Insurance firms must plug in to new age

If companies do not embrace digital consumers, they risk being left in the dust by their rivals

In the digital era Chinese people are always on. This has created a new competitive landscape, raising questions about the sustainability of traditional business models and raising consumers' negotiating power and expectations. Customers expect high levels of service across multiple channels - be it via apps, laptops, desktops or tablets or when they call their insurer.

Furthermore, customers compare their digital experience with their insurer to their digital retail consumer experience. If it is easy to buy a pair of running shoes or a new iron online at the likes of Taobao and Paipai, it should be easy to buy insurance through a financial services company's website. Consumers might appreciate that insurance is a regulated industry, but they will not accept insurers that fail to provide them with experiences similar to those they enjoy from other industries.

Meanwhile, as barriers across industries blur, new competitors are rapidly emerging. Banks have already entered the insurance space in search of new fee-based business. They now service a significant portion of the life insurance business and are increasing their presence in the general insurance sector, too. Perhaps more pressing is the new challenge from high customer-touch web dominators, such as Alibaba and Tencent, which are also testing the ground.

Accenture research shows that Chinese consumers are the most willing in the world to buy insurance online. According to a global survey of 6,000 insurance customers conducted in 2013, including 500 from the Chinese mainland, consumers from China (93 percent) are more likely than most others (the global average is 71 percent) to buy insurance online. Indeed, 47 percent would consider buying car, home or life insurance from an online service provider - the global average is 23 percent.

Furthermore, asked whether they would switch their insurance providers, 81 percent of Chinese respondents said it was a possibility, more than double the global average of 40 percent. The most important reasons were for more personalized customer services and dissatisfaction with current claim management processes. Eighty-four percent of the Chinese respondents said they were willing to pay more for personalized advice when buying insurance.

As a result, customer focus must become a priority for insurers. Studies conducted by Accenture suggest that failure to deliver a high-quality customer experience can result in a staggering erosion of a company's customer base, or a loss of as much as 50 percent over five years.

At its best, customer focus means having each current and prospective customer at the center of the business and operating models. There are five key steps Chinese insurers need to take to make sure this happens.

First, they should be listening to and understanding their customers' needs, which means organizing data by customer rather than by product. They should maintain the relevant views of the customer based on traditional data, such as age, address, contact history, claims, queries, complaints, etc. But they need to pair that information with new available data, such as preferences based on customers' social media views (many insurers have their own social media pages) or analyzing customer buying behavior to know when and how best to sell to customers.

This dovetails into the next step, which is ensuring offerings are customer-oriented. Insurers need to devise propositions that are as tailored as possible to meet each customer's needs and preferences.

The third pillar is about allowing the customer to use traditional and innovative channels according to his or her preferences. Some people do all their transactions via their phones. Others prefer laptops. Many use a mix. Insurers need to know this about their customers. After all, even the best proposition at the wrong time or through the wrong channel is likely to fail.

Insurers also need to provide a constant quality customer experience. The most successful insurers are sensitive to their customers' changing needs. Think about it: Customers may want one service when they are single, yet another when planning their wedding, more when they have a child and still different solutions when they are planning for retirement.

In order to accommodate this, insurers will probably need to redesign and change their management structure. The development of a customer-centric business model is likely to require that companies undergo meaningful organizational changes.

Insurers will need to rely upon digital enablers that make customer focus happen, including:

Analytics, or business intelligence techniques based on predictive statistical models and self-learning processes. This is useful in listening to customers' needs and devising personalized offerings.

Digital marketing. The use of digital tools and channels, together with customer insights gained through analytics, can provide tremendous support to commercial offerings. Digital marketing helps reverse the traditional push approach of insurers in favor of a more effective pull approach that is tailored to meet customers' needs and preferences.

Mobility. Services accessible everywhere through mobile devices such as laptops, smartphones and tablets. Almost 70 percent of consumers worldwide are interested in mobile-based insurance services. It is therefore expected that many more mobile apps and enhancements to existing services will emerge in the near future.

Social media. These provide insurers with access to an immense amount of customer data that, coupled with data they already possess, can provide rich customer insights and enable the development of superior customer propositions.

The insurance industry in China is a growth market, and all of the tools are in place for insurers to expand their businesses in customer-centric ways. However, the big insurers cannot afford to be passive. If they do not embrace the new digital Chinese consumer they risk being left behind for competitors who will.

The author is managing partner of Accenture's management consulting for insurance for the Asia-Pacific region. The views do not necessarily reflect those of China Daily.