Detecon Study Explodes Some Common Myths About Digitalization Insurers Cannot Successfully Implement Digital Transformation Without Intelligent Multichannel Management 50 Detecon Management Report dmr 2 / 2015
There are some common assumptions which tend to be viewed as generally applicable for an ideal multichannel strategy. We question the validity of three common presumptions and offer recommendations for action to achieve successful digital transformation in sales and account management of insurance companies. D irect account management almost exclusively by insurance agents and brokers or bank advisors has been supplemented by a complex diversity of additional, above all digital interaction possibilities. Policyholders now decide themselves what communications channel they want to use when and in what way. One of the most important tasks for insurance companies today is to accomplish optimal coordination and networking of the various multimedia channels. As a Detecon study 1 was able to demonstrate for all industries, the heightened flightiness of customers necessitates an omnichannel architecture without any media disruptions or barriers. As has been shown, the implementation of integrated and consistent customer 1 Roos/Friedrich, Customers Like It Simple! Omnichannel Architecture as the Foundation for Successful Customer Journeys, DMR Impulse, February 2015. 51 Detecon Management Report dmr 2 / 2015
touch points across all online and offline channels in particular calls for major adaptations in traditional IT architecture. If insurance companies want to make the right adjustments and avoid realization of the necessary digital transformation that nevertheless sails past the needs of their customers, insurers have no choice but to understand completely the customer journey of their policyholders. With this in mind, Detecon has collaborated with the market research institute YouGov to conduct a survey among policyholders that delivers valuable answers. Within the framework of a representative study, more than 3,000 policyholders were questioned about their conduct over the course of the customer journey. Before starting the study, the customer journey was broken down into the four phases awareness, research, consultation, and purchase. Among other points, the study answers the following questions: > Where does the product purchase fit in as part of the sales process, differentiated according to touch point, product, and communication channel? > What is the relationship between socio-demographic characteristics and the choice of media/channel? > How do policyholders assess the multichannel communication of their primary insurers? > What communications services are currently missing from the policyholders perspective? > What cross- and up-selling opportunities are there in phone contact with policyholders? > How will preferences and requirements change in the future? An especially striking result, and one of decisive importance, is that the study refutes commonly held dogmas about Web 2.0. When choosing a digital strategy, insurers must take into account the special conduct of policyholders and not unquestioningly accept common assumptions on faith. Along with these results, the study determined some industry- specific findings for bank sales, direct sales, sales via comparison shopping websites, broker sales, or agent sales (among others). Selected highlights from the various industries are illustrated in the separate presentation in the Spotlights. Myth 1: Social media are of key importance for the account management of insurers. Social media is the generally used collective term for media and technologies that enable users to share experience and opinions and to create media content. There is no disputing the fact that the utilization of social media has led to fundamental changes in the ways people communicate with one another. This does not mean, however, that it is unnecessary to examine the generally accepted presumption that social media are important for every company when the issue is the sale of insurance policies. According to the Detecon study, the starting point for the conclusion of a simple insurance policy such as car or homeowner s insurance comes from online sources in almost one-third of the cases. Less than one percent of all of the respondents, however, became aware of insurance policies via social media. The replies of policyholders to questions about the sources of research and consultation and about the place of purchase are similar. At all three of these stages of the customer journey as well, less than one percent of all respondents communicated with the insurer via social media. On the contrary, the traditional channels continue to dominate. Even for purchases within the last two years, the awareness leading to purchase, research, and consultation for complex policies (such as endowment life insurance, private pension insurance, or occupational disability insurance) came from insurance agents or brokers or bank advisors more than 60% of the time. When it came to the purchase, this figure rose to just under 80%. A look at the preferred customer journey of the future did not produce any other results: social media will not be used for purposes of research, consultation, or purchase of insurance policies. There is no doubt, however, that online channels such as comparison shopping websites or insurance home pages are generally on the advance. When it comes to social media, we can conclude that policyholders do not want to interact with their insurers via social media at any phase of their customer journey and that from a sales point of view the use of social media will be of extremely limited benefit for insurers. 52 Detecon Management Report dmr 2 / 2015
