Market Conditions Drive Change in ConsumerExpectations

Economic growth in the U.S. continues to expand, but at a ratethat is lower than pre-recession.[i]  Consumers and businesses continue tofocus on reducing expenses and stretching their dollarsfurther.  Consumers now spend more time than ever beforeresearching their options before they make any type ofpurchase.  What's interesting however is that whileconsumers have become much more discerning around price – price isnot the only factor in their purchase decision.  More andmore customers are willing to pay more for a better customerexperience.

A study conducted by Oracle in 2012 found that customerexperience is key component of revenue growth in an increasinglyglobalized economy where products and services are increasinglycommoditized.[ii]  Their study, "Why Customer Satisfactionis No Longer Good Enough," reveals that 81percent of consumerssurveyed are willing to pay more for superior customerexperience.[iii] Andnearly half (44 percent) indicated they would be willing to pay apremium of more than 5 percent.[iv]

Another recent study released by Accenture, called "CustomerDriven Innovation Insurance Customer Study" found that 54 percentof consumers aged 18-24 and 52 percent of those aged 25 to 34responded they would probably or certainly be willing to pay morefor auto insurance with personalized service.[v]  In fact, the surveyrespondents under the age of 35 indicated price mattered less tothem as long as they received more value.[vi]

Consolidation in Personal Auto Market

Meeting changing consumer expectations around product offeringsand service is just one more challenge facing the auto insuranceindustry in an environment of intense market competition. Within the personal auto insurance market, market share of the top15 writers has grown from 54 percent in 1970 to 76 percent by2012.[vii] Billionsof dollars are spent each year by insurers on advertising in anattempt to gain more share from an otherwise very slowly growingmarketplace.

A recent article in The Auto Insurance Report discussed theincreasingly competitive nature of the auto insurance industry indetail, and predicted that given the rate at which technology ismaking it more visible for customers to price insurance andunderstand whether a carrier can provide the type of service theyare looking for, carriers that have mediocre results willultimately disappear.[viii]

The ability to segment customers, provide innovative insuranceproducts, and optimize pricing will become even more important asbroader demographic and vehicle technology trends developfurther.[ix]

Collision Repair Marketplace Evolves

Within the collision repair industry there has also been a greatdeal of momentum by the large, multi-region, multi-store operators("MSOs") to expand their footprint and market share.

In his 2014 update to "A Profile of the Evolving CollisionRepair Marketplace", Vince Romansreports that the combined revenuefrom the three distinct segments of multi-location companies andmultiple location networks accounted for 23.6 percent of the annualcollision repair revenue for 2013.[x]  So while this was still less thanone-fourth of the overall revenue in 2013, the pace of acquisitionin 2014 certainly will continue to drive the overall share ofmulti-store operators (MSOs) in the future.

This chart below shows the growth in the national and regionalMSOs share of the nearly 5 million DRP appraisals for which CCCcollected data each year between CY 2000 and 2013.  In CY2000, combined national and regional MSOs accounted for ten percentof overall DRP appraisal count uploaded, and grew to over 30percent thirteen years later.

What's certainly clear is that within both the auto insuranceand collision repair industries, companies are faced with both apace and nature of change that will continue to pose significantchallenges in the future.  Driving a lot of the momentumof change in these industries and many others is the rapid changewithin technology. 

Technology today has not only made it easier  for theMSOs to get all of their locations on the same platform, but has brought convenience and a new range of capabilitiesto consumers whose expectations have also subsequently evolved.

Technology Enables Consumer Behavior

Technology has become a key enabler of changing consumerbehavior. Mobility and the cloud have created ultimate anytime,anywhere experience for consumers.  According to datareported by Nielsen, 63 percent of smartphone owners keep theirphones with them for all but an hour of their working day – and allagree that the smartphone has become a critical tool for connectingwith friends, family and colleagues.[xi]

Mobile devices have dramatically changed the overall time thatconsumers spend on digital platforms.  Data from comScoreMedia illustrates the 83 percent growth over just three years inthe number of minutes spent in the U.S. on digitalplatforms.[xii]  What's important to note is that thegrowth has  been almost all incremental to desktop usage,with usage of smartphones and tablets almost doubling the amount oftime Americans spend online.[xiii] 

In fact, research conducted by the Vivaldi Partners Group showsthat 48% of the U.S. population today is 'always connected,' usingsome sort of device that collects and communicates digital data24/7, a number that has nearly doubled in just 3-4 years.[xiv]  More andmore people are not only going on line multiple times per day, butare using multiple devices, with many owning and using at leastthree different connected devices.  And while manyoccupations today require connectivity to the internet and cloud,consumers are also connecting more and more often while at home,and even from their automobiles.

