Digital Insurance Agenda

Start the Implementation Process

Written by Stephan Binder, Ulrike Deetjen, Simon Kaesler, Jörg Mußhoff and Felix Schollmeier (McKinsey & Company) on Aug 16, 2021

In the previous article ‘Moving to a user-first, omnichannel approach’ we mentioned new digital players and ecosystems that converge to offer basic insurance products. Carriers now need to evolve their digital capabilities and online user experiences to remain relevant and competitive. Our recommendation is to implement an overarching strategy using a three-step implementation process.

Developing a deliberate, coordinated implementation strategy
Implementing a user-first, omnichannel approach has far-reaching effects on an insurer’s technological and organizational setup (Exhibit 5). As a consequence, there is certainly no single, standardized approach to getting started. However, we recommend an overarching implementation strategy in which the capabilities of all channels are aligned toward the common business goals of acquiring and retaining business by meeting customers where they are. Now more than ever, that location is online.

Key prerequisites of the implementation process
This strategy typically requires a three-step implementation process.

1. Create transparency on user behaviour and channel performance. Since today’s decision journeys often span several channels, omnichannel users can switch back and forth between the same channels multiple times. To start, insurers must correctly define customer journeys and understand what drives decision making. To this end, insurers need to not only combine data across channels (as far as data privacy regulation allows) but also set up processes for measuring customer traffic, customer experience, and the value of converted business on a continuous basis.

Based on this data, insurers can correctly attribute the impact that each of their advertising campaigns has on the number of sales of a given policy and gauge the success of their individual channels in converting prospects to customers. This visibility is critical for finding out where and how the customer lead was generated.

2. Fully enable and optimize your online customer journeys. With the rising cost of lead generation, insurers must optimize conversion rates. The online channel is an essential part of the decision journey of most customers. Insurers should thus enable and incentivize customers to continue their journeys on the insurers’ websites for as long as possible and to purchase online.

To excel at converting customers online, insurers need first to ensure the technical prerequisites for online purchasing are in place. Second, they must regularly verify that products are fit for purpose, providing information on their costs, profits, and probabilities, as well as allowing for sufficient flexibility. Third, insurers need to continuously improve their landing pages and product journeys to be able to create the best possible user experience. User interfaces must be engaging, intuitive to navigate, and effective in guiding customers’ attention to purchasing. Insurers should employ continuous experimentation and testing to eliminate impediments that lead to increased drop-off rates. Effective measures include providing price information as early as possible in the journey, presenting callouts that explain requests for sensitive data, and incorporating short videos to explain more complex contexts.

3. Orchestrate advice capabilities. Digital journeys will not eliminate the need for in-person advice anytime soon. However, customers may need advice to clarify a certain question on their decision journey, and they may actually value the speed and convenience of the online channel for the remainder of their journey. Insurers should thus orchestrate and deploy advice capabilities in a targeted way along their online and offline customer journeys to systematically enable customer decision making and increase conversion rates.

To this end, insurers can take a two-step approach: first, they should make contact options for advice capabilities (for example, a call center, agency, or bank branch office) prominently available at relevant touchpoints along the online journey. At points where drop-off rates are high or a large number of customers bounce off their customer journey, carriers should display options for advice. Second, insurers should aim to identify prospective customers as early as possible on their online journeys to proactively deploy advice capabilities and follow up on promising leads.

Organizational and technical enablers
In parallel to the implementation process, four enablers need to be established.

Data activation, measurement, and analytics. To accurately map customer journeys and the factors that influence decisions (attribution), insurers need to combine their data across channels. Typically, this requires feeding first-party data (for example, digitally initiated insurance contracts, which were closed offline by an agent) into the digital marketing system where machine-learning algorithms can be used to optimize online sales activities (data activation) to find similar customer profiles. In addition, tools and processes need to be implemented that facilitate and ensure continuous measurement of key metrics across the complete customer journey, using advanced deterministic and probabilistic techniques to match customers across devices and channels. Insurers also need to implement the right data model, digital platform, and IT architecture.

Agile collaboration methods in cross-functional teams. To provide users with a seamless, high-quality customer experience, the organization needs to break down silos across online and offline channels, as well as call centers. In this context, cross-functional teams with end-to-end responsibility have proved to be very successful. By adopting an agile methodology, these teams can significantly increase the quality of their output, reduce the number of handovers, and provide structure while keeping teams highly adaptive and flexible. The rigorous focus on customer experience might also expose new talent needs—for example, user interface and user experience designers, data scientists, and agile experts.

Modern, flexible technology infrastructure. A modern, scalable technological infrastructure is key to the integration of microservices and data pools across channels. To this end, insurers’ platforms need to be sufficiently flexible so that customer journeys can be improved and adapted for each customer segment on a continuous basis. Furthermore, APIs to integrate additional internal and external modules are essential. These modules should include the required digital assets for delivering advice capabilities remotely, such as easy-to-use video-conferencing applications and online appointment-booking tools.

Incentivization and performance management. For users to experience a truly seamless journey across touchpoints requires intermediaries to change their role. To help make this happen, insurers need to measure and incentivize intermediaries not only regarding their actual closing of insurance contracts but also for contributing to contract closings in other channels. The different sets of key performance indicators for how a channel’s performance is measured and how intermediaries are compensated need to be aligned. In addition, commission systems must allow for split-commission payment and for all intermediaries to access the same customer data and to collaborate through information-sharing tools.

For German insurers, evolving their current platforms and channels has never been as easy and promising as today. All pieces of the puzzle—effective digital channel technologies, high-performance computing hardware, significant acceleration in digitization, and a widely expected further shift in channel mix to digital- and remote-interaction models and tools—are ready to be leveraged and scaled.

As individual best-practice examples from insurance and adjacent industries demonstrate, effectively leveraging the potential of user centricity and an omnichannel approach along the customer journey can maximize buying propensity, significantly improve customer experience, and boost revenues.

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