Insurance Experiences: Trust, Transparency and Technology
In part one of this series we considered how complex insurance is, especially when it comes to building customer relationships. It’s hard to build robust personas for insurance customer journeys, because everyone needs insurance, and often, the usual demographics make little difference to the kinds of product, travel, car and home options on offer. Our solution was to toggle-on and toggle-off all kinds of aggregated insurance options, so that regardless of how your age or status changes, you have insurance that changes with your needs. However, that might take care of the range of things a customer wants to insure during their lifetime, but it doesn’t address two big problems insurers face – trust and transparency, and technology.
Trust and transparency
How are consumers supposed to know if they are getting a good insurance deal? The usual way is through either price comparison sites, or by comparing anecdotal experiences with their friends. However, that never tells the full story because as we have said before, insurance is complex, and too often, that complexity is also opaque.
There’s a lack of transparency about why your renewal quote is higher, or why certain kinds of insurance are cheaper, and the lack of transparency creates a lack of trust.
Consider the wide variability of what different insurers can offer within the same vertical:
- Some insurers own chains of repair shops for car damage, so they can offer faster repair services and with them, lower premiums because they save money on repair costs. However, they don’t necessarily cover all makes, or imported vehicles, or vehicles over a certain age and so on. For those specialist items, you need a specialist insurer, who accesses networks of repair shops and have wildly variable prices as a result.
- Similarly, some home insurance providers have the right networks and underwriting to insure properties in flood risk areas, but most don’t. Or they might have certain kinds of specialist skills in-house, for different kinds of roofing or building materials, and others won’t and rely on networks of suppliers. Some might insure household appliances, others might not, again, depending on their access to the necessary infrastructure. So home and contents insurance can vary widely.
- We also know that insurers compete on quotes, often by varying amounts of cover vs. customer contributions, or varying the terms of legal fee support and so on. This explains how sometimes, you can get a big saving on your car insurance by changing providers, even after years of brand loyalty. Or by haggling over your renewal quote, threatening to leave and go to another provider. It also explains how sometimes credit cards can give you free travel insurance, whereas it’s more expensive from a travel insurance provider, but cheaper if it’s bundled with a holiday package from a major tour operator.
The consumer experiences this wide variation in price – for apparently similar products – as a trust issue. They often feel stung by more expensive quotes, or badly let down by cheap quotes that have hidden charges. There’s a lack of transparency about why your renewal quote is higher, or why certain kinds of insurance are cheaper, and the lack of transparency creates a lack of trust. Consider this example of a typical insurance trust problem:
- Customer A has a rusty old car, which she insures for the basic low cost package. She lives in a cottage near a river in a rural location. The cottage has a thatched roof. She pays little for her car insurance, lots for her home and contents, even though she has old furniture and few valuables.
- Customer B has a new car, which she insures fully comprehensive. She lives in a new house in a town, no flood risk, with a new build slate roof with a 25 year guarantee. She also has a whole load of new home electronics and antique furniture. She pays more for his car insurance, but less than a fully comprehensive package on Customer A’s car. Her home insurance is much lower.
What’s the trust issue? Well, Customer A and Customer B are the same person, Ms. C, before and after she gets a new job and relocates to a new area. Does Ms. C therefore trust her old, expensive home insurer for her new home? No. Does she trust her old insurer with her new car? No. Even though her old insurer was specialized for the type of property (old, flood risk) and offered a fair package for the old car (third party), the old insurer appears more expensive when the product changes from an old, high risk scenario to new low insurance risk scenario (a new home and new car). Her new insurer might not have been nearly as competitive if she had tried to get them to insure the old place, and the old car. The reasons for this are obvious to the insurer, but not to the customer.
Total transparency and price comparison as a customer service
We would make the price relationship completely transparent, and break down precisely how much Ms. C’s premiums were and why, and offer her all the information she needs to make an informed choice about choosing another product. We would also offer a free comparison tool, to encourage Ms. C to compare our products with the competition on a like-for-like basis, not on price and similarity. The purpose of this apparently counter-productive move is simple:
- Trust is key in human centric design, so being transparent will enable a better connection with the customer (which is why so many other commercial services offer itemised billing). Will customers always go cheaper? Maybe, maybe not. They may well not be price-sensitive, but favour convenience or added value (remember, we are toggle-on, toggle-off). But customers always go for transparent over opaque.
- Going cheaper has a friction cost in changing all your details over, filling in forms, payment details and so on. If you have a really engaged, trusting relationship with your customer, that friction might not seem worth it to save marginal amounts of money on a less transparent provider. Is a 10% cheaper quote worth the hassle? How much is your time worth?
A completely transparent approach, with price comparison tools, means we are recognizing the central role of the price point in insurance customer journeys and building a more human-centric customer experience around price transparency. We can also ensure we compensate for price comparison sites tendency to put low-budget, low service products alongside more expensive, higher service products without highlighting the differences in a really transparent way.
Will customers always go cheaper? Maybe, maybe not. But customers always go for transparent over opaque.
Smart technology and the future
In many respects, the role of smart technology in insurance is a follow-on from the need to improve price points, and also the need to improve transparency and find ways to lower premiums without discriminating on statistical markers like age and gender. Sure, women are less likely to be involved in accidents than men, and over-fifties are more likely to maintain their homes to a high standard and take safer holidays, and younger people are more active and less likely to need health care, but those discriminatory price-risk differentiator days are over.
However, suddenly, we have smart homes and wearable tech, which enable a whole new level of granular insight which is much better than the discriminatory blunt instrument of actuarial data.
Smart home tech enables energy efficiency, and also improves monitoring, reduces burst pipes, fire risk and the likelihood of burglary. So a customer with the full smart home package should expect a lower premium than one without it.
- Cars with smart data recorders (as already proven with smartphone app based insurance products) can identify lower risk car owners, and reward them with lower premiums. Adding in-car breathalyzers and autonomous speed limiters (already in discussion) should also improve premiums.
- Owners with wearable fitness trackers can demonstrate a healthy lifestyle and reasonably expect better health insurance premiums. Similarly, smart scales (measuring water and fat content) and various other biometric tech (sleep trackers and blood pressure monitors) could further improve offerings, especially within at-risk demographics.
There are a world of technological tools that can improve insurance premiums by generating a much more accurate measure of risk for each individual customer. Again, this is all about personalization for price. Because we have a fully transparent approach in our Sutherland Labs insurance store, we would offer all customers all the technology enabled options they could use to reduce their premium. So when it comes to renewal time, we’d offer discounts for linking-up smart homes, in-car tech, and wearables against relevant packages. That means customers could make informed choices, and reduce their premiums based on lifestyle choices, not demographics. For old-age fitness fanatics, energy conscious homeowners and safe drivers, it means they can enjoy the financial benefit of belonging to a non-gendered, non-age limited dataset, not demographic.
If Sutherland Labs was an insurer…?
We should point out that the team have partly imagineered a bunch of new ideas, partly pulled together the best human centric service design examples we’ve encountered in insurance, financial services and lifestyle products we’ve experienced. However in this post, and part one (on personas, see here) we have taken our human-centric design approach, and applied it to a fundamentally human problem that insurance represents, the idea that stuff happens. To everyone, all kinds at all times.
For an industry that has remained more or less unchanged for decades, it feels like the technology is finally here, and the service design skills, to finally take some of the risk out of being an insurance company using human-centric design.