Despite insurer profitability increasing largely due to claims falling, only 32% of customers globally report having positive experiences in 2013, according to Capgemini and Efma’s World Insurance Report 2014 (WIR).

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Nearly 70% of insurance customers are at risk of changing carriers, marking the second year that flight risks remain high, and highlighting the need for insurers to focus on improving customer experiences to minimize defections and secure profits.

The report finds that digital channels (with mobile leading) are the most likely to drive profitable customer behaviors such as referrals or purchasing additional products. The report also suggests digital improvements were needed in the areas of claims payouts and policy acquisition.

In fact, the demand for digital channels has grown at a rapid pace with insurers reporting that within five years they expect nearly one-third of their business to occur over digital channels,  projecting approximately 20% to come from online channels and nearly 11% to come from mobile channels.

The report’s Customer Experience Index (CEI) found a clear link between improved customer experiences and customer behaviors that lead to greater profitability such as additional purchases and customer referrals.

The CEI finds that customers who have a positive experience are nearly twice as likely to make a referral and 50% more likely to make additional purchases. This is especially true in emerging markets where customer experiences with insurance companies are relatively new. In contrast, negative experiences can be detrimental. The percentage of customers who have expressed intent to leave their insurer is double for those with negative or neutral experiences.

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The report finds that agents remain the dominant channel for driving positive customer experience (39% for life, 47% for non-life), followed by internet (32% life, 41% non-life) and mobile (26% life, 31% non-life).

The Netherlands had the largest increase in positive customer experience at 18.2%, primarily due to digital and broker channels. Younger customers (ages 18 to 34) are showing preferences for digital channels over traditional.  In the emerging markets of Developing Asia-Pacific and Latin America, the importance of digital channels is very high among younger customers.

While mobile is currently the least likely channel to give a positive customer experience, when it does, it has a heightened impact on profitable customer behaviors. Positive customer experiences through the mobile channel are most likely to drive customers to refer friends (48% for life and 47% for non-life) and buy additional products (40% for both life and non-life).

Firms with a strong digital presence and a customer focus are, on average, 26% more profitable than other firms. To meet customer demand for digital and improve customer experience, insurers need to fully embrace a top-to-bottom approach to digital transformation, while also driving operational excellence at the back-end to ensure profitability. Key areas for insurer focus this year include multi-channel integration, maximizing social media and taking advantage of predictive analytics techniques.

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