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Digital insurance industry trends in customer experience

Digital insurance industry trends in customer experience

Global digitalization and pandemics deeply impacted the insurance industry, due to changes in the customers' behavior. This led to the rapid emergence of new service providers - insurtech, which operate on relatively different principles.

In this article, we try to observe what are the main customer experience trends in the insurance industry, and how customer-centered UX design could help not only to switch negative emotions to positive ones, but also ensure the best value for customers.

Key Takeaways

  • The insurance industry is transforming from “detect and repair” to “predict and prevent”.
  • To remain relevant in the future, insurers first of all need to foster a transformation culture and customer excellence culture to position towards delivering value to customers and solving their real problems.
  • Technology should be used to increase the value of service delivery, because technology is a means, not a target.
  • Incumbent insurance should follow insurtechs in adopting an experience mindset and embracing opportunities from disruptive technologies—instead of viewing them as a threat—point the way to next-generation capabilities.
  • Leveraging opportunities of digital technologies and developing appropriate contextual ecosystem strategies (embedded insurance) will enable insurers to make a larger impact on customers' daily lives.
  • Digital becomes a huge part of the insurance experience, thus making UX design investment a key competitive advantage in the brand strategy.

Insurance industry still at the early stage of digitalisation

Some regions, especially Asia, will almost seamlessly have resumed their pre-crisis development as early as 2021. The recovery elsewhere will be much more uncertain. Western Europe will lag behind, but nevertheless still experience growth - with total premium income up by 1.2%.

Overall, 2021 was an opening shot for a strong decade. Globally, average growth of over 5% over the next 10 years appears possible, driven by higher risk awareness, the pivot to sustainability and the further rise of Emerging Markets.

According to EY 2021 Global Insurance Outlook, disruption caused by the COVID-19 pandemic represents a huge opportunity for insurers to remake their purpose into meaningful action and create value for individuals and society.
As McKinsey & Company points out, many insurers are modernizing their technology stacks but are at an early stage of the digitalization journey.

Top 5 insurance industry trends in customer experience

1. Omnichannel insurance experience becomes standard

Due to the Covid-19 pandemic, customers are embracing digital interactions more than ever before and insurance is no exception. The main issue is that today's insurance customers tend to have a fragmented multichannel experience.

In practice, that means there are different isolated communication/service channels. For example, if a customer starts a claim submission process by phone call and then wants to finish it through the web Client Portal, he/she has to submit certain information again. The channels are not linked. Therefore, there is an increasing demand for more integrated and holistic experiences that provide a single, connected experience flow and information consistency across a combination of different channels, depending on customer's needs and preferences.

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Nevertheless, it is worth examining this phenomenon closer. We interviewed insurance users about their experience with insurance to get insights into their habits, behavior and struggles related to it. The interviews revealed that users prefer different types of channels for different tasks.

“[..] I would like to use more digital tools to manage insurance related tasks on my own, but at the same time I need to be able to contact a human being to discuss any questions or problems that I might have.”

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Hybrid interactions will be predominant in the future. Insurers must address this by building a unified channel system taking into consideration customer-facing channels, as well as employee-facing channels to provide holistic customer experiences. This is important not only for onboarding tasks, such as getting advice or a quote for new coverage, but also for ongoing engagement and management of existing insurance policies.

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Omnichannel might be a competitive differentiator for insurers today. However, in the near future, it will become a default requirement for insurers to remain relevant for customers.

2. Simplicity and speed in insurance experience become key benefits

In terms of customer experience, insurance is placed in an extremely sensitive area. This is because the key quality assessment by customers occurs at the moment of greatest emotional vulnerability and tension, when an accident occurs. The most common friction points are complicated contracts and poor claims experience. That's why many customers view their insurance experience in a rather bad light.

Tasks in the onboarding stage, in particular, represent an opportunity to improve the insurance customer experience and ensure better clarity for customers and confidence in insurance. For instance, as customers still value human interactions, remote video-call consultations with a human can make a difference, even if it is not in-person. Innovations in this stage of customer experience will be especially relevant in markets that rely heavily on brokers and agents, such as Belgium.

During our user interviews, insurance customers indicated that one of the most frustrating and time consuming aspects of their experience is whether insurers heavily rely on physical paperwork processes.

“My mailbox explodes from the amount of documents I receive from some of the insurers. Even if I extend the coverage period of an existing policy, they still send paper documents and I have to spend hours to review if the conditions haven't been changed. And then, of course, send back the documents by mail. It is hell!”

