In recent years, the insurance industry has witnessed intensecompetition for customers across every segment of the market.Claims has become a central front in this heated battle for marketshare.

It is no surprise, then, that many carriers have madesignificant investments in claims transformation initiatives andforward-looking insurers are adding a higher-quality customerexperience to their list of critical outcomes. Market leaders havecome to view a quality customer experience as a means todemonstrate true customer centricity and differentiate based on thestrength and the stability of their brands.

The business drivers for broad-based transformation are clearand well recognized:

• More empowered consumers, with higher expectations forinformation on demand, service efficiency and reliability, and anincreased propensity to switch carriers
• Outdated technology infrastructures that limit the ability ofclaims organizations to gain integrated customer views and providetailored and responsive service
• A proliferation of channels and touch points through which toengage and service policyholders—which consumers expect to use fora broad range of tasks
• Intensifying competitive stakes, with rival carriers moreaggressively pursuing new customers
• The imperative to combat increasing rates of fraudulent claimsactivity, reduce the claims leakage associated with longer claimscycles, and increase the accuracy of claims payments.

The customer experience is something of a common denominatoracross these transformation drivers, as companies realize it isessential to overall customer loyalty.

The bottom line is that the customer experience has moved up thestrategic agenda throughout the insurance industry. Insuranceorganizations seeking to upgrade and modernize their claimsoperations should find ways to incorporate customer experienceenhancements into transformation programs as a means to enhanceoverall ROI.

Over the longer term, claims organizations can use customerexperience upgrades as guideposts on their continuous improvementjourneys. This paper highlights the importance of the customerexperience within claims transformation programs, outlines the keyconsiderations for insurers seeking to upgrade some or all facetsof their claims customer experience, and defines key metrics forbuilding the business case and for measuring success.

Why Customer Experience Matters

The consumer empowerment revolution that has upended retail,financial services, and other industries has more recently begunreshaping the insurance industry. In the last decade, policyholderexpectations regarding the service and communications provided bytheir carriers have increased dramatically, with impacts feltacross the enterprise.

Today's consumers expect everyone at the company — includingagents, customer service representatives, billing staff, claimsadjusters, and technical support—to share information and recognizethe customer's identity and history. They don't want to be askedthe same question multiple times or have to call multiple phonenumbers or visit multiple sites to find answers to their questions.Every touch point needs to be equally informed and shareconsistent, comprehensive data concerning transaction and servicehistories.

Insurers must consider the customer experience in the context ofmultiple channels. Today's consumers—both individual and corporateclients—may prefer to research and compare policy options online,buy at a traditional brick-and-mortar agency or through a brokerrelationship, and then access services (like claims information)through a range of online channels, including websites, apps andlive chat. The proliferation and fragmentation of channels haveplaced great pressure on the technology infrastructures of manyinsurance companies. Most are simply not equipped to deliver,across multiple channels, the integrated service and completeinformation consumers expect.

Further, channel proliferation has raised the stakes fordelivering a quality experience. When things go well (e.g., a claimis paid quickly), insurers may benefit from the "free advertising"provided by their customers spreading the news among friends andfollowers via social media. However, if things go poorly, not onlyare consumers more likely to switch to a competitor, they maybroadcast their discontent more broadly than before.

In part this is a function of generational change. Younger, moredigitally-oriented consumers are less likely to be tolerant ofcompanies that do not have broad, integrated views of customer dataor claims status. As a result, they are more likely to exploretheir options and tell their friends if a carrier doesn't provideefficient service or digital channels for self-service. In thissense, a positive customer experience in claims helps eliminatereasons for policyholders to consider a switch.

Beyond demographics, there are also business factors driving thechange. In an intensely competitive market and challenging economy,carriers need strong net results from their claims transactions.That means paying the right amounts on individual claims andmanaging claims efficiently. A quality experience, supported byuser-friendly tools, an intuitive process, and clearcommunications, can help in these areas.

Further—and perhaps most important—insurers have come to realizethe extra value that accrues to their brands when they gain areputation for treating customers well, through efficient andresponsive service, and quick and reliable claims settlements.However, it's important to recognize the limits of value that aquality claims experience can provide, as well as the precise waysin which it adds value. Because today's customers generally expectto have a good claims experience, it is a baseline, not acompetitive differentiator by itself. A bad claims experience,however, is likely to cause policyholders to shop around.

Therefore, it's critical that insurers understand theexperiential touch points, steps or sub-processes with the highestloyalty impacts and focus their transformation efforts on those.These "leverage points" vary by policy and customer type, as wellas carrier. Thus, insurers should base their technology and processre-engineering efforts on a clear and granular understanding ofwhere their current processes fall short and then prioritize wherenew technologies may help them streamline communications or providemore flexible options for individual consumers.

Elements of Claims CustomerExperience

In the past, customer experience was often thought to be therealm of consumer researchers and digital marketers. In fact, therise of e-commerce and online shopping in the 1990s inspired arapid evolution and maturation of customer experience knowledge andbest practices. For insurance companies, as with businesses inother sectors, the customer experience is best viewed as theentire, interdependent network of touch points and channels throughwhich interactions are made with customers and prospects across thefull relationship lifecycle.

