ACORD Symposium: Customer Intimacy and Engagement Key to Winning Strategy
DOCOsoft attended the ACORD-organised Best Digital Customer Experience Symposium on the 9th March at Minster Court where speakers like ACORD CEO Bill Pieroni outlined their vision of the future of digital insurance. The focus of the symposium was mainly personal lines but there were lots of takeaways for London market insurance carriers, claims teams and service providers across the board.
The future is digital for general insurance. That much, we know but the symposium shone a light on tangible, practical ways that the insurance industry can meet the challenges it faces from new market entrants and new types of digital customers. Pieroni concluded the conference by analysing the results of a survey, ACORD’s Best Digital Customer Experience Study, which screened and assessed the websites of nearly 1,200 carriers, brokers and aggregators on the digital experience they delivers to online shoppers. The study concludes that only a few insurance companies are delivering the digital experience that modern day consumers are crying out for.
Looking at the personal lines landscape we know that general insurance shopping is only going to get more competitive. Insurance companies will have to really stand out in a crowded marketplace to succeed. That holds true whether you are UK motor general lines business or, in our opinion, a niche London market Managing Agent or broker. It seemed to me, however, that this would be a good opportunity to check out the general lines landscape to see if there are any lessons we can learn in our very own London market.
The ACORD case study noted that premiums are stagnating. The stats don’t make for comfortable reading. For example, UK Motor Insurance Net Premiums Written since 2011 have declined every year falling from more than £12 billion to £9 billion in 2016. Customers exhibit low levels of loyalty to insurers in this landscape. UK motor insurers are more than twice as willing to shop and switch compared to their U.S counterparts over the past year.
Now a London market carrier might say: “well, so what, it’s a completely different market to ours, you can buy car insurance online but no one is likely to do that for an oil rig any time soon!” and that is fair enough. Just consider, however, that as technology applications for insurance increase in scope what does that mean for everyone when barriers to entry are reduced and transactions are commoditised?
Is that really possible? The London Market is responsible for paying claims on high-profile risks, including the 2011 Japanese earthquake and tsunami ($1.95 billion paid out), the 2011 New Zealand earthquake ($1.2 billion), and the Deepwater Horizon oil spill in 2010 ($600 million). London has insured singer Bruce Springsteen’s voice (for a value of $6 million) and soccer player Cristiano Ronaldo’s legs (for $144 million).
Clients complain, however, that London’s benefits—expertise, colocation, networking, and rigorous regulation—also make it expensive. Although clients and their brokers will accept this premium for complex risks, they are reluctant to pay a premium for more commoditized risks.
London Matters: The Competitive Position of the London Insurance Market, a study commissioned and published by the London Market Group (LMG) estimates that despite London’s unique position, 30 to 40 per cent of its business is in relatively commoditized lines, which could move to regional or local markets if the cost gap is not closed.
Meanwhile, “Lots of reinsurance risk can be commoditised, especially natural catastrophe,” says Michael Wade talking to the Financial Times, a former Lloyd’s underwriter who is a senior adviser to the UK government on insurance. “That commoditisation is coming down the food chain to marine and aviation, and as it comes down the food chain it isn’t coming to London. It goes to Bermuda or Zurich.”
So what can our market learn from the general insurance sector? The ACORD study statistics show that UK insurance shoppers have increasingly turned to online sources of information. 80% of shoppers engage in online research and 45% make their final purchase online. Therefore, providing an “effective and compelling digital customer experience is crucial.”
ACORD identified and screened 1,200 websites for best digital customer experience, focusing specifically on two criteria – enablement and engagement. Enablement: does functionality exceed expectations, is there strong support across process, and are there superior omni-channel capabilities? Engagement: does the site show superior cross-industry design; is navigation intuitive, does the brand align with strategy?
The analysis evaluation results showed that strong performance in enablement does not correlate to engagement. Insurers must focus on both functionality and user experience in order to deliver a winning digital experience. Mobile capabilities are strongly associated with overall performance. Evaluators ranked websites higher when they provided high quality experiences on mobile devices.
The leading takeaway is that perceptions of “winners” strategies and intention to buy were strongly tilted (80%) to Customer Intimacy, way ahead of Product Leadership (20%). “Operational Excellence” and “Disruptive Innovation” were other key markers in the survey; however, they did not score a single percentage point in terms of contributing to a Winning strategy, which is certainly food for thought. Presumably, operational excellence is taken as a given while only funky early adopters from Hoxton are given to buying a product for its disruptive innovation potential!
So to sum up the survey findings, a clear strategy is essential to performance and Winners overwhelmingly compete on customer intimacy and interaction. When you think about it, the focus on customer intimacy is something that the London market has promoted as a key asset for all of its 300-plus years of history. Clearly we have been doing something right as a market in that time. The key to the next 300 years will be how we marry that face-to-face customer intimacy with the digital variety.