How can insurers transition into a customer-centric business

Arthur D. Little narrowed it down to six steps.

Insurers have traditionally developed business models optimised for understanding risk and maximising earnings. However, this approach falls short of serving today’s customers who expect seamless, digital-based services. Insurers need to shift to a customer-centric model to meet these expectations, an Arthur D. Little insight said.

Insurers aim to grow their portfolios amid rising competition and increased combined ratios. Focusing on customer-centricity offers a unique opportunity for profitable growth. 

However, insurers face challenges such as policy-centric technology platforms, siloed customer data, independent communication channels, and lack of coordination within their organisations. Measuring their baseline in customer centricity and comparing with peers also remains a challenge.

Understanding and segmenting customers is crucial. Typically, 10%-20% of customers account for 90% of a business's value, while 5%-20% may destroy up to 40% of total value. 

Insurers should segment customers, understand each segment’s behaviour, and tailor their business model to focus resources on the most profitable customers while developing strategies to convert high-potential ones.

Insurers must transition from product-oriented to customer-centric businesses. This involves:

1. Designing a Distinctive, Shared Customer-Centric Strategy: Advanced insurers build ecosystems offering complementary services and incentivise cross-selling. They also integrate prevention services, transforming from claims payers to risk management partners.
2. Driving Cross-Functional Collaboration: A cross-functional steering committee should create a common customer vision and detailed customer-centricity plan. Leaders need to align team incentives and ensure project visibility and internal reporting.
3. Engaging Employees, Agents, and External Partners: Clear communication of the customer vision, specific training, and adapted internal policies are essential. Partner contracts and action plans should also reflect client-centric KPIs.
4. Managing Interactions with Customers, Agents, and Brokers: Insurers should break silos to create integrated customer experiences and provide consistent, personalised interactions across all channels.
5. Testing, Measuring, and Improving: Basic KPIs like net promoter score (NPS) and quality metrics should be complemented by surveys and advanced customer research techniques. "Close the loop" calls and a "test and learn" approach can help identify and implement improvements.
6. Personalising the Experience Using Customer Analytics: Developing analytics capabilities involves identifying and prioritising personalisation use cases, ensuring legal compliance, building a diverse analytical team, and developing a functional analytical platform. Deploying these capabilities requires integrating core systems and enhancing functionality in sales and customer relationship management.

To meet rising customer expectations, insurers must transform their business verticals into an integrated value chain focused on customer segments. 

“To drive real change, organisations should integrate a customer-centric vision and adapt processes, tools, and governance to ensure consistency and implementation.” the Arthur D.  insight said.