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Excellent Customer Experience: The Growth Engine mechanism in the Insurance Industry



– Companies that offer best-in-class customer experiences grow faster and more profitably. To reach this level, insurers must relentlessly improve customer journeys across channels and business functions.

The difference between great and poor customer service has always been clear, and businesses on the wrong end of this spectrum usually pay a price. This is as true for insurance as it is for any other customer-facing business. Today, the consequences of subpar service are amplified by the speed and reach of social media.

One poorly handled claim, one mistake captured on a smart phone, can escalate quickly into a brand-damaging crisis. This is just one reason firms across all industries should increase their focus on providing great customer experience. Providing a strong customer experience is not just about reducing the risk of customer service mishaps.

It is increasingly a way for companies in competitive markets to distinguish their brands. The airline industry is a good point of comparison with insurance. Both are highly regulated and highly competitive, and carriers in both industries find it increasingly difficult to differentiate their products without lowering prices.


Delivering a superior customer experience takes more than developing a mobile app or adding call centre staff. It requires significant investments, relentless improvements, and collaboration across customer channels and business functions, from distribution and underwriting to claims handling. Many insurers look at each customer touchpoint, from visiting the website to calling an agent, as a discrete event.

But customers see those events as steps in a single journey to meet an important need, such as protecting themselves and their families or recovering from an accident. Improving customer satisfaction can be an engine of profitable growth, but it demands a common vision and new levels of coordination across historically strong organizational silos. Establishing cross-functional, multichannel customer experiences should be a CEO and board-level priority. In this context, digital tools are unlocking new opportunities for insurers.

For example, since more than 80 percent of shoppers now touch a digital channel at least once throughout their shopping journey, carriers can find new ways to engage customers efficiently and effectively with personalized messages, and improve speed, service, and consistency to raise satisfaction. A number of commercial lines carriers are using digital tools to improve journeys. Many commercial insurance buyers value online interfaces with self-service features and the ability to track the status of interactions in real time instead of having to make inquiries by phone, email, or through their brokers.

Advances like these require coordinating multichannel interactions with an overarching view of business value. Quick, cosmetic fixes are likely to fall short, while costly changes do not always deliver strong returns. Delivering a superior customer experience depends on the full range of pricing, products, and services.


The main reason so many companies fail to improve customer journeys is that understanding what customers’ value is not an easy task. Identifying what drives customer satisfaction and translating it into operational performance improvements requires deep customer insights, solid analytics, and modelling the most important customer journeys, with cross-functional ownership and multichannel, end-to-end management.

So how can insurers overcome these barriers and deliver exceptional customer experiences? The first step is to align on what type of experience they want to deliver. Experts disagree on some fundamental elements of this issue. Some believe that fewer customer touch-points are better, while others say more interactions create more opportunities to add value and build loyalty.

Both can be correct, of course, depending on particular customer segments and the specific journeys they are on. Customers with more complex insurance needs might want a higher-touch approach during sales and onboarding.


Understanding what customers want is paramount in building a better customer experience. But real transformations are achieved when carriers take a comprehensive approach to customer journeys and how their organization works. Only a holistic process can deliver tangible and sustained improvements.

There are four core elements to a successful approach to excellence in customer experience: inspiration, insights, improvements, and institutionalization. Each element can yield a better experience, but the full impact is seen only when the four are pulled together.

Exh. 1: The growth engine


Create a comprehensive vision for a customer-centric business and operating model with clear targets. A customer-centric transformation begins with an overarching vision exemplified by senior leaders and modelled throughout the organization. CEOs listening in to live call center phone calls or serving coffee to their customers are nice, powerful touches.

But the real value of a customer-centric culture is unlocked when employees rally behind a common purpose that drives them to go beyond their regular standard of work. Customer-centric organizations go the extra mile, demonstrating that customer satisfaction is not just a metric on a dashboard but an inspiration.


