Lead with Value

Price, value, fairness and how insurers all too often look at data, customers and the opportunity of regulation the wrong way.

All too often, I find the conversation on leading vs. lagging indicators is missing in insurance.

Leading indicators are metrics that predict future outcomes, such as customer satisfaction, website traffic, or employee engagement. Lagging indicators are metrics that reflect past results, such as revenue, profit, or market share. They may not be perfect for assessing the quality of the outcomes of customers experience, but they are useful indicators for past performance.

We typically work with our customers on their Transactional Net Promoter Score (tNPS). This is important, because it’s a way of intensifying a customer satisfaction metric by focusing on specific experiences in real-time. These often include metrics that historically insurers struggle with. For example, the referral rate (NPS) during or post a claim (t) is a far more telling outcome. 

I think we also need more leading indicators like this for price, satisfaction, overall outcomes and usage across insurers, so we know where things are headed as opposed to where they’ve been.

On one hand, a lagging indicator in insurance would be a healthy claims ratio on say claim rates. On the other hand, a leading indicator might look at low usage, low engagement and indicate low benefit, likely loss of customers or even regulatory action.

If we measure the wrong things, we’ll optimise or fix the wrong things. It’s as simple as that. This risks a huge potential for disinvestment and frankly low levels of improvement. So we need to get this balance right. For many in insurance this remains the root cause of mis-aligmnet, and why many customers still have low levels of trust, satisfaction, loyalty and referral rates.

What other metrics and experiences should we be looking at?

Measuring metrics like claims rates, product usage, customer journey drop-off rates etc. should be an engrained source of reference for most insurers. However, there’s a spectrum of how well we’ve seen them implemented, managed and utilized.

Most insurers have healthy enough “dashboards” that display these key indicators. My concern is that dashboards tend to sit with functions that can be thwarted by analysis paralysis. And these functions often don’t have the ability to dig underneath the key metrics and, more importantly, act on them through change.

The topic of “fairness” has only arisen recently on the insurance agenda with the advent of Consumer Duty moving it even further up the Exec priority list. Fairness, however, has many factors, and in insurance it must be balanced against economic viability, and measured against the outcome of loss - not just the frequency or likelihood. It’s easy to attribute a causal relationship when there’s been a price hike and people aren’t renewing their car insurance. However, if rejected claims rates also rose in that cohort due to a specific term or clause, then questions should be asked about the fairness and impact. This should all be accomplished in real-time but many insurers don’t have the ability to do so. This is where new software and AI tools can rapidly decrease the time for this sort of analysis and free time for investigative work and delivering resolutions.

Foundational shifts in business design and the adoption of customer centric ecosystems can diametrically change this paradigm. Insurance life-cycles are massively complex, and technology ecosystems have tended to reflect this. Creating data and operational silos that make this sort of analysis much harder.

How do you manage this through proliferated distribution and the whole lifecycle of insurance?

In reality, there’s a distinction between brokering or intermediating commercial versus personal lines insurance.

Sticking with personal lines. The broker relationship with customers and insurers is very intensive and often in short time spans, typically around selection and renewal cycles. This shouldn’t be the case. It should be on a continuum. In an increasingly price driven market, fair pricing was partially addressed with GIPP, but it’s important to ensure that people also know what they are getting.

It’s still incredibly hard for brokers and customers to balance the value or what they are getting in their insurance with the prices they are seeing. The result is a marginal gain in price could be massively offset by the additional value being provided, which all too often gets lost.

The way through all of this is simply to ensure the triumvirate of relationships (insurer, broker and customer) are in unison, intelligently managed, personalized and most importantly, there’s plenty of engagement opportunity.

Insurers can do a lot more to provide hubs, portals and engagement opportunities that can intensify their relationships with these parties and help ensure optimal and fair outcomes.

True digitisation has the potential to massively shift the transparency, openness and success of relationships between all parties, making products and services far easier to understand, consume and experience in the process. 

Equally brokers are aware there’s accountability and responsibility here. Speaking to a group of brokers recently, they are making more selections where they can articulate to the customer a better relationship paradigm and ability to intermediate successfully.

Will the regulators continue to push on this?

Perhaps. It certainly expects to have insurers prove they are achieving fair outcomes.

This transparency will seep into the broker and customer world far more than it has before. Perhaps acting as a sort of new Defaqto rating for the industry. Or at the very least a trust rating.

Vulnerable customers have also risen on the agenda and they’ll form a more significant part of the analysis and action regulators take.

I think value is a challenge for insurance. The truth is no one policy looks the same or can be priced accordingly. Despite insurers best efforts to continue to operate like it produces reams and reams of the same document, it's had to bend legacy to adapt policies in a number of ways.

I think regulators will be far more interested in the transparency of coverage and efforts made to bring customers on a journey or understanding and outcome management.

The new regulatory pressure on insurers is therefore really an opportunity. It’s asking us to get close to our customers and act in their interests.

This can only be mutually beneficial. I for one am still concerned at the ability to ‘exit’ customers and want to see this next wave of pressure drive a more competitive market.

Customers need insurers that can value customers, not just policies.