And while smartphones and tablets have accounted for much of thetime spent connected, consumers increasingly look to other productsand services to extend the convenience and access to informationavailable to them in every aspect of their lives.  Takefor example the navigation systems within  avehicle.  According to Edmunds.com's 2013 Car ShoppingTrends Report, navigation systems were the third most enticingoption or upgrade among all option categories.[xv]  This  is adevice that is always on, tracking where the vehicle currently isand providing directions, information on best routes, traffic jamsto avoid, etc.

Becoming a Digital Leader

A recent article in strategy+business titled "Reimagine YourEnterprise" talked about the challenges many companies have as theytry to reach the goal of creating significant value for theircustomers in a digitally powered business environment.[xvi]  They point tothe lack of real growth seen when companies simply focus onreengineering processes and products, invest in technologyplatforms, or focus on improving back office efficiency.[xvii]

Instead they point to the need for "reimagination" – where yourentire business is reshaped around the customer or user experience– a concept termed 'human centered design".[xviii]

A company that practices "human centered design" creates atangible emotional connection with its customers, supports thatconnection across many channels such as brick-and-mortar locations,websites, mobile apps, collects data on what its customers do oneach of these channels, and then uses that data to react and pivottheir business.[xix]

How Can Our Industry Become DigitalLeaders?

Advancements in technology for the insurance and collisionrepair industries have been instrumental in restructuring the wayauto claims are handled.  Electronic appraisal reviews andshared guidelines provide business partners with information needed to fulfill work in a transparent,compliant, and complete manner.  Management dashboardsfacilitate claims performance review in a concise, targeted manner,enabling managers to address specific areas of performance, adjustlevers, and evaluate the impact in real time.

The collision repair industry  also has benefited fromgreater use of technology,  whether through the ability toautomatically update the vehicle owner  of the status of arepair, or through the ability to automatically update the repairproduction stages via an iPhone® or Android® device. These changes have shaved time off of the claim and repair processand have worked to streamline communication between all parties. Asconsumers' expectations and service demands continue to grow, morewill need to be done to deliver a positive auto claim and repairexperience.

Carriers are looking to differentiate themselves by reachingcustomers through the devices that they are using more and more intheir daily lives.  Data from the 2013 CapGemini WorldInsurance Report identified which areas carriers are focused onwithin the mobile space to develop positive customer experiences,and what percent are focused there today versus where they expectto be in 2015.[xx]To date carriers have focused many of the mobile capabilities onproviding customers with product information,  whether forpricing/quotes or for providing consumers with proof ofinsurance.[xxi]  However, by 2015, 73 percent of theinsurers that responded anticipate mobile will be a big focus inclaims services to drive positive customer experience.[xxii]

Carriers are responding to consumer demand for more choice andpersonalization by extending the options available to a customerfor vehicle inspection and even repair.  Today's consumeranticipates there will be some choice in how they prefer to havetheir claims handled, the one-size-fits-all experience will nolonger suffice.  When supplemented with data about basicthings like  vehicle information and damage information(i.e. point of impact, whether or not an airbag deployed), carriersare able to not only identify the potential level of repaircomplexity, but can also work with the customer to recommend theappropriate  method of inspection.  Carriers areeven evaluating policy information (years of service, number ofpolicies) to provide the appropriate  vehicle inspectionmethod for that customer.

With nearly 50 percent of customers  "alwaysconnected," insurers and repairs are looking at ways to leveragethis capability while positively impacting customerexperience.[xxiii] As a result, more and more insurers andrepairers are providing customers the option to submit photosthrough a mobile application and quickly retrieve an estimate ofthe damages.  For the insurance company, it not onlyimproves customer satisfaction but also helps reduce cycle time andLAE costs (no need to wait for a staff appraiser to be scheduled toappraise the customer's vehicle).

As a response to consumer demand for choice, many insurancecompanies are offering their customers the option to select anybody shop to get an appraisal.  For example,  CCCONE® Open Shop allows the carrier to connect electronically withapproximately 20,000 repair facilities.  Thisallows  carriers to provide their customers additionalshops to choose from, in turn positively impacting customersatisfaction (CSI).  As for the repairer, it generatespotential new repair leads and lets them electronically connectwith more insurers while reducing phone calls and emails. It's a win-win for the insurer, repairer, and most importantly thecustomer. 