Within claims organizations, those touch points include allinteractions and communications throughout the claims process, andmay even include preliminary steps like policyholder educationabout how to submit a claim. The claims customer experiencetherefore may incorporate:

• Conversations with agents and contact centerrepresentatives
• In-person visits from claims adjusters
• Online tools and apps for submitting claims data
• Standard, automated electronic updates about claims status

Mastery of the customer experience is all in the details. Forinstance, customer-service or claims agent scripts and email alertsshould use consistent language and data to minimize customerconfusion. Online instructions for claims submissions must be clearand provide easy ways to receive more information. Further,customer preferences must be taken into account.  Justbecause it is possible to automate notifications every time a newpiece of data hits the claims files does not mean every customerwants to receive a text message about it.

Planning for a Quality Experience

For claims executives that understand the potential value of aquality customer experience, the question becomes how to identify,prioritize and plan for those improvements in the context ofbroader claims transformation programs. To a large extent, itstarts with planning and ensuring that customer experience impactsare accounted for as early as possible in broader program planningand at all relevant phases of the implementation.

Executives overseeing claims transformation initiatives shouldconsider the customer experience as a strengthening lever in termsof contributing additional ROI from their programs. Therefore, theyshould explore specific process improvements as they begin toassemble the business case and ROI models.

An audit of current practices and capabilities, as well as amapping of existing customer experience, may raise importantquestions:

• Where are the current pain points and bottlenecks withinexisting operations?
• Is there a clear understanding of how today's policyholdersfeel about existing processes?
• What ideas do front-line, customer-facing staffs have aboutimprovement opportunities?
• What leading practices and lessons learned can be applied?
• Which channels do our top customers want to use?

The questions can proliferate as insurers consider all theirchannel options, which makes prioritizing action plans moredifficult. It is also important to note that answers will come fromvarious sources across the organization.

In looking outward to a future state, primary market researchcan augment existing institutional knowledge about what customerswant. Further, it can help sort through the many options andpotentially predict customer preferences based on core objectives.Primary market research can also help define success metrics forevaluating experience design or other, even broader, claimstransformation programs.

Building the Business Case 

While it is clear that the customer experience should be on theradar of senior executives, presenting them with a pragmatic andtargeted approach will improve approval and implementation. Claimsleaders are uniquely positioned to build an objective andcompelling business case that can point the way to prioritizeddeployments and near-term value creation.

Building a business case based on quantifiable improvements canbe difficult. Not unlike branding or advertising, customerexperience improvements involve factors like "positive buzz" or"word of mouth" that are notoriously hard to measure precisely.However, given the importance of the customer experience in claimsand the large scope of investments in claims transformation,project teams should conduct scenario modeling to establishbaselines and parameters for the business case. Among the metricsto consider:

• Increased retention and loyalty
• Reduced churn
• Increased acquisition through recommendations
• Cross-selling volume—increased share of wallet
• Cost savings from lower call volumes to contact center andincreased first-call resolution rates
• Cost savings from shorter claims-handling times and per-claimsexpense
• Reduced claims leakage

As insurers gain more sophisticated analytics capabilities andas customer experience standards emerge, these pillars of thebusiness case will only become clearer and more quantifiable.

A Word of Caution

Insurers that attempt simply to duplicate the experience andcapabilities of their competitors risk sabotaging their own effortsto improve the customer experience and achieve competitiveadvantage. An insurer could actually make the customer experienceworse if they do not proceed in specific process improvementstailored to the unique demographic and geographic mix in theirpolicyholder base, as well as a their company's individualoperating and sales models..

Ideally, the future-state claims customer experience is definedthrough input from a range of stakeholders across the businessincluding input from various functional areas.  This broadperspective will help to ensure that hidden impacts from redesignedprocesses are identified in advance. For instance, differentfunctions should have access to the same customer data so there isno need to ask customers the same question more than once.

As plans progress, transformation leaders must ensure customerexperience impacts are not overlooked as project teams focus on theevaluation, selection and implementation of new technology. Puttingtechnology before the needs of users and customers is a common riskin transformation initiatives.

The incremental investment in the customer experience can addvalue by making it easier for insurers to serve customers at everypoint in the claims process, but specific improvements must beidentified in advance and then incorporated directly intoconfiguration and deployment requirements. Further, training shouldalso feature in project plans. Customer-service representatives andclaim handlers should understand exactly how new customerinteractions will be structured and how their roles may changebased on new interaction models.

Even more importantly, changes to the customer experience—likeclaims transformation initiatives as a whole—should be tailored toenterprise strategy. Insurers that gain insight into and reachconsensus about the types of customers they want to attract have aleg up in defining the optimal experience. Such strategic alignmentand focus are critical given that today's claims technology enablesvirtually an infinite variety of options in configuringinteractions and matching consumer preferences.

The task of improving the customer experience can seem daunting.Indeed, it is unlikely insurers can succeed at addressing all thedimensions of the customer experience—the people, process andtechnology—simultaneously. However, an approach centered on quickwins and building momentum through incremental improvement hasproven to be effective at many early-adopting organizations. Thekey is to identify changes that can deliver immediate-termvalue.

Conclusion

As insurers strive to become more customer-centric and win overtoday's more demanding consumers, they are rightly focusing ontheir claims processes as an important part of the overallpolicyholder experience and lifecycle. Customer centricity hasbecome synonymous with competitive advantage and marketleadership—and the highly visible, customer-facing claims functionis one area where the battle can be won or lost. Certainly, it iswhere the value of transformation initiatives can be maximized, andwhere insurers can gain real traction with a new generation ofhighly empowered, digitally engaged consumers.

Nicole Michaels is a principal in the Financial ServicesOffice of Ernst & Young LLP. Michaels is based in Minneapolis,Minn., and can be reached at [email protected].