Customers seeking simplicity are switching to insurers that eliminate frictions and save time. The 2020 Gartner FS Customer Experience Survey found that two out of top five insurance customer requirements are related to speed:

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3. Customers demand embedded insurance experience

  • 42% resulted in a positive outcome (increasing business with the provider)
  • 41% resulted in a negative outcome (decreasing business with the provider)
  • 17% were passive (no action taken)

This affirms why so many users describe their relationship with insurers as a love-hate relationship. To make it a more-love-less-hate relationship and drive loyalty, insurers will need to create new touch points and find meaningful ways to engage more with customers, by adding value to the relationship through proactive, personalized and contextualized experiences, thus providing a positive impact.

Creating new touch points to engage with customers entails expansion beyond corporate walls and reinventing business models beyond insurance to build an embedded customer experience of the future.

Embedded insurance can be bought where there are customers and from brands they trust. It can become a feature of the product, rather than something that is purchased separately. According to PYMNTS.COM research of 3,551 U.S. consumers, 70% of digital bank customers would be highly interested in at least one type of bank-embedded offer based on their transactions history.

Insurance will become more present in consumers' everyday lives, due to the reach of technology empowered ecosystems in which companies collaborate to offer different complementary services in mutually beneficial ways. This includes win-win partnerships for insurtechs, insurers, non-insurers and, ultimately, for consumers. For example, Tesla already includes car insurance when customers purchase it.

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Insurers can either be one of many participants in such an ecosystem or be an orchestrator of it. The latter is a much more difficult role to take on but also presents a greater opportunity to make a larger impact on experiences that consumers encounter on a daily basis. This role entails a thorough rethinking of insurance business and redesigning the customer experience away from a product logic toward a holistic service approach.  Good partnership management is critical for ecosystem business.

Delivering a customer experience that encompasses not only insurance related aspects but also other daily life aspects, with an aim of making users feel safe and taken care of, results in an untapped potential for growth.

The three main shortfalls are:

  • lack of appropriate ecosystem strategies;
  • scarcity of the specific interdisciplinary skills and lack of necessary organizational structures and cultures;
  • insufficient technology architectures.

Providing an embedded insurance experience largely depends on the ability to gather and analyze data for useful insights. Technology-intensive ecosystems can be a great source of diverse data points, especially because the potential of creatively developed ecosystems present opportunities for insurers to pair omnichannel networks with customer intelligence, analytics, IoT, AI, AR, blockchain and other emerging technologies.

This allows them to create more personalized and dynamic customer engagements. This includes interaction with customers at the right time and with the right message, hyper-personalized offers, personalized support at risk mitigation, proactive servicing, event-based processing, decision automation, etc.

4. Digitalization will improve CX in underserved SMEs category

Just like individual customers, commercial insurance customers have been affected by the Covid-19 pandemic. There has been a surge in products, such as insurance against business interruption, coverage of business expenses in case of forced closure, protection against liability incurred from employees and consumers catching a disease in their place of business.

As Renuka Sridhar, General Manager of Insurance at Wipro has pointed out “small commercial insurance customers, usually a subset of the personal lines insurance consumer class, expect the same digital experiences from their insurance providers that they receive from personal lines insurance companies”.

Insurance customers who are looking for sophisticated and customized products, are waiting for detailed personalized advice from brokers, which is a major challenge for the digital development of insurance. At the moment, SMEs did not see an appreciable difference in the convenience offered by agents and brokers, digital channels or direct channels.

However, to accommodate this change of role of agents and brokers, insurers will need to extensively upgrade their back-office tools to increase the efficiency and user experience of their teams. As reported by Capgemini World Insurance Report 2021, agents and brokers want to ramp up their digital engagement capabilities, and about 44% said they need support from their insurers.

5. Digitalization increases the role of customer-centered design

Global digitalization and pandemics drive significant changes in customer behavior. The development of the digital ecosystems lowers the threshold of entry and leads to the emergence of new players and increased competition on the market. The ability to provide customers with the greatest value becomes the main competitive advantage.

In terms of product categories, 66% of insurtechs operate within P&C lines of business (led by auto insurance), while 18% and 16% focus on health insurance and life insurance, respectively. Around 47% of insurtechs launched between 2000 and 2020 focused on personal lines, with the number that operate in commercial lines increasing in recent years. Insurtech companies design digital products with the consumer at the center, providing industry disruptive service.

