Insurance Companies Look to Online Retailers as Role Models

by Nathan Golia for the May 2012 issue of Insurance and Technology Magazine.

The consumerization of technology has changed how consumers interact with businesses, and online retailers have led the way in providing the kinds of real-time, personalized transactions that customers have come to expect. Insurers can learn from the retail customer experience to improve their own customer satisfaction.

Next year, children born when Amazon.com sold its first book online — in July 1995 — will turn 18, possibly striking out on their own for the first time to purchase auto, renters, health or life insurance. Those consumers will have grown up in a world defined by e-commerce — their ability to instantly purchase products and services has been limited only by their imaginations (and their wallets). Like a new song? One click on iTunes, and it’s yours in 30 seconds. A friend at school has a cool pair of new shoes? Zappos can deliver your own pair in 24 hours.

Feel old yet? If you’re selling insurance, you can’t afford to. You need to stay current with the times. Within the insurance enterprise, the business, technology, marketing, distribution, human resources and even compliance departments must work together to create and deliver insurance products that meet consumers’ evolving needs and real-time expectations.

“That need for speed is in the minds of consumers dealing with insurance carriers,” says Forrester Research(Boston) analyst Ellen Carney. “It has to be fast, and the delivery of the product has to be fast. Fifteen minutes is too long now.”

Though speed is of the essence, there are a number of other lessons insurance companies can learn from the ways retailers have adapted to the new consumer paradigm, adds Neff Hudson, assistant VP of emerging channels at San Antonio-based USAA(about $19 billion in revenue). “When you think about what’s happened to retail because of commoditization and price transparency, they have to get really good about getting people into stores,” Hudson says. “They’ve been very forward-leaning in terms of marketing, use of data, partnerships in unusual places and cost efficiency.”

USAA has viewed Amazon as a role model for “three to four years,” according to Hudson, who says the integrated financial services provider is especially impressed with Amazon’s use of predictive analytics to offer product recommendations. People like easy-to-understand comparisons, and there’s a lot of opportunity to do that in financial services, he adds. “For example: ‘People like you need life,’ ‘People like you need this much comprehensive coverage,’ ‘Have you considered umbrella insurance — because people with your asset class tend to use it.’ “

But when it comes to cross-selling other USAA financial products to the company’s insurance customers, the regulatory framework is not always so simple. The differences between what information the company is required to disclose and store (and secure) for investment sales, for example, mean USAA has to be very careful about sharing information among business units, Hudson says. “Sometimes we get intimidated by regulations and following process and procedures, and we forget that what people really want is advice,” he acknowledges.

There’s also the matter of customer loyalty, Hudson says — specifically, not taking it for granted. “We can’t assume we have a trusted relationship with every product — you may trust us with auto insurance, but do you trust us as an investment company?” he poses. “We feel, if we can get you as an auto insurance and banking customer, we can keep you for a long time.”

Where USAA really sees the benefit in retail-like customer analytics, Hudson adds, is in product development. He points to the banking unit’s Deposit@Mobile capability as an example of tying the end consumer’s desire for faster processes with a business need to reduce paper flow. “Our best innovations have been the ones where the business need was aligned with the member need,” Hudson reports. “In that case, our enemy was paper, and what members needed was a way to get their money deposited quickly. Asking people to use their phones to speed up a process is just natural.”

Smoothing the Buying Process

To speed up the insurance application process, Progressiveis looking to exploit consumers’ penchant for mobile devices by offering mobile imaging. Forrester’s Carney says streamlining the application process is an area in which insurers need to up their games in order to meet customers’ demands to get out the door with an insurance policy as quickly as they would with an online retail purchase. Big data, she says, can help these efforts by tapping unconventional data sources to build a risk profile faster and with less effort on the prospect’s side.

“As soon as customers have to put in things like their Social Security numbers, you’re going to get drop-off,” Carney contends. “If we can get the algorithm right, where we don’t have to ask for sensitive information, people are going to be more apt to complete the application.”

Mobile quoting, she explains, doesn’t mean just translating the online application experience to an app or mobile website. Insurers should be prepared to take advantage of some of the unique capabilities of a smartphone to build a risk profile in new ways.

“You can certainly figure out some of the characteristics of their location based on GPS data,” Carney says. “The information may not be perfect, but can it be good enough? The right kind of predictive analytic might help us figure out enough about this customer that could streamline that process.”

San Francisco-based Esurance ($872 million in written premium), a unit of Allstate, also has realized the potential for analytics to smooth the buying process. The company uses data pre-fill based on proprietary analytics. And for customers weary of filling in their bank information on yet another site, Esurance has accepted the third-party service PayPal (San Jose, Calif.) since 2005. According to Lisa Ward, VP of customer experience and communication at the online insurer, Esurance also has initiatives in the pipeline that will take those analytics to another level.

“This helps them make more-informed decisions throughout those processes, and helps us improve customer satisfaction,” Ward says. “We will be rolling out new coverage recommendation features very soon.”

 PEMCOPerformance Reviews Like many online retailers, Seattle-based P&C insurer PEMCO invites its users to review its products on its website, publicly and without editing (other than for profanity or personally identifiable information). But, “It’s different than having tens of thousands of books or apparel items to choose from when you’re talking about coverages in several lines of business,” acknowledges PEMCO CMO Rod Brooks. “What we should be doing is looking at the type of experience retailers offer, and look at where we can borrow from that model and apply it in our space.”

