M&A in the insurance sector shows no signs of slowing, but what will it mean for the customer? Dean Carroll, general manager of Xpedition, looks at the issues.
Latest figures from Deloitte show that insurance mergers and acquisition (M&A) deal values are up over 150% year on year. Pushing into new markets and growing market share by acquiring an existing book are among traditional reasons for pursuing M&A.
But as Grant Thornton acknowledges, the advent of Insurtech is a fundamental driver of M&A activity too, as incumbent brands aim to preserve their position in the market by acquiring Insurtech firms and get the IP and innovative tech they don’t have or can’t build quickly enough to compete. It rebalances some of the so-called ‘technology debt’ that legacy systems create.
Another advantage is that M&A activity also enables organisations to access newer, richer customer datasets. This data can drive even greater customer experiences, so long as this merging of data is expertly managed.
Digitalisation means better products and service
It’s understood that 80% of people will pay more for a personalised customer experience. Therefore, buying an Insurtech is one way that traditional providers can make a significant leap towards digitalisation and compete on the key battleground of customer experience.
A seamless, personalised customer journey is becoming ever more critical to winning customer loyalty in competitive markets. Insurance firms have long struggled to demonstrate value to customers because the product is only useful if there is a claim to be made. Digitalisation helps overcome this, offering more opportunities to deliver a more premium, personalised service, adding more value to customers in turn, and even the chance to lower premiums where the financial benefits of efficiency gains can be passed on.
For instance, the age-old practice of selling ‘generalised’ annual products according to aggregated data trends can shift to one of designing policies that reflect the needs of specific customer segments because there’s more data and analytical tools to inform product development.
The difficult road to digital maturity for legacy carriers
Reaching this new level of digital maturity can be hard, however. The task of merging different technology stacks, data sets and service models after a merger or acquisition is immense and can put continuity at risk.
Despite completing an analysis ahead of a merger, even the most established insurers grapple with how to get started. The realities of project scale, complexity and integration costs can quickly accumulate, contributing to further delay.
Of course, there is no right time and there will be some risk. But just like an Elastoplast, the longer you leave it the more painful it will be. These projects can take longer than customers originally expect, so in my opinion, early decisiveness on the priorities is imperative. Working with an experienced partner to align your people, process and technology to your key business objectives and desired customer experience is an invaluable investment.
However, how do you tackle it? The two priorities should be to a) set out what the customer experience will be once the integration has been completed and b) understand how the employee experience can also positively change through digitalisation to contribute to the digital customer experience.
Start by asking specific customer related questions; what do customers want? How can we personalise the experience? Can automation create extra value? What are the success metrics – improved net promoter scores, customer lifetime value?
Data drives successful customer experience
A lot of firms are tempted to start drawing data from the various data repositories as soon as they can, all in the name of customer experience. But this is a fundamentally flawed approach. The first problem relates to data quality. It’s fine to bring two or more data sets together, if the data is valuable and trustworthy. Yet, very often, we find that multiple data sets are out of date, incomplete or duplicated. Any attempt to merge these datasets before initiating a comprehensive deduplication and cleansing exercise will only amplify already existing data issues, severely impacting reporting, customer experience and sales.
The second problem relates to data culture, or lack thereof. As organisations grow, data governance can slip, causing data silos to form, reducing information sharing throughout the business. On an individual level, there can also be a reluctance to share data as employees like to remain in control of a key asset. Take the example of marketing and sales – one is generating leads the other converting them, but both should be viewing the same data to understand a customer’s intent signals and preferred communication channels to ensure as seamless customer journey as possible.
The third issue relates to how the data will be used. Projects don’t always consider the employee experience as part of an integration project. But I’ve seen first-hand what happens when employees are consulted on how they want and need to access information. Improving data literacy instils confidence that the data being made available is trustworthy. Data literacy promotes data sharing, encourages employees to ask the right questions of the data, and to communicate the responses in a meaningful way across the organisation to help develop frictionless and personalised customer journeys.
Finally, when merging technology and data, the appointment of a Chief Data Officer (CDO) can help further cement new practices. A CDO helps oversee the merging of data, ensure standards are upheld, and align the various functions that will use the insight to generate sales and value.
CDO or not, transformation success comes from having a clear vision of the customer experience you are looking to provide, and understanding the role that high quality data, innovative technology and committed teams play in helping make this vision become a reality.
As seen in Insurance Intel