For many consumers an auto accident is fortunately a situationthat does not occur very often.  Subsequently, manyconsumers have no idea where they would like to have their vehiclerepaired.  Among the criteria a consumer might use arehours of operation, distance to home or work, and perhaps, mostimportantly, referrals from friends or family, or other referralsfound online.  Today Yelp, Google, and CCC's Carwise™Solution provide reviews and ratings for consumers. Insurers and repairers are looking to leverage this data withintheir own websites to provide customers the information they needto make an informed decision that drives a positiveexperience.  Having access to consumer  reviews,comments and ratings,  potential customers have theability to see what other  customers are saying about therepairer. This is important, because according to a studyby Nielsen from April 2012, 92 percent trust recommendations fromfriends and family above all other forms of advertising, up 18percent from 2007.[xxiv]  Online consumer reviews are thesecond most trusted source of brand information with a 70 percenttrust rating, up 15 percent since 2008.[xxv] Television ads were trusted only by 47percent, down 24 percent since 2009.[xxvi]

Another key component of customer satisfaction with the claimsprocess that has been identified by numerous sources is the overalltime to handle the claim and return the vehicle back to thecustomer.[xxvii] Consumers also want more visibilitythroughout the process – on the right device at the righttime. 

Insurers and repairers communicate with customers about thestatus of their claims. Unfortunately, this means customers may be hit with the same or even conflicting informationnumerous times, making the overall process seem disjointed,unorganized and potentially wrought with error.  Having asingle coordinated communication  can lead to bettercustomer satisfaction.

Traditionally, CSI surveys are sent weeks after the claim iscomplete making it nearly impossible to address customer concernsin an impactful manner.  Now, repairers and carriers areleveraging technology and analytics to proactively address customerissues before it is too late.  Text mining and sentimentanalytics identifies those customers providing negativesentiment.  In addition, post-delivery feedback generatesalerts to the repairer  and carrier notifying them tofollow up with an unhappy customer. 

In summary, as companies look to achieve greater engagement withtheir customers, it is important to consider all of the interactionpoints that customers may have with your business.

Customer satisfaction with a claim is not just the satisfactionwith the repair of the vehicle itself.  Certainly this isa critical component, but a consumer wants to have information upfront in the "pre-service" period that helps them make an educateddecision on where to get his or her vehicle fixed.[xxviii] 

With referrals from friends and family and online reviews valued most by consumers, providing feedback fromprior customers that is available to  new customers iscritical, particularly since most customers do not have accidents very often, and are unlikely to have had the need tocheck a shop's website, Facebook page, or Instagram account priorto the accident.  Most consumers will want the ability tochoose a shop based on location, hours of operation, and online reviews.

Regular updates during the course of a claim are critical tokeep the customer informed and engaged. As  engagementlevels grow, so  does the likelihood that customers will respond to customer satisfaction survey. And finally, as more customers become engaged and willing to takethe time to recommend the repairer and the insurer, theserecommendations can be used during the "post-service" period todrive more business in the future.

The information and opinions in this publication are forgeneral information only, are subject to change and are notintended to provide specific recommendations for any individual orentity. Although information contained herein has been obtainedfrom sources believed to be reliable, CCC does not guarantee itsaccuracy and it may be incomplete or condensed. CCC is not liablefor any typographical errors, incorrect data and/or any actionstaken in reliance on the information and opinions contained in thispublication. Note: Where CCC Information Services Inc. is cited assource, the data provided is an aggregation of industry datacollected from customers that use CCC's products or services and/orthat communicate electronic appraisals via CCC's electronicnetworks.

[i] www.bea.gov.

[ii] http://www.oracle.com/us/corporate/press/1883120.

[iii] Ibid.

[iv] Ibid.

[v] www.propertycasualty360.com,"Accenture: Consumers Willing to Buy Insurance from Banks, Google,Amazon." February 7, 2014.

[vi] Ibid.

[vii] AutoInsurance Report, June 3, 2013.

[viii] Ibid.

[ix] Ibid.

[x] Vincent J.Romans and Mary Jane Kurowski, The Romans Group.  "AProfile of the Evolving Collision Repair Marketplace." CollisionWeek, Tues, 30 Sep 2014.  www.collisionweek.com.

[xi] www.nielsen.com, April 2012.

[xii] comScore.U.S. Digital Future in Focus, 2014, page 8.

[xiii] Ibid.

[xiv]http://vivaldipartners.com/pdf/VPG_Always-On%20Consumer%20Study%202014.pdf.

[xv] www.edmunds.com.

[xvi][xvi]Christopher A.H. Vollmer, Matthew Egol, and NaseemSayani.  "Reimagine Your Enterprise."  www.strategy-business.com,April 14, 2014.

[xvii] Ibid.

[xviii]Ibid.

[xix] Ibid.

[xx] CapgeminiWorld Insurance Report 2013.  www.capgemini.com/wir13.

[xxi] Ibid.

[xxii] Ibid.

[xxiii] Researchconducted by CCC Information Services Inc. with its customers.

[xxiv] www.nielsen.com, April 2012.

[xxv] Ibid.

[xxvi] Ibid.

[xxvii] Researchconducted by CCC Information Services Inc. with its customers.

[xxviii]http://csi.mckinsey.com/knowledge_by_topic/consumer_and_shopper_insights/consumer_experience_journey.