Building Relationships Is the Key

Though speed is a major component of the retail experience that consumers crave, they also want to feel valued by the companies with which they do business, and personalized recommendations and service go a long way toward building the right types of relationships. As a result, insurers need the best view possible of their customers in order to match them with the right coverage.

Rod Brooks, CMO for PEMCO(more than $300 million in annual premium), says his company’s familiarity with its policyholders is a clear-cut advantage for the regional Seattle-based property-and-casualty insurer. “Within retail, there are a lot of different kinds of experiences that people value: big-box stores, convenience stores, the online experience, the local store,” he says. “You need to consider the clientele and the consumer and give consideration to how you can translate your brand. Once you take that position that says we’ve got a home-court advantage — we know the customers more than the national guys — that’s the differentiator between the the big-box stores and the local mom-and-pop store.”

The difficulty for insurers is that once the product is sold, the customer doesn’t typically make repeat visits to the site, Brooks cautions. Retailers have an advantage in terms of being able to touch consumers multiple times and at many different points — through advertising, in the parking lot, online, he says.  PEMCO’s strategy is to take a start-anywhere, end-anywhere approach to distribution, combining its network of direct agents with independent agents and also the company’s website, according to Brooks.

“We focus on providing information, content, relevant options for the public to choose from in a multichannel way, but we recognize that we’re really going to have to take our product to where customers are — they are not going to come to look for our product,” Brooks says. “That could be anything from how you sign, greet, bill, interact at the point of claim or point of promise — it’s making routine touchpoints talkable and remarkable.”

When PEMCO has an opportunity to talk to existing customers, it encourages them to come back to its website and leave a review of the product they’ve purchased, Brooks notes, explaining that this serves the dual purpose of reinforcing PEMCO’s position as a trustable institution while also replicating a familiar experience for today’s online shopper. “Retailers want to have their products and services reviewed, especially when they think that’s a competitive advantage,” he says. “Any time we have an opportunity to interact with a customer at one of our primary touchpoints, we’ll offer them the opportunity to leave a review with us.”

Knowing whether a customer has left a review also becomes a data point for PEMCO that it can touch on in its later interactions with the policyholder, Brooks adds. Retailers are always keyed in to the last time a customer interacted with them, he says, and PEMCO is making investments in its customer data systems to make sure it has that single source for all customer information.

“If someone calls, you have to be informed about what they bought, what they’re open to buy, when’s the last time they called, what kind of service experience did they have, did they write a review, what’s the household makeup,” Brooks insists. “Amazon built their company that way. But insurance companies are converting our companies to that. You can’t provide a world-class experience if you have to pull up three different systems to figure that out.”

UPMC Tools of the Times To improve the customer experience, Pittsburgh-based UPMC Health Plan found an opportunity to incorporate a popular consumer health site into its member portal with a health coaching program powered by New York-based WebMD. “WebMD’s specialty is consumer health tools — it’s their core business, not our core business,” says David Passavant, senior director of consumer innovation at UPMC Health Plan. “Any time we look at technology, we measure build versus buy — and with WebMD being the best of the breed in this area, partnering made sense to us on a lot of levels.” Copyright 2012 WebMD Health Services Group, Inc. Used with Permission.

A Healthy Approach

Regardless of what happens with the healthcare reform bill (the Supreme Court was deliberating its constitutionality at press time), health insurers also are focused on providing a world-class customer experience, with the expectation of increasing sales, and they are trying a number of retail-like ways to connect with customers. BlueCross BlueShield of Illinois (6.5 million members), for example, last year began a partnership with Zagatthrough which members can review their doctors.

Michael Burke, senior manager, national network management, for the Chicago-based carrier, says consumers are used to looking for product information online, including information about medical procedures. “You need to create a retail shopping experience, not necessarily for [insurance] products, but for services: Who’s good at knee replacements or MRIs?” he comments. “You can search online for any product — for cost, quality, user reviews. When we have more of a shopping experience for insurance products, we might see it there, but right now it’s more about the care products.”

Louisville, Ky.-based Humana(approximately $37 billion in revenue) has incorporated a rewards program, HumanaVitality, into its wellness initiatives. The program, which is similar to a credit card or supermarket loyalty program, awards points based on how policyholders meet wellness milestones. Those points can be redeemed online for merchandise.

“People think of health with negative connotations — things like hospitals and operations,” says Shankar Ram, Humana VP of innovation. “This is around the more positive aspects of health: Instead of just having an interaction with Humana just when they’re paying a bill or visiting a doctor, you have this continuous interaction” via a reward mechanism, he explains.

People can gain points by meeting certain education, fitness and prevention milestones, Ram continues. Humana issues customers pedometers that allow them to gain points daily, and the company entered a partnership with videogame maker Ubisofton a fitness game that also allows point accumulation.

“The future is in non-intuitive partnerships between healthcare companies and consumer-focused companies,” Shankar says. “What’s really unique about this partnership is that we haven’t just sponsored in-game content; it’s the data exchange point that’s allowing us to get the data from gameplay to reward our Vitality members.”

BCBS Social Awareness Retailers are known for disruptive marketing tactics. Chicago-based Health Care Service Corp. took this to a new level by displaying a Twitter hashtag in the lights of its building and measuring the response. “We use Radian6 [Fredericton, New Brunswick] for a lot of the social monitoring that we do,” says Lynde O’Brien, Health Care Service’s social media director. “It’s amazing the power of this tool for monitoring for customer service and the effectiveness of initiatives like this.”
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