the environment and also saves money. Allowing more remote work to reduce commuting has a positive impact on the environment but also can increase morale.
  • Regulatory scrutiny – Governments are going to become increasingly focused on controlling water usage, carbon emissions as they strive to meet their national and electoral commitments to the environment.

So as all these factors converge, we believe we will see an increasing effort in the insurer to have clearer eco-centric policies across the organisation. These will impact both supply and demand of technology, and also show the role that technology can play in getting the organisation to be smarter about how they work – think shared services, remote labour force as examples.

For more detail, see our report published next month.

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.

Wisdom From South Park

Wisdom From South Park

Fans of the TV cartoon South Park were treated to a comical scene this week that resonated with me. The episode raises an intriguing question: Can there be rational thought behind some of the decisions being made about the economy and financial institutions?

Stan (a normal kid from Colorado, for those of you who don’t watch) sneaks into the U.S. Treasury offices. He’s wondering how Treasury officials make decisions about saving troubled institutions, and here is what he sees: One official chops the head off a chicken and throws the bird onto a giant horizontal wheel sectioned off in bright colors, with each section labeled as a potential option. Another official spins the wheel. A third takes out a kazoo and performs circus music while the bird lurches around crazily, spewing blood. When the headless bird finally expires, the space on which it falls lights up with a game show flourish of beeps and the decision is made: “BAILOUT!”

I’m quite certain that Treasury officials have other tools at their disposal. (Ping pong ball lottery machines instead of chickens?) But the broader point is that there are so many unknowns right now that we might as well be using the chicken method. We simply don’t know where this is all going.

At Celent, we’ve been blogging and writing and speaking about related issues for several months. But for me, there are at least as many questions now as when the crisis began in the fall. So what’s an insurer to do? First of all, don’t focus on the unknowns, as they will drive you crazy. Second, keep doing the things that seemed like good ideas before this all began. Invest in technology, improve your infrastructure, and keep asking questions about how you can make things better for customers and agents. Finally, don’t get too caught up in the prognostication. As anyone who grew up in the country can attest, chickens are surprisingly resilient, even minus their heads.