Everyone rated horses until Ford created the first affordable motor car
Ask any customer about their experience of having to make an insurance claim and you’ll hear a horror story, but ask any insurer about how well they process claims and you’ll hear the exact opposite — they believe themselves to be number 1 (as confirmed by their customer NPS score). How can customers provide high NPS scores but complain bitterly about the claims process? How can insurers big up their performance without being more honest about the the lack of trust their customers have in them? Surely we should all be able to agree objectively and honestly as to whether insurers are fulfilling their basic promise?
Having studied political science, a parallel can be see in politics. When asked about their specific MP, constituents across party lines will single out their MP favourably but when asked about politics as a whole will express an instant and deep mistrust of politicians.
What’s really going on? It seems to me that there’s enough in the current process for both sides to kid themselves that the model is working but then again, everyone rated horses highly until Henry Ford created the first motor car.
Having mentioned Ford, let’s think about the typical motor claim from an insurer’s perspective. A phone call comes into our call centre — this can be many days after my customer has had the accident, but that’s not something we can control (which is most unfortunate, since where our policyholder is at fault, we’ve incurred massive 3rd party losses from not knowing sooner). We’ve optimised call times so we are managing the customer’s expectations in the shortest time possible using the least number of multi-skilled agents. We’ve also automated the instruction to the repairer (not the appointment itself as that’s also outside of our control, but it’s ok since it’s our repairer bears the cost of making contact with the customer). Plus we’ve done the same for our hire supplier (so they too have to make contact with the customer at their cost, not ours). In fact, we’ve been optimising the cost with the entire supply chain for decades now, driving out cost from our insurance operation and externalising costs onto our supply chain. We’ve done such a good job that it’s really hard to think about how we could make this production line any more efficient. We must be number 1.
Now let’s look at the same event from a customer’s perspective. I’ve had a motor accident and expect to have to deal with it alone. I have to exchange details with the other side, come to an initial view on who was at fault, figure out whether making a claim is worth it’s weight in hassle and ask some family and friends for their advice. That’s 30 minutes of my life that I’m not going to get back. When I can summon the energy, I’ll pick up the phone to my insurer. I’ll spend 20–30 minutes on the phone going through the accident circumstances, where they’ll confirm that I’m covered and that their repairer will be in contact with me in the next 24 hours. But since it looks like fault could be disputed I won’t know whether I can use a courtesy car until I’ve spoken to the repairer. More work for me. I need to arrange a date and time for the repair and alter my current plans; another hour. If I can negotiate a hire car, I’ll need to arrange on-hire and off-hire, another 2–3 hours if I have to collect a vehicle. None of the considerable time, hassle, or mental energy that I spend on this (a working day so far) is given a moment’s thought by my insurer since it doesn’t impact their bottom line, but since I can’t fault the fact that they picked up the phone when I called, managed my expectations and offered solutions, I guess they’ve been as helpful as I could have expected, so I’ll more-likely-than-not rate them highly when this is all over at which point I’ll just be glad to put the whole thing behind me.
And there you have it, insurers can believe themselves to be an industry leader, from their perspective, whilst customers can universally see claims as awful but at the same time rate their specific insurer to have done ok.
Through decades of profitable success, insurers have lulled themselves into a false and mis-guided sense that their modus operandi is the best-possible of all possible worlds, but driven only by profit, the industry has created the ‘service-equivalent’ of Ford’s model production line. The insurer together with their outsourced third-party administrators and multitude of supply chain companies are each made responsible for just their part of the claims production line and who in turn, can influence and optimise only their part of the process. The negative externalities caused by a ‘service-production line’ are primarily borne by the customer, being a) the actual financial cost from damage that isn’t covered, b) the cost of their time having to do repeat the same information to different companies, and worst of all, c) the mental health cost of having zero control in a highly stressful situation. The secondary cost of negative externalities are borne by suppliers who are at the mercy of insurers, who offer none. During Covid, no reciprocal support has been offered to supply chain ‘partners’ who for years have borne the cost of having to support a service model designed to satisfy insurer profit margin demands.
It doesn’t have to be this way. We can create the seemingly impossible; 1) a step-change in insurer profitability, 2) a fairer-deal for suppliers and 3) reducing the negative externalities borne by customers.
How? By moving from a ‘services production-line to a customer production-line’. I find this wording more instructive at internalising what the future looks like than describing it as a move from being ‘product-centric’ to ‘customer-centric’ or from ‘push to a pull’ as the latter haven’t generated the imagination required to fundamentally alter the traditional model that has served insurers so well.
So how does a customer production line model work? First, it’s a service that’s driven by the consumer. It’s the consumer that’s best placed to understand their needs and self-serve the fulfilment decisions they need, not the insurer. The insurer’s job is only to make the tools and services available to enable the customer to pull the service they need when they want to. Customers should be able to have deep, digital access into an insurer and their supply chain, accessing any service via any channel at any time regardless of who is providing the underlying service. But this in turn is only possible by embracing a platform/eco-system model that has been specifically designed for highly automated customer-centric processing and which enable the customer to have a single, consistent user experience (as opposed to a very fragmented experience from interacting with different suppliers each with their own process, preferred channels, apps). Adding more digital capability into existing enterprise stacks which were designed for a service production line won’t create a customer production-line, however hard you try.
This is what I find unique about Claim Technology’s innovation platform. An insurer can create a customer production-line where a policyholder can scan a QR code on their dashboard to report an accident, get an instant AI decision on whether their vehicle can be repaired, decide whether to directly book a replacement vehicle or receive a virtual credit card to cover a couple of Uber rides, and receive automated updates throughout the repair period. All this is done without ever having to speak to anyone, unless of course the customer wants to, where the agent can see the latest info in real-time from their own systems and continue from where the customer left off. This type of approach could support a ‘hyper-personalised customer experience’ instead of the ‘this-is-what-you-get’ model from a service production line.
A customer production line reduces negative externalities from the customer’s experience as they assume a sense of control, can access the right solution in real-time and self-serve remedial actions, knowing that help if they need it is also a click away. At the same time, cost is taken out of the supply chain process as the instruction, estimation, invoicing and customer communications all move to being automated and in real-time. But by embracing the 180 degree change to make the process so accessible and instant, it is insurers that have the most to gain. Empowered through sheer ease of doing business, customers naturally speed up the process, enabling insurers to capture non-fault 3rd parties through automated AI liability decision making, drive down indemnity costs and close exposures faster. This is absolutely vital in an industry where motor books have been profitable for only 3 years in the last 25.
Which insurer will embrace the first customer production-line, and proudly claim to be the real number 1?
