Short-term insurers lose sight of customer experience as race to digital transformation intensifies

There is a fallacy across many businesses that digital transformation and customer experience and satisfaction are interchangeable.  They are not.  Technology will change and evolve, but the fundamentals of being relevant and responsive to customer needs and wants on every aspect of the customer journey remain steadfast. This is one of the key take-outs from the 2019 South African Customer Satisfaction Index for Short-term Insurance conducted by Consulta.

“Having all the best digital platforms, tools and apps does not translate into customer loyalty or satisfaction.  If not managed correctly, digital transformation can create customer frustration and dissonance when aspects such as complaints handling, resolution and claims processing are ‘process driven’ rather than demonstrating empathy and trust to your customers,” explains Ineke Prinsloo, Head of Customer Insights at Consulta.

While many insurers are embracing digital transformation and artificial intelligence to streamline processes, communications and enhance insurance personalisation through data analytics, customer experience (CX) comprises a much wider strategy of how companies engage with their customers across every aspect of the relationship and value chain.

“Human insight, engagement, listening and empathy are critically important to customers and these drivers come through in the latest index. The call for the insurance industry, and greater financial services sector, is that digital transformation isn’t the strategy or destination - it’s just one of many vehicles towards enhancing customer experience.  By focusing overtly on digital transformation to the exclusion of other important touch points, insurers run the risk of losing sight of the customer,” adds Ineke.

The 2019 SA-csi for short term insurance provides highly scientific insights into the overall level of satisfaction of customers of South Africa’s short-term insurers.  The latest index also differentiates between direct and intermediated (broker-driven) insurers. However, when it comes to the competitive landscape and consumer perspective, it is important to note that all short-term insurers compete for the same customers regardless of their distribution models.  The 2019 SA-csi for short term insurance polled almost 4300 consumers of short-term insurers during the second half of 2019 across the following brands:  

Intermediated Insurers:  Auto and General, Discovery, Hollard, Momentum, Old Mutual Insure, and Santam.

Direct Insurers: MiWay, OUTsurance and Virseker.

 

 

 

 

Key take-outs of the 2019 SA-csi for short-term insurers

On customer expectations: Only a handful of providers meet and exceed customer expectations, while the biggest gap is found around the reliability of the offering, in other words did the cover do what I expected when things went wrong?  Overall, intermediated insurance brands performed better than direct insurers in meeting and exceeding customer expectations – this is put down to the importance of the advice process and helping customers understand exactly what they are covered for – and not covered for – and managing customer expectations at inception of cover and not at claims time.

On perceived quality: Virseker, OUTsurance, Old Mutual Insure and Santam lead the way on delivering a high-quality experience for customers, with most others providing a high quality, but undifferentiated experience. Apart from the brands already mentioned, Hollard’s consistent and marked improvement especially in 2019 should be of significant concern to competitors as the result of their strategic interventions start bearing fruit.  

Value for money plays a massive role as the economy bites:  The perception of value for money is a very strong predictor of future usage and company growth. On this measure Discovery Insure, Auto & General and Santam score below the rest of the industry, with the quality of cover not living up to customer expectations.  The effort levels that customers experience in their engagements with their insurers, claims processing and complaints handling and resolution have a big impact on perceptions of value, with customers being at risk of moving their cover when the hassle-factor becomes too high. The best technology platforms, apps and loyalty points do not substitute when customers question whether the trade-off between price and value is worth it.  

South Africans still look to advice: Sentiment and key driver analysis shows that customers are more likely to be satisfied with their experience if they make use of an intermediated provider, as the broker makes up for what direct suppliers lack in their ability to give advice. Customers still favour having someone to help and guide them through the insurance process, remove the hassle factor and provide professional advice, both at inception of policy and especially at claims time.  In this space, Old Mutual Insure has done considerable work in creating a consistent experience for customers whether they deal with their broker or insurer.

Customer Satisfaction – Overall Index

•Direct Insurers:  Virseker takes leader position in the overall customer satisfaction index for the third consecutive year with a score of 83.2, above the industry par of 80.0 and also improving on its 2018 score of 80.7. OUTsurance comes in on par (81.5) while MiWay (77.6) scores below par on overall customer satisfaction.

• Intermediated insurers:  Old Mutual Insure (81.2), Santam (79.7) and Hollard (79.1) are all on par.