Develop customer insights and link customer satisfaction to operational key performance indicators and business impact (such as churn and cross-selling). Improvements in customer experience result from a clear understanding of customer needs and their implications from an operational standpoint. Most customer-centric processes also improve efficiency, but large investment decisions demand a clear articulation of costs and benefits, such as how much value an innovation adds from the customer’s point of view and how much of a competitive edge it provides.

In other words, customer satisfaction initiatives should be grounded in facts, not gut feelings. Many companies typically rely on two tools to assess customer satisfaction, both with shortcomings:

Top-down metrics: All insurers periodically measure customer satisfaction. Many do so on a differentiated basis—by division, for example. Those may be good starting points, but they rarely provide clear indications as to where and how to make improvements.

Customer satisfaction scores need to be linked to operational metrics and economic value to highlight how to address customer needs. Likewise, recommendation scores may not reflect true customer satisfaction. In some industries, improving the customer rating may barely increase the likelihood of renewing a subscription or buying a new product, while in insurance, a similar jump can be a differentiator.

Internal surveys: Surveying internal leaders is a good way to generate ideas for improvements, but these leaders tend to focus on technical shortcomings and may not rank other nuances in interactions the way customers do. Increasing customer satisfaction goes hand-in-hand with operationally relevant customer intelligence.

Insurers can also gain valuable insights—and avoid trying to solve the wrong problems—by comparing how customers describe their experiences with actual company data. In other words, if customer complaints about long callcentre wait times do not match reality, then the problem might have more to do with communication and not necessarily be solved by adding call centre staff.


Radically redesign customer journeys from start to finish, using digital elements as the standard. Insights from research help insurers decide where to invest, but effectively redesigning customer journeys also requires discipline. Journeys can be optimized according to a five step structure. An effective process usually requires a cross-functional team with members from sales, operations, IT, and other areas:

Step 1—Break down the journey using customer perspective as a central focus.

Step 2—Map the journey against current internal operations.

Step 3—Call out the “wow moments” and pain points, such as unnecessary wait times or delays in communication.

Step 4—Prioritize pain points based on what matters most to customers.

Step 5—Radically redesign the journey to address the pain points and focus on customer needs.

Improvements must be seen as a continuous process. Carriers should plan for successive rounds of innovation, especially in digital, where expectations rise rapidly. All changes should be tested quickly with real customers, and not every lever must be in place before testing begins: they can be piloted and implemented in stages, and many incremental improvements are possible without lengthy preparations or IT infrastructure overhauls


Build customer-centricity into the organization, changing culture and processes from the front line to the C-suite. Sustained improvements in customer satisfaction are possible only if the entire company—from top executives to the front line—is aligned around the effort and the rollout is rapid. Five best practices that increase the chances of success:

  • strong executive ownership and a clear mandate for cross-functional journey owners to drive change across the organization
  • central measurement architecture that continuously reports customer intelligence to the relevant operational KPIs, allowing feedback and improvement
  • lean management practices with regular performance dialogues about customer satisfaction between top management and operational leaders
  • proactive change management with compelling “change stories,” recognition from top management, regular interaction with real customers to gather feedback, and new approaches to attracting customercentric talent
  • training to give employees new skills, and “navigators” and “champions” to carry the change to individual departments and make it stick.

Many companies do well by starting with one or two small, rapid pilots to demonstrate impact and generate knowledge. They then use the momentum to scale up the improvements across the company, rolling out three or four customer journey categories at a time, with organizational owners for each.

A strong central team uses a standardized methodology and identifies synergies between customer journeys, such as in service and claims call centers, and identifies the skills required for success in individual areas. Every team has clear objectives in terms of customer satisfaction with regard to the best competitor. Recruiting profiles and human resources policies are aligned with the new way of working.


Insurers need to invest human and financial resources in customer-centricity to build and maintain a competitive edge. Best-inclass players have already made some of these investments and are reaping cascading benefits. The opportunities for insurers to differentiate themselves through stronger customer experience are huge and growing.

