Alternate Channels

If there is one element that characterizes the omni-channel shakeup in the retail sector, it is this: consumers do not think in terms of distribution channels. Instead, they want simple, convenient ways to research, compare and buy products. And they want to switch between these modes smoothly and with no duplication.

Retailers increasingly understand that their information technology and business processes have to change to meet the reality of how people buy stuff these days. There is the example of a shopper who sees a promo ad on a mobile app, compares the deal online (or with friends), talks to a service agent about features and then drops by the local store to purchase it. For some, that fluid process is a tall order that renders the structure of distribution “silos” virtually obsolete.

According to online publisher Retail TouchPoints, Canadian Tire is “working toward improving collaboration across mobile, social, online and in-store technologies such as self-serve kiosks.” Similarly, Adidas Canada is “employing an omni-channel approach” by “working on a number of different consumer-facing projects, the biggest being bringing more of a technological, digital experience to the bricks-and-mortar business,” notes Dx3 Digest, an online publication focused on digital marketing.

These are just two examples of an omni-channel wave that has spread from big-box outlets to grocery stores to clothing retailers. The million-dollar question for insurers: Is omni-channel applicable to the property and casualty insurance industry?

“I think it is highly relevant,” says Monika Federau, senior vice president and chief strategy office for Intact Financial. “That is because consumers are defining their desired experience with us based on how they purchase other goods and services. We are now dealing with online, digitally savvy consumers who want that consistent experience.”

“The insurance industry is just starting to grapple with the omni-channel environment,” says Allan Buitendag, national consulting insurance leader for PwC. “It’s a complicated scenario. Unlike multiple channel distribution models, omni-channel is about not just the quality of the service, but the ability to move between channels. There may very well be multiple channels involved in one transaction.” 

CUSTOMER-CENTRIC

Omni-channel represents a potential point of departure from the p&c industry’s troubled history of multiple distribution channels. Many insurers offer more than one way of buying insurance – through brokers, direct, online and/or affinity programs. However, the provision of consistent service levels and brand identity across these channels has been a challenge.

“When insurers talked about multi-channel, at its basic level, it was about having multiple channels of interaction,” notes Kathy Hutson in an IBM blog post, Its Omni-Channel, not Multi-Channel. “Oftentimes, they were separate and distinct, with separate owners within the company … Channel data remained proprietary to the channel, with little sharing across the company. The customer experience was disjointed and the quality of service and information varied depending on the channel.”

The omni-channel approach makes an important distinction in that it is based on looking at insurance sales and service from an integrated consumer point of view – or “customer centricity.”

“Customers’ expectations, in short, now bridge online and physical worlds,” according to a 2013 report from Bain & Company, For Insurance Companies, the Day of Digital Reckoning. “Customers want to be able to use the channel convenient to the moment, whether that’s a website, call center or a video chat with a broker. They expect insurance companies to anticipate their needs and involve them in devising tailored solutions. And they don’t hesitate to use social media to let others know how they were treated,” the report adds.

An omni-channel model acknowledges that control is in the hands of the customer in terms of research, preference and buying patterns. It is clear that the balance of power has shifted to customers due to the proliferation of social media and mobile devices. According to Google/Ipsos research, customers on average use 10.7 sources of information before making a purchase. Accenture’s Seamless Retail Study showed that 89% of customers believe it is important for retailers to allow them to shop using the sales channel most convenient to them.

GRADUAL CHANGE

In the insurance world, this power shift has occurred at a more uneven pace.

“We see these consumer changes happening more gradually in insurance,” says Daniel Shum, partner and national insurance leader, consulting for Deloitte. “We are seeing a 10% increase in alternate channels on a year-over-year basis, not a huge 50% radical shift. Because of that gradual change, insurers are struggling and trying to figure out their channel strategy.”

In fact, according to Ernst & Young’s Global Insurance Consumer Survey 2012, only 32% of survey respondents use the Internet to research insurance, and only 7% have actually bought insurance through a website. Nevertheless, 31% of respondents indicated they will use insurance quote comparison websites in the future.

“The upshot is that while online channels are an important part of insurance distribution, they are just one component of the insurance sales cycle,” Ernst & Young noted in its survey report. “Insurers should seek to seamlessly integrate both online and offline channels to meet customers’ needs, as most still prefer to buy insurance through more traditional channels.”

“I believe it is a challenge for insurers to ensure a seamless hand-off between channels,” says Doug McPhie, leader, insurance for EY-Canada. “Many customers still want their personal advice and someone to talk to about insurance; it is a bit more complex than buying a kettle,” McPhie says.

“The challenge with insurance is that we are selling a complex product, which can’t always be explained or handled without some form of dialogue with a professional,” observes Tony Hayes, vice president, sales & marketing, RSA Canada. “For example, explaining policy limits, recommending a certain type of coverage or helping a client navigate a claim, are very individualized services (that) often require a personal touch to be effective.”

HOW THE BROKER FITS IN

So, how do insurers move to an omni-channel approach? How can they transform from a transaction-based to customer-centric model? And how can they integrate service and customer experience with one of their key distributors: independent brokers?

