Customer journey mapping for a CIO

Customer journey mapping for a CIO

If you’re like most CIOs, your firm has embarked on the latest craze – customer journey mapping.  I’ve blogged about this before.  It’s a terrific exercise – intended to identify how customers engage with your firm through every type of interaction – personal, machine, or paper.  Most are focused on optimizing the interactions between the policyholder and the insurer; some include optimization of the agent experience, and some are starting to look at expanding the experience to look at how to embed the insurance experience in non-insurance aspects of an insureds life.  (See FIGO for a great example).

Some firms have hired third party consultants to help with this exercise; some have even put a new position in place – a Customer Experience Officer – someone who looks across the traditional siloes of underwriting, claims and finance to craft a holistic experience. 

As carriers go through this exercise, demands are being placed on the IT team. Here’s a few ways you may be asked to participate:

  • Data and reporting– Part of understanding the customer journey is tracking it.  Understanding where the biggest interaction points are, and where the biggest pain points are is the first step in improving the experience. You may be asked to install tracking software on the website (if it’s not already there).  Third party data and AI may play into new segmentation schemes as teams are looking at new ways of doing dynamic segmentation (See my report on this topic)  You may be asked to add new reporting or analytics tools as the team looks at using predictive modeling to identify next best action. And you’ll be asked to measure the progress of the new journeys through new reports and new metrics such as a customer friction factor.
  • Workflow and Task Automation – Much of customer journey mapping is figuring out how to operationalize the new journey.  Once the customer experience has been defined, the hard part is to deliver on it.  If you are reliant on people to deliver a consistent experience, you leave yourself open to error.  Your team may need to spend much more time defining business rules and implementing workflows to deliver the experience. If you are one of the insurers that has not yet automated this, you may need to consider adding some additional technology.  (This has actually been one of the major drivers of core system replacement).
  • Customer Communication – Insurers are looking at eliminating the jargon and simplifying the message. This may mean redoing forms or creating new forms.  That’s not a huge deal.  But where we see more effort is finding new ways of communicating with customers.  Text, mobile applications and video are all growing ways of communication.   Here’s a great example of automated video communication to deliver a personal touch with no people involved.  Push communications, text or phone messages letting the claimant know their check has been issued, for example, can reduce calls to the call center while improving customer satisfaction
  • Omni-channel access – Smartphones are on track to bypass desktop computers as the number one way to access websites.   You’ll need to make the website mobile-friendly.  But you also may need to put in a call center – especially for those insurers who are looking at adding a direct or semi-direct channel. 
  • Cool stuff – As insurers start going down this path and get more comfortable being creative, they often look to add more ‘cool stuff’.  Gamification is one of the newer areas – using game techniques to drive engagement and to drive behaviors.  Drones are reducing the need for scheduling inspections.  Video chat for first notice of loss can reduce fraud and improve satisfaction.  There are many tools – and many InsureTech startups playing in this space. One last area that can be kind of cool – the user interface.  If you don’t have formal skills in this area, definitely use an outside consulting firm to help with this. UI design is fairly complex and makes a huge difference in the customer experience.  All of this cool stuff requires integration. One note, while the partners out there likely all have open APIs,  your team may end up spending more time than anticipated making sure your own systems can integrate and send data and service calls back and forth.
  • An agile organization –  As insurers become more skilled at understanding how to tweak and enhance the customer journey, speed becomes even more important.  Creating an innovative, agile organization  is a critical aspect of delivering quickly.  If you haven’t chatted with Mike Fitzgerald on innovation, or Colleen Risk on shifting to an agile development process, now might be the time.

In a highly fragmented industry with excess capital and declining rates, insurers are looking to building a solid customer experience to drive growth and retention.  Journey mapping is one of the tools being used.  Time to step into the fray and get involved. 

The Great Insurance Experiment

The Great Insurance Experiment

There is a battle going on today for the future of the insurance industry. Like other industries there are those within the insurance industry and new entrants who are seeking to test whether alternate, digital models will prevail. As a participant in the industry and an observer the intriguing thing for me is no one has proven the existing model is actually broken or that there is a better proposition out there. It seems the telematics experiment I wrote about a few years ago is expanding in focus.

I'm sure taxi drivers said the same when faced with Uber, hotels with AirBnB, the print industry, the travel industry, etc. However let's look at the benefits of digital propositions to customers and see if they apply to insurance.

Transparency
One of the key benefits of digital propositions is transparency and low prices – something that telematics and IoT propositions endeavour to deliver for consumers. The peculiar thing about insurance is that transparency and too much data is at odds with what insurance tries to achieve. Put another way, insurance is designed to hedge the risks to a population across the whole population, so that individuals pay a reasonable price and those that suffer a significant loss are reimbursed disproportionally to what they put in. Absolute data and visibility – transparency in its purest form – will reveal the poor risks and in practice deprive them of the very service they need. Good for some who will not see a loss, but not good for all and not good for society as a whole.