The fundamental challenge many companies face is getting the organization moving. There is no time to wait. In the digital era, consumer power is rising. Carriers that cling to product-, function-, or channel-centric views risk falling behind as market leaders build deeper relationships with customers and capture ever-larger shares of the market.

For carriers with the resolve to see their business through the eyes of the customer, each interaction becomes a way to live up to their brand promise; functions come together in new ways across customer journeys; and technology and digital become accelerators. Transforming any large organization is difficult, of course, but the value at stake is significant. The adage is still valid: “You don’t earn loyalty in a day. You earn loyalty day by day.”

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Climbing the Power Curve: Winning in the Insurance Market



Insurers can take concrete, evidence-backed actions to move them in the right direction and, cumulatively, improve their odds of long-term success. Purposeful, bold moves aimed at shifting resources, boosting underwriting margins and productivity, and delivering on a series of programmatic M&A deals can dramatically improve an insurer’s odds of reaching the top quintile of economic profit. While these moves may sound instinctive, many companies fail to pursue them rigorously. In fact, these moves are most powerful when undertaken in combination, at or beyond the thresholds of materiality described in this narration. The point isn’t that there’s a magic formula for achieving strategic differentiation. Rather, by taking a hard look at the potential of your key initiatives to achieve bold results in these areas, one can get a realistic forecast of the odds that one’s strategy will transform performance.

Understanding the power curve and how to apply it

Research identified a power curve—proof that economic profit is unevenly distributed among insurance companies (exhibit) across geographies from 2013 to 2017. The power curve illustrates the uneven distribution of insurance industry economic profit.

These findings may come as a wake-up call to insurers that find themselves outside the top quintile—but embarking on an effort to move up the power curve is difficult.

How to move up the power curve

Research shows that moving up the power curve requires a laser focus on the factors such as foundational factors and bold moves that have an outsized impact on success, measured as economic profit.

Pursuing the five bold moves by Insurers

While the five bold moves may seem intuitive, and many companies may already be doing them in some form, two factors set these actions apart. First, magnitude and intensity matter; these efforts force insurers to break free from their standard processes of investment and initiative prioritization. Even if a company is doing something in each of these dimensions, how much it is doing often makes a difference. In other words, strategy is not only about the directionality of moves but also their materiality.

Second, the impact of these moves is cumulative. Companies that employ three or more of these moves in concert are likely to be propelled up the curve. Findings show empirically that companies that focus on multiple moves over time can learn from and adapt to them, reaping even further benefits.

Dynamically shift resources between businesses

Some carriers offer customers too many legacy products that do not produce meaningful profit. These legacy products take attention away from distribution, product development, and policy administration. Instead, companies should reallocate capital to higher return-on-equity (ROE) activities and away from lower-ROE lines of business. Proactive measures are critical given the sector’s highly competitive pricing environment.

Resource allocation should also be employed across various strategic lines, not just products. Based on research, the threshold for outperformance is the reallocation of 60 percent of surplus generated over a decade. Insurers that optimize their business mix accordingly have a better chance of improving their odds of ascending the power curve. This threshold parallels our findings across industries that dynamic resource reallocators gain approximately three to four more percentage points of total return to shareholders each year compared with low reallocators.

Other companies have increased economic profit by divesting underperforming assets. In the wake of the financial crisis of 2007–08, a number of companies exited underperforming businesses through closed-block transactions through either legal entity sales or reinsurance transactions. These transactions were with organizations that were more natural owners of the distressed assets by virtue of their capital structures or business models. These back-book transactions, when thoughtfully structured, have freed up capital that helped move sellers up the curve.

Reinvest a substantial share of capital in organic growth opportunities

Reinvesting earnings in profitable and well-performing businesses is a reliable way to increase economic profit, but finding these opportunities has been challenging for many insurers over the past ten years. Companies meet the threshold in this area if they are in the top 20 percent of the industry by strategic reinvestment relative to new business premiums; typically, that means spending 1.7 times the industry median.

