Channel is not the Game Changer, Trust and Customer Experience Are.
The debate within the insurance industry about changes to the sales channel is white-hot. What impact will the growth of direct, multichannel, and even non-traditional providers (think Costco, Walmart, and Amazon) have? Are forecasts about the impending demise of the traditional agency channel valid? This debate is driven in large part by the question about how customers going forward want to buy insurance – a product they rarely understand or appreciate.
But maybe the battleground is not so much about how the customer wants to buy, but who makes it easiest to buy. That may sound the same, but it isn’t. Buying insurance is actually really simple. If you get an online quote and truly believe it to be a great deal, more often than not, you can buy immediately. Progressive and GEICO work hard (and spend a lot of money) to convince you to trust online quotes. Alternatively, if you have a local agent that you believe understands your personal circumstances and you trust them, full coverage is just a phone call away. The buying part of insurance is simple; it is the trusting part that is hard.
Channel is not the game changer – trust is. In the past, trust has been built up by a combination of national or regional advertising and face-to-face relationships at the local level. But face-to-face contact is breaking down. More consumers are working and living away from their hometown, don’t have time to meet with an agent, or have become comfortable with online research and purchase. This would imply agents have become less relevant and direct purchasing will win out, but it is not that simple. Just as technology has allowed insurers to reach the consumer directly, it has also changed the trust game. Social media could be described as a relationship technology, delivering recommendations, advice, and information that can trump advertising. Consumers have powerful tools to find out whom their friends and family trust, whom they don’t, and what experiences they have had. Trust is no longer delivered by a big ad budget or a relationship lasting many years and generations. Trust now comes secondhand –from the personal experience of people connected through social networks.
Good experience does not favor any channel; it can work for and against each one. Consider USAA; they are the most trusted financial services company in the United States, but have no agents, have a limited ad budget, and never pretend to be the cheapest. What they do provide is a great customer experience and everyone knows it. In a conversation with a software vendor that sells insurance claim fraud detection software, I was told that USAA had no interest in their solution because trust goes two ways. They trust their customers to be fair and honest with them and that drives the corporate culture. I don’t know if the story is true, but I can believe it, and that is how word of mouth works. Just as likely, you will hear stories about local agents that go out of their way to help, or tales of a claims experience with an insurer that makes a terrible situation far more bearable. Word of mouth amplifies personal experience not marketing. There is nothing new about this, just that social media has made it so much easier to share those experiences.
Customer experience goes beyond what we think of as customer service. Picking up the telephone when it rings is customer service, but customers expect more. They want to be contacted proactively when there might be an issue, educated about how to prevent risks, and informed about how to save money.
Consider for one moment video rentals. Blockbuster owned the market. They had stores on every corner, great video selections, knowledgeable staff, and the prices were reasonable. But they lost out to a company that took two days to get a movie to you. You had to think about Friday movie night by Wednesday. The market shifted because of Blockbuster’s policy toward late fees. It created a bad experience. That happened before social media took off; today, the demise of Blockbuster would be far more rapid.
According to Econsultancy in a recent study across multiple industries, the majority of companies (58%) are just beginning to develop their strategies for improving the customer experience and just 8% % claim to have a ‘very integrated’ customer experience. In might be safe to suggest that the insurance industry would be more towards the back of the pack.
So while we discuss channel, we are missing the biggest differentiator, customer experience. The industry needs to think not just about how customers want to buy a product, which is a one-off experience, but about the total lifetime experience. It needs to look at the disconnected experience that can occur as customers move back and forth between agent and carrier. Only then will insurers get a grip on churn, stop customers thinking about insurance on price only terms, and increase the lifetime value of the customer.