Propositions in this area have moved towards education and rewarding behaviours that reduce risk – the win-win for insurer and client. Many have observed that this is arguably not insurance but rather risk advice, engineering and management. Others observe that claims prevention is absolutely part of insurance and has been all along, albeit the tools of old have been regulation, law and classical education rather than the digital variants.

Existing experiments reveal customers care do care about not claiming, about limiting the impacts of a claim and about small rewards for good behaviour. Regulators have also shown they're keen that all parts of society have access to financial services and insurance at a reasonable cost. Use of transparency and data can go so far in insurance but there are limits to how far it can disrupt.

Control
Another key benefit of digital propositions is the just in time and just enough nature of them – the ability to finely control the product and as a result the costs. This is another area that is being tested in insurance with micro control over what is and isn't on cover available to customers via their phone.

The challenge here of course is that this again removes some of the hedging. By assigning a cost per item turning everything on will typically yield a higher price for insurance than a classic contents policy which offers blanket cover for items in a property or even while travelling.

The other benefit of the classic policy is that one doesn't have to engage with it. It's all well and good that one can turn cover for items off and on quickly but to really take advantage of this capability the insured has to care deeply about the level of cover or the cost.

There will be customers who want this level of control in their insurance and will actively seek it – but for the mass market a good enough policy at a reasonable price will be just fine.

The long tail
Now here we could see some disruption, or at least shake up of the market. We're already seeing some splits in the market as people interested in health rewards take up the various incarnations of vitality insurance, young people take up telematics car insurance after being priced out of the classic policies. There will be customers interested in control over their policies, customers who give up human interaction in favour of digital cost control.

In this way we might see smaller, more agile companies with lower cost bases taking their share of the market by satisfying a niche.

Conclusion
In practice, the jury is still out and the experiment still continuing. Do todays consumers want the products they have always been offered or something new? What of tomorrows customers?

For sustained innovation, it is not only the “What” but also the “How”

For sustained innovation, it is not only the “What” but also the “How”

I read an excellent article recently by CoinDesk on John Hancock Insurance Company’s testing of blockchain in insurance. This is one of the early, public declarations that insurers are exploring the potential of this technology. Jamie Macgregor and I also explored this subject recently in the report: Blockchain in Insurance: Use Cases

There is another important angle to the John Hancock story that lies beyond the technology. In our approach to innovation at Celent, we separate the “what” of innovation (blockchain, artificial intelligence, analytics that personalize the customer experience) from the “how”. How companies execute on innovation involves building repeatable processes, incentive systems, and cultures of experimentation that establish a new “way we do things around here”. Note that John Hancock’s LOFT program provided the mechanism through which the insurer could test blockchain. Next week, month, year it will be a different “what” to feed into the “how” machine.

Beginning in the Q3 of last year, Celent research observed the pattern that leading financial services companies which have invested in the "how" of innovation are beginning to gain fast mover advantage over those that have not.  We expect to see an increasing, widening gap between those insurers which have investe in the how of innovation and those that have not. The leaders will use their innovation machines to more rapidly and effectively figure out how to make the “what” of the possible real in their organizations.

Young, broke, and no credit: Financial services reborn

Young, broke, and no credit: Financial services reborn

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You are young, broke, and don’t have any credit. You also don’t have many bright prospects since you have never been independent and you don’t even have a bank. Sound like most 20 year olds? It certainly might. However, I’m talking about The United States of America in 1790. When our nation began we were in a tough spot and did not have very many prospects. Luckily, Alexander Hamilton, supported by George Washington and other leaders, had the vision to build what we now recognize as our modern financial system.

What does this have to do with today? At Celent, we are convinced that a confluence of forces places Financial Services at another crossroads. Customer expectations and digital technologies are combining to compel a transformation across the industry. We expect this will play out as a rebirth of financial services, one that will combine the DNA of our past with digital processes to create a new industry, related to the one we know now, but not the same.

Drawing inspiration from the past is the theme of this year’s Celent Innovation & Insight Day #celentiandi. We look forward to hosting over 350 financial services professionals at the Museum of American Finance in New York City on Wednesday. We will use this unique location to take the best lessons learned from the past and apply them to the opportunities of the future.

Our agenda includes keynotes from a global venture capital leader, Nadeem Shaikh of the Anthemis Group, the CEO of an insurance blockchain start up, Leanne Kemp of Everledger, and, of course, the recognition of our 2016 Model Bank and Model Insurer award winners. You can find all of the details here.

This year, we are introducing a new feature, an interactive emerging technology expo area that we call the Geek Playpen. Attendees will have the opportunity to touch, feel, and experience items like virtual reality goggles, drones, and onmichannel digital platforms. There will even be an example of using location-aware mobile devices to assist in the evacuation of buildings. We thank our inaugural Geek Playpen sponsors Cognizant, Mindtree and Relay IT for their participation.