It requires having empathy for what customers are going through when they are interacting with an insurance company. There are two key touchpoints in the insurance customer journey - purchase experience and claims experience.

When buying insurance, customers are increasingly looking for personalized and customized solutions.

Besides personalized coverage plans, more important is that customers want to feel the insurer understands their pains and concerns, that they can rely on their insurer as a trustworthy partner and that the insurer will be there for them to help overcome problems in case of an accident. In other words, customers expect empathy and human-touch from their insurance providers.

That leads to the second occasion when people contact insurers - claims experience - which is one of the most important, if not the most important touchpoint in the insurance customer journey. This is because it is often related to emotionally charged unfortunate or tragic accidents. At these moments, customers are especially sensitive to how they are treated, how their requests are handled, what they have to put up with and consequently form most of their opinion about the insurer.

Digital product interfaces have become an important determinant of customer experience.

Only when insurers empathically recognize specifics of different customer touch points and address them, is it possible to design an intuitive and caring customer experience for their users. The best way to achieve that empathy level is through insurance UX research and using findings of it to design and build a customer-centric insurance UX / CX.

Insights from best Insurtech companies to improve customer experience in insurance


Clark

Personal digital insurance broker that stores all insurances in one place (irrespective of provider).

  • Not in the service of a single insurance company, but in the service of customers.
  • Support with claim submission to respective insurers.
  • Provides personal consultations with insurance professionals.
  • Requires power of attorney from customers to represent them.


Lemonade

Digital-only insurer with web and mobile platform.

  • Chatbot-powered conversational policy purchase process.
  • Renters insurance.
  • Car insurance based on driving habits.
  • Accepted by a major mortgage lender.
  • Helps to easily switch from other insurers to Lemonade.
  • AI claim review and instant payment (for simple cases).
  • Donates unclaimed premiums to causes chosen by users.


Metromile

Leading pay-per-mile car insurance in the US (acquired by Lemonade in Nov, 2021).

  • Rate is based on the user's driving habits.
  • Uses a telematics device that plugs into the car's diagnostics port, as well as driver’s mobile phone to get data on car usage.
  • AI assisted claim review system.
  • Access to a nearby repair shop, rentals and everything you need to get back on the road in case of accident.


So-sure

Phone and home content insurance management (with plans to add other insurance products).

  • AI driven object recognition allows users to take a snapshot of objects, receive insurance estimates within seconds and get insured.
  • Engages customers by making insurance social and offering payback.


Luko

Digital home and real estate insurance app offering prevention, comprehensive coverage, maintenance and repair.

  • Damage assessment by expert through video call.
  • Access to free services to fix damages and network of certified artisans to get advice through video calls to help with minor repairs.
  • Partnership with Netatmo smart home devices and offers a discount to insurance, if security solutions are used.
  • Donates unclaimed premiums to causes chosen by users.


Beam Dental

Digital-first, preventive-focused dental insurance.

  • Electric brush connects to an app to help track and improve brushing habits.
  • Gamified teeth care turns good brushing habits into rewards and savings.
  • Nearby dentist search.


Vitality

World’s largest behavioral platform linked to financial services that encourages behavior-change to make people healthier.

  • Positive effects on insurers and society by addressing 3 key areas – nutrition, physical activity and preventive screening.
  • The platform includes a network of the largest insurance companies.
  • Tailored health insurance solutions, based on individual risk factors and preferences.
  • Rewards for engagement with the program.
  • Access to a network of providers of services.


Alan

Digital health insurance super-app offering personalised healthcare and wellbeing (B2B2C).

  • Modular insurance builder - small companies can subscribe in a few clicks; big companies can tweak every single parameter to build the right insurance package for them.
  • A complete interface to manage health insurance both for employers and employees.
  • See nearby doctors and their average fee, book appointments, chat and video consultations with a doctor, get a free meditation app subscription, and others.


Thimble

On-demand business insurance platform made to serve small businesses, self-employed and freelancers.

  • Buy a policy online, in the app, or over the phone in minutes.
  • Coverage by hours, days, months or years.
  • Flexible payment options.
  • Possible to modify, pause, or cancel policy instantly.
  • No direct claim handling process, since they are handled by underwriting partners.