“Insurance carriers are looking at a number of different ideas and opportunities with brokers,” Buitendag says. “Several questions have yet to be resolved. For example, if a customer has an insurance question, does she go to the broker and then to the insurer, or can she just go online? And if she goes online, should it be to the broker or the insurer? It can play out a few ways,” he says.

“As broker-based carriers look to meet the needs of the customers wanting to deal directly with their insurer, we’ll see carriers offer direct sales and servicing channels for their customers,” notes Shum. “As well, (we will see) hybrid models where the carriers offer the infrastructure for customers to interact directly with them, but allow portions of that experience to be controlled and branded by the broker.”

Shum adds that some insurance carriers committed to the broker channel “want to invest in digital, but instead of offering it directly to consumers, they will provide digital capability to brokers. The brokers can then ‘white label’ this capability for their customers.”

Federau explains that Intact Financial’s strategy is to create a platform
for brokers to offer seamless service to mutual customers.

“A lot of brokers have the same technology as direct writers – website, telephony or call centres, online quoting – but they also have an edge or advantage in that they offer customers choice,” Federau says. “Our role really is to allow them to leverage this advantage by giving them more of the same types of tools, such as buy online capabilities or instant quote delivery to their back office.”

Mark Wai, vice president, architecture, global platforms & enterprise information management for Aviva Canada, says his company is “100% committed” to the broker channel. “As such, the omni-channel concept for us is related to how we can support the broker-customer exchange,” Wai notes. “That involves broker connectivity and streamlining back office processes so that they (brokers) have better information and can be more efficient in dealing with customers.”

MONOLITHIC APPROACH

“An integrated approach will be the winner in my opinion – the complexity of insurance requires an equally complex and sophisticated response,” observes Hayes of RSA. “For brokers and intermediated insurers this means finding ways to bring some best practices from other industries (in terms of efficiency and interactivity) into their operating models.”

An omni-channel environment could apply to various aspects of the insurance process, including the front end of quoting/sales, the middle end of servicing and the back end of claims management.

On the front end when consumers are researching, comparing and buying insurance, some say carriers require a more differentiated and nuanced understanding of the customer, even on a product-by-product basis.

“Insurers have tended to take this monolithic approach to telling customers which channel they want them to use,” Buitendag says. “Now, the customer is saying: ‘Don’t tell me how I should purchase this product.’ The consumer may prefer a direct, online process for auto insurance and a more advice-oriented experience through a broker for covering an expensive home.”

Shum notes that insurance companies have struggled with understanding and meeting digital channel expectations. While other financial services players, such as banks, have experimented with features such as automatic cheque deposits via photo on mobile apps, insurers have done little more than move the paper-based transaction process online.

“In the digital channel, consumers want a simplified, instant experience in purchasing insurance online at the lowest price,” he notes. “For example, buyers do not want to go through pages and pages and fill out all the forms currently required to get insurance. If you want to offer that digital experience, you really have to look at the level of simplicity.”

The service space – including policy change, endorsements and additions – could benefit from an omni-channel perspective, according to sources. While customers may want in-person contact to purchase, confirm and bind a policy, future interactions will likely be done via digital or online devices.

“Our research has shown that consumers are looking for more omni-channel experience on the servicing side after they’ve purchased the policy,” Shum says. “They want to be able to interact directly with the insurer online to make simple policy changes and don’t want to have to deal with the added complexity of phoning their broker. However, if they do phone their broker, they expect access to the same if not more information than what the consumer can get online.”

Here is where insurers and brokers can tap into these service areas. How quickly and easily can service be delivered through the customer’s preferred medium? Is it consistent across channels (i.e. if a customer wants more detailed information in another channel)? Are there opportunities to capture richer data on loyal customers for cross-selling targeted products?

“It’s important to acknowledge and address the digital needs and expectations of customers, in addition to providing them with the service they may not even know they need – the option of speaking with an informed insurance professional who can guide them with insurance education,” Hayes notes.

POINTS OF CONTACT

In fact, there may be opportunities for service hand-offs between online, contact centre and brokers. Federau explains that Intact Financial is piloting online chat functionality, whereby a customer can connect directly with a broker if a web-based session expires or if the client has more detailed questions.

“We know that has been successful in other industries,” Federau says. “It is just one example of how, from a business process perspective, we are always looking for ways to introduce pieces to the technology platform that will benefit brokers.”

The insurance claim is another point of customer contact that can gain greatly from an omni-channel perspective, according to Federau. Property & casualty insurers are moving to integrate claims first notice of loss with contact centre and assistance technologies for a superior experience at this critical service point.

“When a claim happens, people are really expecting fast, personalized experience,” Federau says. “The key is setting up call centres with the selection tools and claims assistance so that all the information about that customer is at their fingertips. We can quickly start the claim and get that customer back on track.”

LIMITS OF LEGACY SYSTEMS

Given the modern consumer’s embrace of digital devices and online channels, one might think that the technology issues facing insurers would involve developing the latest mobile app for smartphones or tablets. However, a much more familiar obstacle stands in the way of omni-channel accessibility for most insurance companies – the core technology of legacy policy administration systems.