• Auto & General (78.4), Momentum (77.8) and Discovery (76.2) all perform below par on overall customer satisfaction.  
• While Discovery managed to make up some lost ground following years of decline, it is struggling on its trust measures with customers questioning whether they can rely on the insurer to do what it promises in their time of need. Customers are expressing their dissatisfaction on measures of trust and peace of mind, and this is manifest across the business since it is unable to compartmentalize its business units – what happens in one affects all the other lines of business.
• Santam, while stable at a high level of customer satisfaction, remains stagnant, and would do well to note the competitive threats, such as Old Mutual Insure, OUTsurance and more recently Hollard, which shows strong and consistent improvements on overall satisfaction, perceived value and perceived quality measures, despite the tough market and operating conditions that face all players in the industry.

Customer Expectations and perceived quality

• Customer expectations across the board are high at an industry par of 83.8.  On this measure Santam, Virseker, Old Mutual Insure and OUTsurance have customers with the highest expectation scores that are above industry par.  
• However, when it comes to the perceived quality exceeding expectations, direct insurers struggle to hit the mark, with most not meeting customer expectations.
• On intermediated insurers, Old Mutual Insure, Momentum, Hollard and Auto & General all exceed expectations on perceived quality.  In terms of exceeding expectations, intermediated insurers perform better than direct insurers.
• Discovery Insure (-1.0) showed the biggest gaps between expectations and perceived quality, particularly around the reliability of the offering. Customers experienced more problems than they expected, which in turn drives down the perceptions of reliability.  

Perceived Value

• Perceived value is a measure of the quality, relative to the price paid.  The perception of value for money is a very strong predictor of future usage and company growth.
• Interestingly, only one direct insurer performs above industry par (79.8) on this measure – Virseker is well ahead at 83.2 having improved from 80.3 in 2018.  OUTsurance improved by 4 index points to 81.1 in the 2019 index but remains on par.
• On intermediated insurers, Old Mutual Insure increased its score to 81.5 from 79.9 in 2018 and also shows an upward trajectory on perceived value score for the last four years.  Hollard has made a big comeback in 2019, improving by almost 6 index points to 81.3 from 74.5 in 2018, and has consistently improved over a three-year period.  
• With the exception of Momentum, all other intermediated insurers have improved on their perceived value scores compared with 2018.

Complaints Incidence and Resolution

• In terms of complaints incidence and handling the industry average of complaints incidence is 11.1/100 and complaint handling is 51.4/100, which puts the industry on par with international standards in terms of how well issues are addressed.
• OUTsurance has the lowest complaint incidence (9.5) of all direct insurers, and an equally impressive complaint resolution score of 65.2.
• It is notable that with the exception of OUTsurance, all direct insurers have high complaint incidence scores, well above the industry par.
• Of the intermediated insurers, all insurers are on par with complaint incidence.
• Momentum has a low complaint incidence (10.3) and a high complaint resolution score of 59.7, followed by Hollard with a resolution score of 56.9.
• Discovery, Hollard, and Santam all show complaint incidence scores slightly higher than the industry par.
• With the exception of Hollard and Momentum who track well above industry par on complaint resolution, all intermediated insurers have shown complaint resolution scores below par.  Notably Discovery and Santam showed marked decline in customer resolution compared with 2018 scores, all at an alarming 15+ point deficit below par.  

Customer Loyalty

• Virseker and OUTsurance have the most loyal customers of all direct insurers and are ahead of the industry par of 71.6%.  Both brands have made considerable gains in customer loyalty scores compared with 2018.  OUTsurance has managed to maintain good scores on loyalty and overall satisfaction despite going through a period of rapid growth – typically it is very difficult to maintain growth without losing traction in these areas, which is to their credit.  Budget Insurance has the least loyal customers.
• Of the intermediated insurers, Old Mutual Insure leads on customer loyalty followed by Hollard and Santam, while Discovery has the least loyal customers.
• All intermediated insurers have improved their loyalty scores compared with 2018, with Hollard making more than a 10-point improvement.

Key Driver Analysis

·       In terms of the key drivers of customer experience and sentiment analysis. Customers rate Peace of mind, Keeps promises, Listens and Responds and Staff knowledge as the four most important considerations when it comes to rating their insurers.  It is interesting to note that the top two drivers – peace of mind andkeeps promises – are trust-driven and make up 40% of the total scores.  

·       On the top four drivers for direct insurers, Virseker and OUTsurance lead on all four measures.

·       On intermediated insurers, Old Mutual Insure stands out as the leader on all four top measures, followed by Hollard and Santam.  Hollard’s strong recovery has seen it overtake Santam on all four key drivers.  Discovery score lowest on the top four drivers.

