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Learnings From Across Industries: Insurers Tackle New Technologies and Tech Startups

September 11th, 2017 | Posted by APT in Insurance

With more than 80% of insurers planning to invest in new technology this year, the trend of InsurTech—the application of technology to traditional insurance practices—is sweeping the industry. This trend is evident not only as incumbent insurance players adopt cutting-edge technologies, but also in the rise of insurance tech startups, which are creating a new kind of competition for traditional insurers.

Insurers are not the first to face industry disruption, especially in the form of pressure to adopt new technology or respond to the competitive threat of tech-focused newcomers. Similar changes have emerged in other sectors, from hospitality and banking to retail and telecommunications.

As insurers contemplate how to refine key business programs in the face of such industry disruption, they can apply best practices from their peers across industries. Leading companies in many sectors have turned to business experimentation to innovate strategically in response to new technology and emerging competitors, and insurers can emulate this approach to optimize their responses to the changing industry landscape.

Harnessing the Power of the Right Tech Tools

A variety of new technologies have emerged in the insurance industry, from telematics tools to monitor driver behavior, to “chatbots” to streamline the lead generation process and drones to assess property damage. However, as the urgency grows to invest in such tools to streamline costs, enhance agency efficiency and keep pace with competitors, insurers must understand which technologies will ultimately pay off.

As technological investments have abounded in other industries, the organizations that have developed the capability to rapidly test and measure the impact of new tools on a smaller scale before investing in them more broadly have developed a competitive advantage. As an example, hotels are regularly pushing the envelope with cutting-edge innovations such as mobile check-in apps and virtual reality headsets, as guest expectations for unique experiences grow. However, as exciting as these new tech tools may be, many hotel chains have learned that delivering service with a human touch is critical to overall guest satisfaction and financial growth in the industry.

When it comes to innovation, the risk for any organization goes beyond the upfront cost of new programs themselves. For hotels, rolling out technologies that are not the right fit may also compromise brand loyalty among some guest segments, while for insurers, it could likewise mean losing business to competitors. Additionally, staying ahead of the technological curve means that the guest experience becomes more frictionless—and with fewer human touchpoints, some guests may be less satisfied with their overall experience. The same holds true for insurers and policyholders—particularly those with complex policy portfolios.

In recent years, retailers and banks have also increased their efforts to introduce new technologies in physical locations. For example, many banks are introducing technologies to automate the more routine tasks of the branch, such as information kiosks and, of course, ATMs.

It is critical for banks, as it is insurers, to introduce technology that customers will truly value, not just tools that seem trendy. For instance, some banks have introduced video conferencing technology to enable customers to interact with product experts in other locations. However, some customers may not be satisfied with interacting with a screen rather than a person. Before making the substantial upfront investment required to introduce such technologies, banks must introduce them on a smaller scale to determine whether they are worth the investment.

Across industries, leveraging in-market experimentation is the most reliable way for organizations to pinpoint the overall impact of each new technology introduction. In order to proactively manage the uncertainty that comes with introducing a new technology, insurers should learn from their peers in other sectors and first pilot these services with a small group of agencies or policyholders, to gauge whether they generate enough incremental benefit to justify the upfront costs.

Making Every Policyholder Interaction Count

In the face of increasing competition from insurance tech startups and other industry players, ensuring each policyholder interaction is a positive one is more important than ever. However, there are many different approaches insurers can take to enhance policyholder interactions. For example, some carriers may rely on in-person events and call center outreach to build policyholder relationships, while others look to direct mail and digital campaigns to unlock upsell and cross-sell opportunities. By emulating organizations in other industries that have dealt with similar pressure to make every customer interaction count, insurers can determine which forms of outreach truly have an impact on customer satisfaction and retention.

For example, the telecommunications industry has faced the perennial problem of customer churn—that is, customers cancelling their subscriptions. While churn is often due to external factors, such as customers moving out of range of a given provider’s service, many also cancel in circumstances such as promotion expiration. In these scenarios, churn is often preventable, if communication service providers (CSPs) are prepared to make a compelling retention offer.

Understanding that retention offers cannot be one-size-fits-all, many CSPs have learned to customize their responses effectively, ensuring they reach the right callers with the right offers and messaging, at the right times. By using business experimentation to first test various messages with some subscribers, and comparing their responses to other, similar subscribers that did not receive a given message, executives can measure the program’s direct, incremental impact.

Insurers should look beyond retention to leverage a similar approach to optimize their marketing outreach more broadly. For example, by testing variations of direct mail campaigns with different creative or messaging, they could pinpoint which type of mailer would be most effective for each product, and with which policyholders.

As the insurance industry continues to evolve and prepare for continued innovation, insurers should emulate other industries’ rigorous analytical approach to testing new ideas. By honing their capabilities to quickly test new programs and course-correct before broader rollout, they will be able to invest in winning programs, while cutting unprofitable ones. As it has with leading hotels, banks and CSPs, business experimentation will empower insurers to make informed decisions as they refine their investments in new technologies and make every policyholder interaction count to drive business in the face of disruptive tech startups.

 

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