Safe travels to all joining us and we’ll see you soon!

Slice: Insurance disruption in action

Slice: Insurance disruption in action

Most “disruptive” Fintech propositions are actually incremental; Slice.is promises to be an exception.

Celent’s Banking and Capital Markets analysts have tracked Fintech since 2013 and continue to track movements in areas such as payments, digital banking, and blockchain. More recently, our insurance team has begun looking at Insurtech, especially the initiatives coming out of the Global Insurance Accelerator (@InsuranceAccel) and Startup Bootcamp.

One observation emerging from this experience across the three verticals is that most startup propositions are actually incremental innovations. Despite numerous broad claims of disruption, most of the solutions alter part of the traditional value chain. In insurance, for example, start ups target narrow activities such as claims settlement or customer engagement with advanced algorithms, direct distribution schemes, and/or new data sources. Undoubtedly, some will deliver value, but to label them as disruptive is a reach and strikes me as sensationalist.

An exception to such incrementalism surfaced today in the launch of Slice. Its press release today announces $3.9million in funding and describes their approach as one addressing a new market – the on-demand economy – with a new product – one that combines both personal and commercial coverages into a single contract. The stated goal is to not only change the way we work with insurance products, but to change the way the insurance product works. This is why I consider this as one of the very few examples of disruption – delivering a new proposition to a new market.

Slice has worked with primary insurers and reinsurers to develop policies which provide insurance coverage on a per event, time period-specific basis. Their forms combine what is traditionally both personal and commercial coverages in order to address ridesharing, homesharing, and (eventually even delivery) services. It acts as an MGA, sourcing business both directly and also through on-demand apps such as Uber and Lyft driver platforms. Their goal is to close the current gaps that are not addressed by traditional products and cover the exposures which are often unintentionally retained by operators.

It is exciting to see a new market / new product proposition in the mix. Examples such as Slice reframe the discussion around what true disruption looks like in insurance.

Troll insurance, cyberbullying, and millennials

Troll insurance, cyberbullying, and millennials
As I read through my myriad of promotional mail, I came across an interesting insurance offering – troll insurance. Chubb, a multinational insurance company, is offering its clients in the UK the first ever troll insurance. Chubb personal insurance policy holders will be able to claim up to £50,000 (approximately US$75,000) towards expenses that include professional counseling, relocation due to online abuse, or time spent off work due to cyberbulling. Cyberbullying is defined by the insurer as three or more acts by the same person or group to harass, threaten or intimidate a customer. The inclusion of cyberbullying into Chubb’s policies is a result of a survey of the target audience and brokers. Although the new policy is primarily tailored towards worried parents, adults who become victims of online abuse will also be covered. The policy money can be used to pay a reputation management team that would restore the person’s public image, or even to hire a forensic specialist to trace the origins of the trolling. However, the coverage is pricey. It can only be purchased as part of Chubb’s top-of-the-line home insurance package which costs at least £2,500 ($3,730) per year and is targeted at high-net-worth individuals. While I find it unfortunate that this type of insurance is required, I applaud Chubb for creating an innovative product to cover a gap in the current insurance offerings. Online harassment has real consequences, but the law against it tends to be hit or miss. Ironically, a few American insurers have policies pertaining to cyberbullying, but they protect people who are accused of the offense rather than the victims or harassment. Insurers continue to look for ways to be relevant to the Gen-Xers and Millennials in the marketplace. Chubb’s troll insurance provides a coverage that is relatable to these tech savvy demographics. It’s time for this insurance in North America as well.

$13 million investment in social insurance signals disruption

$13 million investment in social insurance signals disruption
Will a sharing economy model work in insurance? The announcement about the start up Lemonade highlights the challenges that social insurance (also called peer-to-peer insurance) faces. A Celent colleague, Jamie Macgregor attended a panel on social insurance propositions at FinTech Connect Live in London this past week (see Jamie’s blog post). On the panel were leaders of three such companies, Sebastian Herfurth, co-founder of Friendsurance, Steven Mendel, CEO and co-founder of Bought by Many, and Louis de Broglie, President and co-founder of Inspeer. These companies operate as brokers, managing the transaction between the end consumer and insurers. They offer either a deductible sharing scheme or a pooling mechanism to gain price discounts. The panellists spoke about their common challenges — sustaining growth and educating the consumer about an alternative approach to insurance. It remains to be seen if any can achieve critical mass. Of the three, Friendsurance is further along having started (way back!) in 2010. (See Celent report: Friendsurance: Challenging the Business Model of a Social Insurance Startup — A Case Study) Similar brokerage models have also been adopted by Guevara and Tongjubao. These companies seek to apply social insurance to more complicated lines of business – automobile (motor) and life, respectively. The Lemonade announcement stated that it will expand the social insurance model beyond sales and service by taking on risk on its balance sheet. They report that they have applied to be an insurer in New York. This will be an early, significant test given that state’s past regulatory reputation. However, the company has some strong arguments to make. They can point out that sharing increases transparency and aligns the interests of an insurer with their consumers. Additionally, the sizable initial capitalization will positively influence regulators. These alternative approaches are good news for the industry as they challenge the traditional, sometimes adversarial, relationship between insurer and insured. The ability of Lemonade to secure $13 million in initial funding from veteran venture capitalist firms (Sequoia Capital and Aleph) is a serious indication of industry change.

