McKinsey’s Use minimal essential Transparency into processes affects customer satisfaction scores at least as much as speed and quality. 1 In the survey, the link held true among the participants with Medicare Advantage (MA) or individual insurance … Carol S. North and Betty Pfefferbaum, “Mental health and the Covid-19 pandemic,”, John Branch, “Whoosh! Indeed, in 1985, one of the leading auto insurers nationally was a state underwriting plan with a 140 percent loss ratio. Inspiration: Create a comprehensive vision for a customer-centric business and operating model with clear targets. Likewise, recommendation scores may not reflect true customer satisfaction. Please click "Accept" to help us improve its usefulness with additional cookies. 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. Across the US insurance industry, the impact will be uneven. With the prospect of pandemics recurring in the future, telematics directly addresses the consumer need to pay lower premiums when vehicles have lower utilization during periods of lockdown. Even when marketing resumes, aligning the tone of messaging to address consumer sentiment is key. Another touted its “superior service” in a national ad campaign—and saw an immediate decline in its customer satisfaction scores, perhaps because reality did not live up to higher expectations. At first glance, the impact on US personal auto insurance appears to be more muted. The first step is often the most difficult—bringing customers into the room with the team to reveal what their real emotional journey looks like and rapidly testing ideas for improvement before taking them too far. Each element can yield a better experience, but the full impact is seen only when the four are pulled together. The airline industry is a good point of comparison with insurance. It also offered customers a digital connection to the repair network that included rules-based prioritization to guide customers to the shops closest to their work or office location. Due to the Internet, aggregators, and social media, shoppers know more than ever 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. This level of detail helps carriers avoid investing in areas that would not differentiate them from the competition. more to drive profitable growth than raising advertising spending or lowering prices. sales, and profits. As new-car sales decrease, auto insurance will slow down. Insurers may face social pressure, in addition to regulatory pressure, to return or reduce premiums during this period. Already, leading US companies have announced programs to return premiums to customers, who no doubt appreciate a tighter economic link to their behaviors. The frequency and severity assumptions of these scenarios are summarized in Exhibit 8. The future may bring more remote-work call centers, lower commercial real estate costs, and more dispersed footprints across geographies, among other changes. 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. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Lower claims frequency has resulted from continued improvements in safety measures and vehicle technology, but this drop has been partially offset in states that have legalized cannabis. 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. Today, the consequences of subpar service are amplified by the speed and reach cookies, McKinsey_Website_Accessibility@mckinsey.com, How to win in insurance: Climbing the power curve. Step 3—Call out the “wow moments” and pain points, such as unnecessary wait times or delays in communication. Executives may consider pausing their spending, whether on internet leads, direct mail, or TV ads. Across the above scenarios, the more extreme are, of course, less likely—but, for risk analysis, they are critical to anticipate. Article Scale matters … to an extent: Playing the scale game in insurance ... McKinsey Insights … Select topics and stay current with our latest insights, How the coronavirus could change US personal auto insurance. Unleash their potential. The utilization of personal vehicles for commercial use may also increase, with more deliveries, whether by small businesses or via digital delivery apps. Above all, now is the time to show empathy for consumers who are affected by this tragedy, placing human welfare before profitability. Advances like these require coordinating multichannel interactions with an overarching view of business value. 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. As physical distancing is widely encouraged, particularly in states with shelter-in-place directives, individuals have been driving much less. For example, making improvements without insights can mean allocating resources to features that customers deem unimportant. The economic negative-growth scenario for the industry is defined by an extended economic decline and more conservative driving behaviors. Analogously, digital tools now support much faster prototyping cycles, which accelerate the time to market and improve the carrier’s ability to keep tailoring the customer experience. For example, using recurring humorous themes may not be the right approach in markets ravaged by the pandemic. There is no time to wait. A prolonged recession and high unemployment could result in a surge of risks outside the standard market. Redesigning products. … For instance, mobility trends may pause if more people choose to own a car and drive everywhere because they think ride sharing and public transportation are too risky during a pandemic. We'll email you when new articles are published on this topic. 20 years. Some P&C lines will experience spikes in losses from business interruption, directors and officers, event cancellation, medical malpractice, and trade credit, among others. In other words, customer satisfaction initiatives should be grounded in facts, not gut feelings. are way above the industry average. crisis. our use of cookies, and Conversely, the prospects of driverless fleets could become more attractive, especially as an alternative to public transportation, as long as a robust hygiene protocol ensures adequate sanitation. Flip the odds. Both are Higher severity reflects a continued increase in medical inflation for bodily injury, higher repair costs for cars with expensive sensor technology, and several years of “social inflation,” when verdict awards have trended upward across the US legal system. Subscribed to {PRACTICE_NAME} email alerts. Customer usage of mobile … McKinsey Report, The State of AI in 2020. The impact on insurance revenues will not be one-to-one, since most new-car purchases represent a replacement of a currently insured vehicle. consumer behavior raises fundamental questions for senior leaders of. Explore BCG’s latest thought leadership on insurance … 2. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. expectation that customers will pay more for great on-time stats and more reliable baggage-handling. A number of commercial lines carriers are using digital tools to improve journeys. It is the right thing to do, and it will lead to stronger customer loyalty and retention. However, the pandemic could precipitate structural changes in the market. Public sentiment can be widely altered by traumatic events: the Vietnam War and the attacks of September 11, 2001, were examples of such events. This type of research helps carriers understand which journeys and drivers are truly important for customers but still unsatisfactory, and what service levels customers expect, making it possible to quantify acceptable waiting times in the call center, for example. In the past few weeks of this pandemic, millions of Americans are becoming more comfortable with virtual meetings, video chatting, and online transactions for previously in-person activities such as grocery shopping. The COVID-19 pandemic may have far-reaching consequences in reshaping the industry. Few anticipated the pace at which the US economy would shut down and physical distancing would become so pervasive. their brands. Assessing possible behavioral changes against the length and magnitude of the economic downturn suggests four potential scenarios: pause and rebound, retrenchment, YOLO (“you only live once”), and black swan (Exhibit 6). about coverage, prices, and services. Subscribed to {PRACTICE_NAME} email alerts. For example, a large carrier aiming to redesign its auto claims processes set out to reduce call center waiting time. For example, many carriers overlook the fact that speed of resolution is as important as employees’ courtesy, empathy, knowledge, and professionalism. If you would like information about this content we will be happy to work with you. highly regulated and highly competitive, and carriers in both industries find it increasingly Only a holistic process can deliver tangible and sustained improvements. In other words, if customer complaints about long call-center wait times do not match reality, then the problem might have more to do with communication and not necessarily be solved by adding call center staff. Alex D’Amico, Mei Dong, Kurt Strovink, and Zane Williams, “How to win in insurance: Climbing the power curve,” June 2019. 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. In McKinsey’s discussions with executives, many have remarked that the remote mode of working has proved to be more efficient, in many ways, than the status quo. The spring breakers recently crowding beaches and the “coronavirus parties” that have been reported in some states illustrate the reality of this risk-taking cohort. The net impact would be a continuation of the decades-long favorable trend in claims frequency after the downward spike in the first half of 2020. Excessive speeding has been reported across the United States on highways, where several states have seen a major uptick in drivers clocked at faster than 100 miles per hour, and in cities such as Chicago and New York, where individuals have been driving up to 75 percent faster since the pandemic started. The combined ratio would benefit from decreased claims frequency because of less driving, and the pandemic may lead to more conservative, cautious driving behaviors. We use cookies essential for this site to function well. In downturns, the ROI for retaining customers is often multiples of customer-acquisition spending, so customer retention becomes far more important. It is increasingly a way for companies in competitive markets to distinguish Step 2—Map the journey against current internal operations. Many do so on a differentiated basis—by division, for example. Please try again later. China insurance: How insurers can improve customer experience where it matters. Increasing customer satisfaction goes hand-in-hand with operationally relevant customer intelligence. This scenario reflects the worst case for economic contraction and behavioral changes, combining the YOLO and retrenchment scenarios. Those may be good starting points, but they rarely provide clear indications as to where and how to make improvements. Many companies do well by starting with one or two small, rapid pilots to demonstrate impact and generate knowledge. In McKinsey’s research into repairable auto claims in the US, five qualities were key to driving customer satisfaction: employee courtesy. Other important factors, such as the steady increase in vehicles with advanced safety features and more manageable levels of fraud, would also revert to preCOVID-19 levels. our use of cookies, and Journeys can be optimized according to a five step structure. Enterprises using AI to improve inventory and parts optimization, pricing and promotion, customer-service analytics and sales & demand forecasting … Digital upends old models. Another major carrier is raising prices—moderately—on the The 1973–75 recession is the exception, when both growth and profitability were strongly affected. There is a chance that personal auto insurance will experience the same volatility seen in the 1970s and 1980s, when nonstandard risk segments, assigned risk pools, and uninsured motorist surcharges threatened the industry’s viability. Transforming any large organization is difficult, of course, but the value at stake is significant. McKinsey has found that five best practices 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 customer-centric talent, training to give employees new skills, and “navigators” and “champions” to carry the change to individual departments and make it stick. ... to track, manage, and inform those interactions. Many insurers look at each customer touchpoint, from visiting the website to calling an agent, as a discrete event. Read our latest research, articles, and reports on Insurance. Insurers must also appreciate the longer-term changes that this pandemic may precipitate in the industry. Insights into the 2020 individual market—increased consumer choice and decreased premiums. As in the pause and rebound scenario, if insurance companies return premiums or collect lower premiums, the projected combined ratio would be slightly higher. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. The pay-as-you-live model is especially popular among health insurance providers, which is aimed at improving controllable behaviors to lower insurance … Markets could mirror the state environments that insurers abandoned in the 1980s. Some executives may still see insurance as a low-engagement, Quick, cosmetic fixes are likely to fall short, while costly changes do not always deliver strong returns. Insights: Develop customer insights and link customer satisfaction to operational key performance indicators and business impact (such as churn and cross-selling). 2 (For an in-depth discussion of insurance ecosystems and customers’ service preferences, see Customer Behavior and Loyalty in Insurance: Global Edition 2017 and "Ecosystems: How Insurers Can Reinvent Customer Relationships," September 2017.) For the European version of this report, see The growth engine: Superior customer experience in insurance (PDF–316KB). Our flagship business publication has been defining and informing the senior-management agenda since 1964. Flip the odds. Recent polling by the American Psychiatric Association found that 36 percent of Americans say the coronavirus is having a serious impact on their mental health, and 59 percent say it is seriously affecting their day-to-day lives. New ways of working. The authors wish to thank Simone Gammeri, Sascha Lehmann, and Philipp Schaumburg for their contributions to this article. Can insurers follow this example and avoid competing on price until profits are shaved to zero? Digital upends old models. Could the current pandemic lead to similar levels of strain on the industry? In the digital era, consumer power is rising. Difficulties managing the spread of the virus and complications from the economic shutdown would produce a lengthy downturn. There remains much uncertainty about the full impact of COVID-19. By harnessing the resulting insights, insurers can offer usage-based policies and determine claims liability easily and accurately. Consumers will look for products that “go to sleep” for periods of nonuse, which would maintain compliance with state insurance regulations while allowing insurance protection that reflects reduced usage more appropriately. service mishaps. Historically low oil prices will make driving much more affordable. Our analysis used a projected combined ratio of 99 in 2020–21 as the starting point. “The Effortless Experience: Conquering the New Battleground for Customer Loyalty,” Rick Delisi, Matthew Dixon, Nick Toman; Penguin. Insurers may face social pressure, in addition to regulatory pressure, to return or reduce premiums during this period. ... McKinsey … Beyond this, insurance companies may consider other ways to show support and empathy—for example, checking in with customers to see how they are weathering the current crisis. highly concentrated, leading carriers are delivering customer experiences that inspire Some cohorts in the population may exhibit a YOLO outlook on life, similar to the que será, será (whatever will be, will be) exuberance of the 1970s after US soldiers returned from the Vietnam War. The 1973–75 recession is the exception, when both growth and profitability were strongly affected. Our research this year provides new insights … One carrier spent a significant sum upgrading its telephone system to reduce the average wait time from 40 to 20 seconds, but barely improved its customer feedback. 30 percent of auto insurance … A customer-centric transformation begins with an overarching vision exemplified by senior leaders and modeled throughout the organization. Since 1980, the market’s premium growth and profitability trajectory were unaltered during five recessions (Exhibit 1). One poorly handled claim, one mistake captured on a smart phone, can escalate quickly into a brand-damaging In auto insurance, an average of 11% of customers switched carriers in the past year. Digital platforms make switching easier for consumers and make customer … Recruiting profiles and human resources policies are aligned with the new way of working. In most countries, more than half of all insurance customers are digitally active, meaning they go online to research products and/or conduct important interactions with providers. Sweeping technological advances have created major growth opportunities in the insurance industry, both for industry leaders and for innovative third-party providers. Within two to three years of some recessions, profitability and growth increased. In addition, regulatory pressure could drive rates down further or force expanded coverage, exacerbating the worsening combined ratio performance. Ari Chester is a partner in McKinsey’s Pittsburgh office, Steven Kauderer is a senior partner in the New York office, and Chris McShea is a partner in the Chicago office, where Frank Palmer is a senior expert. That car that just soared by might be heading for the coach,” the, Psychological safety and the critical role of leadership development, The COVID-19 recovery will be digital: A plan for the first 90 days, Alex D’Amico, Mei Dong, Kurt Strovink, and Zane Williams, “. Carriers should plan for successive rounds of innovation, especially in digital, where expectations rise rapidly. Insurance customers need to understand exactly where in the process their application or claim is at any given time. John Branch, “Whoosh! The baseline scenario is that the slowdown will end rapidly, the rebound will be as swift as the contraction, and consumers will exhibit limited behavioral changes. We strive to provide individuals with disabilities equal access to our website. Pent-up demand, supply-chain innovation, and infrastructure commitments would pull the economy to near preCOVID-19 levels within weeks. disintermediated category, but analytics prove that in an industry where profits are From 2009 to 2018, personal auto insurance grew roughly in line with the economy, with some additional growth from improved rates. If mobility trends slow or the country faces a sustained economic downturn, the historic exposure standard of a car month or car half year will be upended. The United States is home to approximately 280 million cars, and annual car sales total about 17 million. We already see ride-share drivers becoming more involved with grocery delivery and other services. Personal lines insurance is becoming similarly McKinsey research reveals the importance ... high-margin telecommunications companies tend to outperform peers when it comes to data mining and otherwise gaining insights from collected customer information. You earn loyalty day by day.”. Research shows that two-thirds of European insurance distribution is focused on physical intermediaries. Best Car Insurance Companies ... the explosion in data and digital technologies has opened up an unprecedented array of insights into customer needs and behaviors.
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