Detecon Study Extract Bank advisors customers have a significantly stronger offline orientation than the average policyholder. Research Offline/Online Purchase Offline/Online Most Recent Purchase. Bank advisors customers go to their institutes for consultation when it comes to complex products such as private pension insurance policies at an above-average rate of frequency. Owing to the high intensity of the consultations about the products (among other factors), bank advisors customers obtain their information and purchase policies primarily offline. During their customer journey in the direction of the purchase, however, they display greater loyalty to channels than customers with an affinity for online activities. This provides bank advisors with an opportunity to maintain close proximity to their customers and to encourage cross-selling for less complex insurance products. Insurance customers should have a firm hold on their bank insurance models, however; bank advisors customers expect their applications to be processed promptly. There are growing expectations among bank advisors themselves that they will be able to take care of some of the steps of the customer journey online in the future. Basis: all respondents; n = 2580, Awareness most recent purchase through bank advisor, n = 150 Shown in % Results as a whole Offline research and Offline purchase 4% 7% 19% 5% 7% 4% Online research and online purchase Online research and offline purchase Offline research and online purchase 70% 85% Awareness most recent purchase through bank advisor Comparison of wish and reality : comparison portals will gain in importance for simple products, especially during the research and consultation phases. Comparison portals are becoming more important along the entire customer journey, especially for simple products such as motor vehicle or liability insurance policies. In the future, one out of three policyholders will do research on simple insurance policies using comparison portals. The channel loyalty of the users of comparison portals, however, is very low. Even in the future, fewer than 15% of policyholders will want to purchase their policies via a comparison portal. Instead, the majority prefer to make their online purchases directly on the insurers home page and their offline purchases from an insurance agent. Accordingly, a uniform brand identity on comparison portals and a simple transfer to their own website are of key significance for insurers. Share of totality 50 0 Awareness Research Consultation Purchase Basis: simple products; most recent purchase ( reality ): n = 1,883; next purchase ( wish ): n = 991Shown in % Direct insurance policyholders are highly attracted to online actions while simultaneously very demanding with regard to telephone service. Direct insurance policyholders purchase simple products such as Phone call with Online chat with motor vehicle or liability insurance policies at an above-average rate. insurance company insurance company Moreover, they are substantially more interested in online actions than 7% policyholders as a whole. While only 19% of all policyholders move exclusively online during their customer journey, the corresponding 16% figure for direct insurance policyholders is 41%. Furthermore, the 31% study reveals that these policyholders are much more demanding in 46% their expectations for telephone reachability than policyholders as a whole. 62% 39% Direct insurers operate on a market with intense competition and with a clientele which, as a rule, is demanding and very sensitive to prices. The build-out of the online channels and a focus on the digital customer journey are of major significance for them. Expectations for reachability: 40 30 20 10 = 8 a.m. to 8 p.m. Mo-Fr = 9 a.m. to 4 p.m. on Sa = 10 a.m. to 3 p.m. on So Insurance agents = Reality = Wish Home pages of insurers = Reality = Wish Comparison portals = Reality = Wish = Only on weekdays = On weekdays and weekends = No reachability necessary 53 Detecon Management Report dmr 2 / 2015
Myth 2: The future of insurance sales is in the app. No one can overlook the trend to the use of mobile communications technology. The smartphone is never far away. More and more smartphones are being used for shopping in addition to their role as mobile companions. In the meantime, onethird of online trade in Germany (measured by sales volume) comes from mobile devices such as smartphones and tablets. The application software for mobile operating systems, the so-called apps, is of key importance in this respect. About 175 billion apps will be downloaded worldwide in 2015. But can the trend to mobile shopping be transferred one-to-one to the insurance business? The Detecon study has revealed that policyholders are inclined to be reserved when it comes to using mobile apps an attitude similar to that toward social media. In spite of the generally rising willingness to research information, obtain consultation, or purchase insurance policies online see the Spotlight Comparison Shopping Websites policyholders at this time do not want interaction with their insurers via mobile applications. Far less than one percent of all surveyed policyholders currently use an app from their insurers during the research, consultation, or purchase processes. The negligible number of app users so far is also a consequence of the currently limited opportunities, of course. Asked about their preferences regarding their next purchase of a policy, however, policyholders did not reveal any significant demand for apps even for the future. Only a little more than two percent of the respondents want to use an app in the future when they are doing research on an insurance policy. Policyholders also continue to display skepticism about the use of mobile apps during consultation and purchase. Just a little more than one percent of the respondents would be prepared to use an app for consultation or purchase of a policy in the future. One reason for this low level of willingness is especially a consequence of the extreme irregularity of communication between policyholders and insurers. In contrast to bank customers, who are in regular contact with their financial services providers, policyholders interaction with their insurers is often limited to the purchase of the policy and claims adjustments when an insured event occurs. Moreover, insurance policies are often so complex that research and consultation using mobile apps are non-productive or impractical. Myth 3: Sales channels should be adapted specifically to the affinity of Generation Y for online communication. The so-called Generation Y (people 35 and younger) is generally regarded as being extremely open to technology and online activities. These digital natives who have grown up in the digital world no longer distinguish between the online and the offline worlds. In contrast to the older generation above the age of 35, also known as digital immigrants, this section of the population is very active in its use of the Internet in virtually every aspect