Net Promoter Score

• Net Promoter Score measures the likelihood of a person recommending a brand. The industry par score is 39.6%
• Of the direct insurers, Virseker and OUTsurance have the highest Net Promoter Scores (NPS) at 47.1% and 42.4% respectively.  
• On intermediated insurers, Old Mutual Insure (50.2%) leads followed by Santam at 43.5%.  
• Discovery (23.8%) comes in with the lowest NPS scores, although Discovery has seen improvement from a low of 8.9% on 2018.

Treating Customers Fairly (TCF)

• The degree to which customers feel they are being treated fairly by their insurer is highest with Virseker (87.0) and Old Mutual Insure (85.7).  
• The make-up of the overall TCF score looks at seven key aspects including:

1. Fair treatment of customers
2. Products and services that address customer needs
3. Transparent and easy to understand information
4. Advice that is suitable for the customer’s circumstances
5. Products and services deliver as expected
6. It is easy for customers to claim, change provides, complain or consider other providers
7. Customers are treated with respect and there is an open relationship

·       Virseker and Old Mutual Insure are the only two insurers that lead above par on all these measures.  

“Trust and peace of mind remain key drivers of customer satisfaction in the insurance sector, yet we are still seeing a number of players dropping the ball on these fundamental drivers.  There is still a disjoin between customer expectations and actual deliverables.  What the 2019 SA-csi results however do clearly indicate is that three key players are investing strongly in customer experience across the insurance value chain - Old Mutual Insure, OUTsurance and Hollard which made a powerful comeback after a tough few years,” adds Ineke.  

What needs to be addressed?

“It is very clear that customers want simplicity and efficacy – not only in product design and cover deliverables, but in engagement and communications with their insurers.  Overtly complex products and loyalty programmes lose favour when they demand unnecessary effort to deal with. Customers also want a provider they feel listens and responds to their individual needs and offers a customised solution, not only in terms of the product, but in the manner that complaints are handled and the channels which they are able to engage with.  Finally, ‘digital transformation’ cannot replace your CX strategy.  The transition to digital cannot come at the expense of meaningful, quality human engagements.  All the tech and innovation in the world won’t make up for a lousy customer experience anywhere in the insurance value chain.  The insurers who will make the most headway in the next months are those whose systems, processes, culture and brand messaging all talk holistically to the customer’s lived experience,” adds Ineke.

While this index was done prior to the current Covid-19 pandemic and lockdown, it will be interesting to see what the impact will be on customer satisfaction in the 2020 SA-csi.

“In business ‘usual’ circumstances, it is already challenging to manage all the drivers of customer loyalty and satisfaction. The Covid-19 pandemic and lockdown are unexpected black swan events, profoundly impacting how businesses conduct their operations and how consumers experience them. Customer needs and expectations of brands are already evolving, almost unrecognisably as the pandemic plays out. We expect that the customer experience landscape in a post-Covid-19 economy will be radically altered. Many of yesterday’s solutions will no longer apply. Brands will be under tremendous pressure to re-imagine their CX strategies to cater for an entirely evolved customer whose beliefs, emotions, needs and wants have been fundamentally reshaped in surprising and unexpected ways,” adds Ineke.

“How insurers respond to their customers in terms of financial relief measures and support during the pandemic will play out strongly in terms of customer satisfaction in future. Insurers need to demonstrate through their actions, not their words, that they take their customer’s financial constraints, changed risk profile, unique challenges and expectations seriously. Insurers should also not lose sight of the fact that many customers are both personal and business policy holders – their experience in either their business or personal capacities will have a huge impact on customer satisfaction and loyalty in future, not to mention influence thousands of people who are impacted by their word of mouth, particularly across social media platforms. In handling pandemic-related claims, while insurers cannot be reasonably expected to pay claims for risks that have not been priced or covered in policies, they also need to avoid any temptation to rely on fine print and technicalities to reject claims. How this all unfolds in the coming months will have a direct and material impact on future customer satisfaction levels across all insurers, and consumer perceptions of the sector at large,” concludes Ineke.    

As a strategic tool for gauging the competitiveness of individual firms and predicting future profitability, an organisation’s customer satisfaction performance, as measured by the SA-csi methodology, provides a predictive indication of how well the firm will perform in terms of future revenue and earnings growth.  Supported by both the scientific and practitioner community, the SA-csi is the first independent, comprehensive national customer satisfaction index with international comparability in South Africa and has collected data from more than 400 000 consumers since its inception in 2012. The SA-csi forms part of a global network of research groups, quality associations and universities that have adopted the methodology of the American Customer Satisfaction Index (ACSI) via its Global CSISM program.