Often considered innovators in the industry, companies that achieve this high ratio of reinvestment to sales have a track record of introducing disruptive products and services, enabling them to grow faster than their peers. Indeed, these insurers are successful at finding accretive internal rates of return. And as they push the boundaries of new offerings, they are often able to achieve higher margins (and ROEs) thanks to the reduced competition at the vanguard.

Pursue thematic and programmatic M&A

The third move centers on the use of programmatic M&A, an important approach for insurers with financial flexibility and access to available targets. A programmatic approach to M&A focuses on executing a series of deals in which no individual deal is larger than 30 percent of market cap but in which the total over ten years is greater than 30 percent of market cap. This is often done in thematic areas of technology and capability building or in extensions to new product lines and geographic markets. Typically, programmatic M&A outperforms both pursuing very large transactions and avoiding M&A altogether. By using a series of small, thoughtfully curated transactions to advance innovation and growth, programmatic acquirers have several advantages: they can simplify integration, avoid competitive bidding, and facilitate the exploration of new opportunities without committing large amounts of capital up front. This approach to M&A also enables more effective acquisition of new capabilities, such as digital and analytics.

Enhance underwriting margins

The fourth bold move involves making ROE improvements through better underwriting and lower loss ratios—a particularly important objective given how, as a core competency of all insurers and particularly in the P&C segment, underwriting efficiency can serve as a differentiating factor that leads to higher economic profit. Insurers accomplish these results either through privileged access to particular customer segments or better use of customer or risk data through analytics. Benefits from productivity improvement are often reinvested to improve product margins. To maximize the odds of moving up the curve, companies need to be in the top 30 percent of the industry by gross underwriting margin.

Make game-changing function improvements in productivity

Insurers feel continued pressure to reduce costs because of increasing price transparency, the effects of digitization, and low interest rates. Indeed, new entrants are closing the gap on incumbents. It’s generally recognized that even though the loss ratio has the greatest leverage, insurers benefit significantly from improving efficiency, lowering expense ratios, and increasing revenues per employee. Many executives in the industry believe that a dramatic wave of efficiency and retooling will crest in the next three to five years, and many are embarking on these high-ambition, enterprise-wide efficiency journeys now. Research reveals that to maximize the odds of entering the top quintile, companies should aim for a cost improvement that is in the top 30 percent of the insurance industry.

The odds of moving up the curve become exponentially larger as insurers pull more levers, while a strategy that does not incorporate any of the moves will likely fail. Indeed, the CEO, CFO, other senior executives, and board members can often use these bold moves as a test of strategies brought to them by their teams. Strategies that neglect to engage these actions typically have a one in ten chance of succeeding, compared with one in two (or better) for those that do.

Rather than thinking about strategy as primarily a matter of frameworks and broad themes, leaders should ask themselves what they are doing to make bold moves along the five dimensions that matter and whether efforts already underway are truly significant. The extent of the moves matters a great deal—materiality matters, not just directionality. And CEOs are in a unique position to calibrate materiality; this, in fact, is one of the greatest aspects of their role and a productive means of challenging their teams. If proposed plans don’t meet the required threshold of activity to bend the odds of moving up the power curve, they are likely not aggressive enough. What often gets in the way is a resource allocation process hindered by social dynamics. Other common obstacles include a lack of objectivity on opportunities and an insufficient understanding of critical thresholds needed to move the needle. As a result, too many companies simply check the box on certain priorities while investing too little in the ones that truly matter.

Improved economic profit is within reach for insurers that can adjust their business models in the face of an efficient market and inject a newfound objectivity into their strategic processes. Indeed, insurers that have a favorable endowment, navigate industry and geographic trends, and make bold moves will be in a good position to climb the power curve.

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