Policybazaar

Personal digital insurance broker. India’s largest insurance comparison app (web and mobile) allows users to buy, store, share and track all insurance policies online.

  • Claim assistance - step-by-step information for each provider.
  • Hospital locator and cashless partner garage locator.
  • Gamifying insurance education.

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Ping An

Looking beyond insurance, and developing comprehensive technology and finance ecosystems. Serves online and offline retail customers through several spin-off companies.

  • A comprehensive healthcare ecosystem that includes government, patients, medical service providers, social and commercial health insurers and technology.
  • Generates strategic synergies of health care services that can be provided efficiently and tailored for different segments.
  • Provides each segment with relevant smart tools for enhanced operations.

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How to build a successful human-centered insurance experience

The insurance industry as a whole is facing a challenging customer experience task - to change the widespread negative perception about it.

In order to win the hearts and loyalty of digital customers and remain relevant in the future, insurers must first foster a transformation culture and customer excellence culture to position towards delivering value to customers and solving their real problems.

Developing or participating in embedded insurance ecosystems will prove to be an effective way for insurers to stand out with their products, not only by providing great customer experience but also by evoking the feeling that their products and services help customers to live their best life every day.

There are many different insurance products that are available. It is crucial to understand the peculiarities and details of the insurance customer journey for each particular product, when embarking on the quest to humanize insurance.

This involves upgrading service channels, tackling legacy systems, leaving behind inefficient processes, changing company culture and shifting mindsets. For many incumbent insurers, it might mean tearing apart everything or at least seriously and thoroughly reconsidering the way things are done before starting to build a holistic insurance customer experience from scratch. It can be scary, but it has tremendous potential. If you look at it that way, it becomes liberating.

The main idea that insurtechs embrace is to leverage technology but remain “human,” by offering greater customer-centricity thus driving better outcomes. Some of the technologies and approaches that can be seen in different insurtech companies and will develop more in the future are:

  • AI and automation for predictive analytics and proactiveness - faster claims, policy administration and risk assessment.
  • Use of IoT to obtain data, prevent losses, reduce risk and offer better rates.
  • Subscription-based models.
  • Hyper-personalized products.
  • Mainstreaming blockchain for smart contracts.
  • Omnichannel distribution and embedded insurance.
  • Mobile apps become the main point of contact between both parties for any transaction.
  • Video call consultations with AR enabled features.
  • Peer-2-peer or social insurance.

Relationships between insurtechs and incumbent insurers can be described as both - foes and friends. It all depends on the mindsets of the companies. The truth is that, in most cases, neither of them can have a successful and fruitful growth without partnering with the other party. Insurtechs often don't have capacity to underwrite all the risks, so they need to be backed up by any of the large, incumbent insurance companies.

Such partnerships are excellent soil for building contextual ecosystems that reinvent business models beyond insurance and will create an everyday customer experience in the insurance industry of the future.

Get UXDA research-based white paper "How to win the hearts of digital customers":

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If you are seeking your financial product SOUL and also an exceptional competitive advantage in the digital age, contact us. With the power of financial UX design, we can help you turn your business into a beloved financial brand that has a strong emotional connection with your clients, resulting in success, demand and long-term customer loyalty.

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ABOUT THE AUTHOR

Alex
Alex, Founder/ CEO/ UX Strategist

Alex has dedicated half of his life to studying human psychology, as well as business success, developing 100+ digital projects and 30+ startups. He spent 10 years researching UX and finance to create UXDA's methodology. Alex is a passionate visionary who's capable of solving any challenge to improve the financial industry.

Arita
Arita, Senior UX Architect/ UX Consultant

Arita bridges the gap between the clients' vision and a financial product that they demand. She's famous for her ability to focus on the user and their business specifics. Her experience with crypto, white-label and retail banking allows her to always find the best UX solution. Everything Arita does comes from the bottom of her heart.

Inese
Inese, Lead UX Architect/ UX Consultant

Inese embodies a powerful fusion of two passions: finance and UX design. Her experience in trade finance, AML and wealth management provides her with exceptional expertise to always find the best solutions for the users. Her unique talent to find value in every product has resulted in countless success stories for our clients.

Linda
Linda, Co-founder/ COO/ CFO

Linda is a source of endless energy. An education in international business management and years-long experience with 20+ digital startups has made her a dedicated strategic thinker who solves any problem with grace. No mission is impossible for her. Linda's responsibility and punctuality have become a legend around the agency.