One of the first structured approaches to decipher digital transformation was taken by Capgemini Consulting in collaboration with the MIT Center for Digital Business way in early 2011. The complete report can be found here. I was one of the early advocates of digital transformation and I had the opportunity to draw significant findings from the report and share it with several clients. This report gave the industry a very promising and thoughtful analysis of how firms with a digital mindset will take advantage over their peers. In the last few years, I have seen a surge in firms taking insights from this report to rebuild and reenergize their core to align with strategies to acquire “Millennial” customers. These customers, who were born after 1980, were categorized as a separate audience with special needs that required transparency in interactions, agility, trust, and everything to happen in a “click,” and insurers and other financial institutions felt they needed to build specific products to attract them. At the time, it was thought that Gen X or older (customers born before 1980) would continue to want the comfortable, old-fashioned channel of human-based interaction via agents/brokers.
Times have changed: The findings from the World Insurance Report 2020 have turned this perception upside down regarding digital adoption. The data below clearly illustrates that Gen X and older customers have overtaken the millennials in terms of digital adoption for day-to-day transactions. In the last couple of years, the customers of these generations have taken a leap in adoption, primarily for reasons which we all can appreciate – convenience, access to information from their preferred channel, ease in operational interactions, and improved service delivery. Improved customer experience has clearly drawn upon the Gen X or older segment, which has begun to value that experience as they become more and more comfortable in using the digital channels. Therefore, the digital divide between the age groups has eroded and customers regardless of age demand the relevant customer experience across channels and to the channel of their choice.
In recent months, the unprecedented pandemic situation has resulted in a surge of online interactions. And, prolonged restrictions will only make the millennial mindset more permanent in Gen X and older generations.
New trust equation: Digital adoption has redefined the trust equation between customers and insurers. The research extract from the World Insurance Report 2020 highlights a fundamental shift in the social behavior and shopping preferences of customers. Customers can be put into the two extremes of “Pioneers” and “Followers” based on their propensity to seek information actively, willingness to pay for services, and propensity to switch. Pioneers are categorized with higher propensity and followers with lower propensity. Pioneers show a strong preference to trust their own research and decision to purchase. While traditional channels have not lost relevance, customers now are placing more trust in themselves.
Pioneers comprise a large segment which is close to 28% of the customer base. These are the customers who typically tend to start shopping 60 days before their policies expire. This is also the segment that is loyal and trustworthy if the right experience is delivered. But at the same, they can be a very risky group because they do tend to switch very quickly. On the other hand, followers, who make up the largest share of customers, tend to let things ride which results in low rates of changing carriers but also low adoption on new products or services.
In this world of enormous data generating every second, insurers have lagged behind in providing personalized experience compared to their industry peers. Retailers maintain a 360-degree view of their customers and analyze structured, semi-structured, and unstructured data to acquire and retain customers. In my view, if insurers can retain a small fraction of their customer base, this will significantly result in a financial incentive to them.
Feel free to connect with me to exchange ideas about customer engagement and stay tuned for my next blog, in which I will present an approach to how insurers can achieve hyper-personalization for their customers through a “3-R” customer engagement strategy.