The Customer Experience in Insurance: Thoughts from McKinsey
July 28, 2016 by Luke Tucker
Call it the Kevin Smith effect. In 2010, Southwest Airlines denied the independent film director a standby flight because he was too large to fit in their seats. Smith live-tweeted the debacle, and in a few hours managed to rebrand Southwest as the “too fat to fly” carrier. The airline’s public apology faded almost immediately, but six years later an entire niche of indie film fans are still offended on Smith’s behalf.
Today, a relatively minor misstep that might have cost a firm a slight handful of customers a decade ago can erupt into a social media firestorm with serious brand-tarnishing potential. But recent analysis from McKinsey reminds us that providing an effective customer experience in insurance is about more than managing customer service blunders. Leveraging customer satisfaction can spur growth in fiercely competitive markets where price wars are unsustainable.
Using the similarities between airlines and insurance – both tightly regulated industries scrambling for share in crowded markets – they theorize that insurers can compete as the most profitable U.S. airlines have, with a strong emphasis on customer service. Domestic airlines with the highest customer satisfaction scores “have profits that are way above the industry average,” the report says. “Another major carrier is raising prices—moderately—on the expectation that customers will pay more for great on-time stats and more reliable baggage-handling.”
Can insurers reap similar rewards by relentlessly focusing on customer satisfaction, instead of relying on typical revenue generators like price cuts and media spends? McKinsey’s research points to yes. “Some executives may still see insurance as a low-engagement, disintermediated category, but analytics prove that in an industry where profits are highly concentrated, leading carriers are delivering customer experiences that inspire loyalty and attract new customers frustrated by their experiences with their current carriers.
To benefit from better customer satisfaction results, insurers must first discover and understand what makes their customers happy, as opposed to what they expect their customers to be happy about. The five most important customer satisfaction drivers learned by McKinsey in their repairable auto claims survey are also applicable to life insurance. They are:
Ease of communicating with the company
Staff knowledge and professionalism
Convenient and transparent processes
The speed of the claim settlement
“In a finding that may surprise industry executives, settlement amount ranked only 12th, behind ease of tracking claim status and flexibility in scheduling the appraisal,” researchers found. This particular group of auto policyholders cared more about service than a speedy payment.
The report goes on to say, “customers with more complex insurance needs might want a higher-touch approach during sales and onboarding, for example, while younger customers might prefer digital-only, self-driven experiences that include advice but remain non-intrusive and available on demand. Also, the more value there is at stake in a claim, the more time customers are willing to spend in live interactions during the first notice of loss. For example, many carriers overlook the fact that speed of resolution is as important as employees’ courtesy, empathy, knowledge, and professionalism.”
There’s much more to parse from the McKinsey study that we may explore in other posts, but for now we’ll leave you with this assessment from its authors: “For carriers with the resolve to see their business through the eyes of the customer, each interaction becomes a way to live up to their brand promise; functions come together in new ways across customer journeys; and technology and digital become accelerators.”
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