of their lives. For instance, this generation is said to have a higher affinity to online shopping. Much as was the case with the preceding myths about digitalization, the question arises here as well as to whether these assumptions can be transferred to the behavior of policyholders. If we consider the utilization of research and purchase channels (ROPO = Research Online, Purchase Online) and of consultation and purchase channels (COPO = Consulting Online, Purchase Online), we can determine a general picture about the online or offline affinity of policyholders. If we consider socio-demographic characteristics such as the age of the respondents, this survey unequivocally reveals that older policyholders make even greater use of digital channels than younger policyholders. According to the results, about 22% of the 35- to 49-year-olds and only 17% of the 20- to 34-yearolds use the Internet as a research and purchase channel. The findings for the use of consultation and purchase channels are similar. Only a little less than 16% of the younger policyholders, but more than 20% of the 35- to 49-year olds take advantage of the offered online services at this stage of the customer journey. Another interesting point is the future attitude of the 20- to 34-year-olds toward exclusively online purchasing of policies. The share of digital natives who want to research and purchase a policy online falls from 17% to 10%. This development becomes even more extreme when the consulting and purchase channels for the next policy purchase are considered. Only 7% instead of 16% are prepared to seek consultation online and purchase the policy online in the future. So the study cannot verify any greater online affinity of digital natives when it comes to insurance policies. On the contrary, the Detecon study reveals that the generation of the 35- to 49-year-olds displays a significantly higher level of online affinity and uses the Internet as a research, consultation, and purchase channel. This thesis is confirmed as well by a recent study 2 on the subject omnichannel conducted by arvato/bertelsmann. According to this study, the brick-and-mortar store is the preferred channel in many industries for the generation under the age of 30. 2 Omnikanal Monitor 2015. 54 Detecon Management Report dmr 2 / 2015
Conclusion: Successfully mastering digital transformation with the aid of intelligent channel networking is impossible without thorough knowledge of the customer journey taken by your own clientele. Can general knowledge about the utilization of digital media be transferred to the communications behavior of policyholders with their insurers? The Detecon study has a clear answer to this question. Contrary to general belief, consumers are not interested in communication with their insurers using social media channels. From a sales perspective, the use of social media does not create any benefits for insurance companies. Even the general assumption that a major part of future communications will take place via applications on smartphones or tablets cannot be transferred one-to-one to the insurance business. The study clearly shows that policyholders are prepared neither to do research nor to seek consultation nor to purchase a policy per app. In contrast to the general assumption that digital natives have a significantly greater affinity for online activities than other generations, this study also shows the substantially greater interest of older generations in online services along the customer journey. So how should insurance companies strategically orient their actions in a digital world? The study results indicate that not all digital channels are of equal significance for policyholders. Customer and comparison shopping websites, for instance, will be of great importance in the future. On the other hand, the continuing significance of traditional offline channels is striking. Insurance agents and brokers and bank advisors will remain a key interface to insurance companies for many policyholders even in the future especially when they are interested in complex policies. Since policyholders expect frictionfree movement among the traditional offline channels and the preferred online channels, intelligent networking must be assured under all circumstances. Companies must pay careful attention to what policyholders are to be addressed, informed, or advised how and via what channel. The first step to achieving this type of intelligent networking is to conduct the required assessment of the customer journey for the specific company. The Detecon study shows that there are significant differences among customers of various sales models such as bank sales or direct sales. Consideration must also be given to what channels (besides the channels preferred by policyholders) are strategically desired by insurance companies frequently offline channels for life insurance policies with high commissions, for example, to secure the loyalty of agents. This leads to a major increase in complexity of the subject. Using a proven Detecon method, the structured development of an optimal omnichannel management specific to the company is then described. Within the framework of this method, relevant online trends for the insurance business are identified and evaluated, enabling an in-depth analysis of the dynamic behavior of online policyholders, and study results are analyzed. The findings are subsequently projected into a vision for efficient and policyholder-oriented online positioning. In combination with the assessment of existing online capability and the collection of online requirements, a strategic overall picture is created; it classifies the necessary fields of action in the added-value chain according to the focal points relevant for online business. The knowledge of customer behavior is thus both the starting point and the hub for the successful digital transformation of insurance companies. Christof Strohkark, who is a member of the Partner team Financial Services, has been working in the financial sector for more than 15 years and advises banks and insurance companies on strategic concepts, customer service, and sustainability. Lorenz Volbers is Senior Consultant and advises insurance companies about successful digital transformation. We wish to thank Christopher Pohlkamp for his contributions to this article. 55 Detecon Management Report dmr 2 / 2015