“Hamilton” the hottest ticket in town – great timing!

“Hamilton” the hottest ticket in town – great timing!
CBS’s 60 Minutes ran a story recently about the hottest new Broadway musical – Hamilton (go to the 14 minute mark). It turns out that some of the research for the show was conducted at the site our Innovation and Insight Day – The Museum of American Finance. This biography underscores why we chose the Museum for our next Insight and Innovation Day (to be held April 13, 2016). The segment talks about Hamilton’s numerous accomplishments:
“…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”
Without these innovations, the modern economy as we know it now would look very different. Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that the financial services industry cannot innovate very effectively. Hamilton graphic nov 2015 So how do we improve? The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts. By the way, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town.

Scary thought: What happens when the worlds of startups and insurers collide?

Scary thought: What happens when the worlds of startups and insurers collide?
Scary044Accelerators, incubators, hackathons and labs, oh my! There have been an increasing number of partnerships between insurers and start-up technology companies in the past year. It is an exciting time, full of possibilities and I don’t mean to pour cold water on the enthusiasm, but… What happens when fast-moving startups meet governance-heavy insurers? When faced with a joint decision, how will professionals who have spent a career avoiding risk reach agreement with their partners who seek out risk? To what degree should action plans be coordinated and how is that done if one group is using an agile development method while the other prefers waterfall? Do these differences really matter, or will the incentive to deliver something really cool power through such differences? It is time to ask this question, along with what is, and isn’t working, and what actions will improve results. Celent is excited to partner with Silicon Valley Innovation Center to assess the current state of innovation partnerships in insurance. We value your views would like to invite you to participate in a survey. Leave your email and I will send you a summary report. The goal of this survey is to accelerate insurance industry innovation / transformation by identifying effective partnering methodologies and processes. It specifically focuses on the relationship between incumbent insurers and start-up firms. It takes under 10 minutes to complete. Hope you will add your views: Click here to start

Heard At IASA, In Insurance Innovation, Fast Followers Also Have Work To Do

Heard At IASA, In Insurance Innovation, Fast Followers Also Have Work To Do
I had many conversations at #IASA2013 about how insurers can improve their innovation capability. As insurers prepare their 2014 plans, this is an area of particular focus.  An increasingly commoditized market requires new approaches in order to build a sustainable advantage. A few of these discussions included a comment like “we have decided to be fast followers”. That comment implied that, by making that strategic choice, those companies don’t need to concentrate on innovation. Based on Celent’s work over the past year, fast following is not the same as just following.  It is an innovation strategy that requires specific actions in order to be successful. Choosing this approach still means you build skills in innovation. Some of these are the same as the first adopters and some are different. For example, successful fast followers have mature innovation processes in place for activities such as: • Scanning the market to identify new innovations – “what is going on out there”: you can’t be late if you are going to be fast • Establishing decision criteria to select which solutions should be “followed fast”: not everything can or should be followed quickly • Employing metrics around the acceptable length of time fast adoption: how “fast is fast”? For those insurers which have chosen the fast follower approach, here are some situations they might find themselves if they do not have these processes in place: • If a personal lines insurer does not have predictive pricing in place, they aren’t fast following, just following • If a heavily intermediated insurer hasn’t established their digital strategy — what it means for their business, what initiatives will be needed over the next two years, it is not fast • If any insurer does not have a mobile platform in place, they cannot claim to be a fast follower • For lines of business where fraud affects loss results, an insurer settling claims in those LOBs now has several automated detection schemes in place if they are following fast Just to make sure that the company is not chasing the latest buzzword, realize that just following is an option too, but be prepared for the consequences. Following in innovation is a passive strategy of adoption without focus, measures or timetables.  As technology continues to change insurance, following will increasingly result in reverting to the mean — average to sub average ROE or return on surplus and increasing adverse selection. Most recently, predictive pricing has given the industry the best example of what happens with a passive following approach. Innovator and fast follower insurers have used this technology to refine their pricing and leave follower insurers with the worst risks. Making a conscious decision to end up in such a situation is not good, but is better than ending up there as the result of randomness and a lack of focus.