Here at Digital Insurance, we like to talk about the ways insurance companies are innovating and making life better for consumers. Whether it’s telematics help underwriters adjust rates more accurately, or AI-enhanced customer service products that help guide clients through the digital claims process. Year over year, companies in the insurance industry have experimented with ways to make the insurance experience as painless and hassle-free as possible.

Notice how I’ve highlighted the words painless and hassle-free. Two words that imply an improvement upon something that was already unpleasant, to begin with. You see, unlike service industries like restaurants and banking– which provide services that offer inherently positive experiences for consumers– the insurance industry is in the business of disaster. Unfortunately, for most people, their first interaction with an insurance company happens to also be one of the most emotionally consequential moments of their life. The First Notice of Loss, or the initial report made to an insurance provider following loss, theft, or damage of an insured asset– can make or break an insurance company’s reputation. 

To illustrate the types of situations insurance companies have to go through, let’s put ourselves in the shoes of a surreptitiously risky policyholder. We’ll call him Johnny. Johnny is a 35-year-old single father making just enough to feed his kids and pay the mortgage. Knowing his financial limitations, Johnny purchases a standard homeowners insurance policy– one that covers the run-of-the-mill calamities– fire and wind coverage, burglary, and not much else. A couple of years pass and Johnny’s doing pretty well for himself– he pays his premiums on time and takes care of his home to the best of his ability. Both Johnny and his insurance company seem like a match made in heaven. 

Little did Johnny know, his mid-century home was rotting at the foundation– an undiagnosed termite infestation was causing immense structural damage to his house. Five months later– kaput– his wall comes tumbling down. Unbeknownst to Johnny, the policy he picked out doesn’t cover damage related to forms of structural decay– the onus was on him to undertake the due diligence. 

We’ve all been there, you pick a policy that fits your budget only to find out, months if not years later that the plan you purchased left you severely underinsured. It’s a situation that consumers detest and insurance companies want to avoid. In Johnny’s case, the damage done to his home and his relationship with his insurance provider was probably irreparable. That being said, although situations like Johnny’s look like disasters on the surface, they don’t have to be. 

Darci Darnell, head of global and Americas customer practice at Bain & Co, believes the FNOL doesn’t have to be the coup de grace for insurance companies. She believes how insurers handle "moments of truth" have as much potential to delight as annoy customers.

"We found that there’s an inverse relationship between how catastrophic an event is to the individual customer and their likelihood of wanting to talk to a human at that moment. In situations like a house flooding or a total loss auto accident, very few consumers are content with a digital experience," says Darnell. "They want to talk to someone because at that moment, they don’t just need something done, they’re looking for empathy, support, guidance, and advice."

According to Darci and the other authors of Bain & Company’s Customer Behavior and Loyalty in Insurance report, the secret lies in delighting customers at the episode level. Savvy companies understand that developing a relationship throughout the lifetime of a policy is an opportunity to instill loyalty from customers for years to come.

"Customers don’t report incidents or file claims very often. That means customers frequently judge their careers on seemingly less consequential episodes such as a request to change a billing address or a question about coverage. Loyalty leaders know that one bad experience, even during a routine interaction, can have serious ramifications. They work hard to constantly improve the customer experience for all episodes," the report states.

It’s this investment in prolonged customer engagement that sets successful insurers apart from their competitors. After surveying nearly 174,000 retail insurers in 74 countries, analysts at Bain found that the most successful companies offer an "ecosystem" of services that not only increase the frequency of positive touchpoints between customers and their insurers but also offer value beyond what they traditionally expect from an insurance company.

"With ecosystem services, insurers can engage with their customers more often and, in the process, build sustained relationships with them. Instead of simply providing accident and theft coverage for cars, for example, an insurer can be part of an ecosystem that offers roadside assistance, devices and apps that monitor and reward safe driving habits, and maintenance notifications and discounts for repairs," according to the report.

If you follow our site, you may be familiar with some of the telematics-based ecosystem services offered by domestic insurers– Progressive’s Snapshot program and Allstate’s DriveWise are just some of the few in a litany of data-driven ecosystem services that come to mind. It might come as a surprise to learn that the future of insurance ecosystem services may not even come from traditional insurance companies at all. 

Major retailers with access to a sizable and loyal client base are uniquely positioned to disrupt the current insurance market. Let’s take Bain’s case study, British supermarket chain Tesco for example. For years, they’ve offered their Tesco Bank insurance program to customers willing to bundle Tesco’s store membership with the company’s banking service and suite of insurance products– which range from travel insurance to home and auto. Customers who sign up for their Tesco club card and insurance program are offered discounts on insurance plans and purchases made in-store– leaving customers satisfied on and off the road. 

In a rapidly changing marketplace, where consumer sentiment relies upon a company’s ability to adapt its value proposition to the tastes of a fickle and customer-centric marketplace, being able to adapt is integral. According to the authors of Bain’s Customer Behavior and Loyalty in Insurance report, successful insurers that rely on the tried and true methods of the past won’t see the same success in the future going forward.

"Some [insurers] are trying to disrupt themselves by creating a company-within-a-company that aims to be digitally oriented, low-cost, and customer-centric. The jury is still out on most of these efforts, but insurers are learning that they can’t just put a low-cost, digital veneer on old-school products and processes. They need to radically reimagine their approach."