“Most legacy systems have limitations,” Aviva’s Wai notes. “Consumers expect ‘anytime, anywhere’ service. No longer is it acceptable that you go to a website or go on a mobile device, enter information, and then someone calls you or e-mails you a day later. We expect instant processing. That is difficult to do with the current state of legacy systems.”

Shum notes that of the top 50 insurers in Canada, most are either in the midst of, or close to, revamping or overhauling their legacy systems because “their core technology is not set up to support multiple channels effectively. The longer-term solution is for carriers to replace their back-end policy administration and billing systems and associated processes with packaged systems that can handle multiple channels on a single platform,” he says.

Another IT obstacle for insurers in the omni-channel world is capturing and using customer information in a rich, flexible and useable format.

“If companies want to provide differentiated service, all of that comes down to having a customer information file that transcends products and channel,” Buitendag notes. “At any point, they need to understand the customer’s value, what products and services they use. Some companies are farther ahead on this than others,” he adds.

“We are facing information overload,” Wai observes. “We are getting data not just from policy admin system, but from Web, e-mail, Twitter, Facebook – or big data. One of the challenges we have is how we can capture and analyze data a lot better than we have in the past,” he says.

Another technology concern for Wai is the security implication of an open access distribution strategy. “Omni-channel requires companies to enable multi-device access, mobile phones, tablets,” he says. “These kinds of digital devices and media increase significantly how we have to deal with security and information management. Different devices and different channels require a different level of security and identity control and management.”

WHO OWNS THE CUSTOMER?

In parallel to the IT challenges of the omni-channel environment, sources say there
are also business process and operational hurdles facing insurance carriers.

“There is still a lot of debate between insurers and brokers around who owns the customer, who should provide what service, how that service should be provided,” Buitendag notes. “Those are business issues; technology doesn’t solve that. You have these business realities happening in parallel with technology issues. I think you need to solve both.”

Those insurers embarking on omni-channel projects need to be aware of “perceived channel conflicts,” according to Shum. “Brokers are wary of any insurer that offers direct insurance as they view it as competing directly with them,” he says. “Carriers need to find ways to balance that by offering brokers incentives or unique product offerings that demonstrate the carriers’ commitment to a true multi-channel model versus being perceived as trying to dis-intermediate the brokers.”

Despite the IT and business challenges, the potential benefits of an omni-channel approach can be seen in the retail sector. When handled successfully, an omni-channel approach may lead to higher revenue and greater brand loyalty.

Studies by McKinsey and Company have shown that consumers who shop across multiple channels spend approximately four times more than customers who only shop in one channel. Another study released by Retail Systems Research (RSR), titled: Omni-Channel 2012: Cross-Channel Comes Of Age, revealed that 38% of retailers believe cross-channel shoppers are significantly more profitable than single-channel shoppers.

Buitendag observes that by leveraging the data gained from digitally interacting with consumers, insurers can offer targeted promotions that feel timely and relevant. “The greatest opportunities with omni-channel are revenue growth, increased profitability and increased retention. That means not only more products and services for existing clients, but more profitable products and services,” he says.

“The opportunity is to gain a greater understanding of the wants and preferences of their consumers and then being able to leverage the omni-channel to provide the right kinds of products and services to those consumers,” Buitendag adds.

Tied in with omni-channel perspectives are technological buzzwords and potential applications, such as online chat functionality, network collaboration, voice over Internet protocol (VoIP), biometrics to avoid password log-ons and customer self-service capabilities. It is difficult, if not impossible, to predict which one is going to be a winner in creating a better omni-channel experience for the insurance consumer. Instead, many choose to focus on the business case for a new approach.

“We are certain that our clients are going to want what they want, when they want it and how they want it; those are the lines on the road, if you will,” Federau says. “We need to have the right IT and business process foundation in place to access that information and create that personalized experience. It doesn’t matter what device it pops out on or how it is presented; what’s important is that we have that core understanding,” he suggests.

“The business case for omni-channel experiences in insurance lies in the battle for market share,” IBM’s Hutson observes. “As companies try to retain customers and attract new ones, standing out beyond price becomes essential. Good customer experience is central to driving a sale and to keeping a loyal customer,” she adds.

The danger, for some, is if insurers simply emulate the retail sector by slapping an ad-hoc distribution strategy onto the current reality of consumer demands for all channel access.

“Omni-channel does not mean digital layered on top of, or to the side of, other channels,” notes Bain & Company. “Rather, the key is to integrate disparate channels into a seamless experience. Only a handful of insurers, however, have begun to tie together their channels in a coherent, compelling fashion,” the company report adds.

“The concept is really about insurers moving to meet the needs of customers who have different preferences for interacting with them,” Shum concludes. “We are starting to see a race emerge around adopting the omni-channel experience, much like we saw with banks and their transition from brick and mortar branches. It will require a mindset of innovation. The winners will be those that get there first.”