Monday, December 9, 2013

Faster Horses

Originally Posted on 

I read a Capgemini whitepaper a while back which declared that in property casualty insurance, the claims experience is often the “defining moment” in a customer relationship. Although that sounded a bit dramatic to me,  I found a couple of reinforcing definitions in the dictionary:
defining moment (noun)
1)     the point at which the essential nature or character of a person, group, etc., is revealed or identified
2)     an occurrence that typifies or determines all related events that follow
Considering these definitions in the insurance context, it seems reasonable to argue that a customer learns about the nature and character of their insurance company when they file a claim, and that their claim experience influences all related events that follow, including customer satisfaction and retention.  Of course many customers never file a claim, so their defining moment comes second-hand, when they listen to a family member or friend or even their agent or broker describe a claim experience. The problem with that, of course, is that people are twice as likely to share negative (versus positive) customer experiences with others, and resources such as Facebook, Twitter and company or industry-specific on-line discussion boards have made it easier to share those comments with a much larger audience.
But even if insurance companies do have customer relationship “reputations” that are largely driven by customer claims experiences, what’s the impact? According to that Capgemini paper, reputation matters: one out of five customers switches insurers after a negative claim experience, and it costs an insurer five to seven times more to attract new customers than it does to keep existing customers.
I recently reviewed a 2012 Global Insurance Survey report from Ernst and Young  (Voice of the CustomerTime for Insurers to Rethink Their Relationships–accessible here) and I started thinking about that old story about Henry Ford, founder of Ford Motor Company.  As the story goes, when Ford was asked about the customer research he had done before he began production of the Model T automobile, he allegedly harrumphed:  ”If I had asked people what they wanted, they would have said faster horses.”   While it’s unclear whether Ford actually said those words, that quote is often used to support the argument that customers really don’t know what they want.
The message about customers in the Ernst and Young paper, however, was quite the contrary.  According to their research, property casualty insurance consumers in 2012 reported very definite expectations about price, product, brand, communication preferences, ease of doing business, accessibility and personal contact.  While price was still cited as the primary determining factor when buying an insurance policy, brand and customer service were right up there with price.
Historically, customers who filed claims (including me, and perhaps you…) tended to approach the claims process with low expectations, bracing themselves for a claim “defining moment” experience that would likely involve trepidation, conflict and disappointment. They didn’t expect or demand an excellent claims experience, and they were so forgiving:  if the experience didn’t turn out to be as bad as they thought it might be, they reported they were satisfied.  In other words, low expectations, exceeded, resulted in satisfied customers! Not exactly a situation that cried out for transformational change.
But customer attitudes and expectations concerning the claims experience are shifting dramatically.  According to Ernst and Young, in the US excellent claims service is now nothing more than marketplace table stakes, a minimum requirement to compete. Consumers expect excellent claims service—anything less will likely drive them to another insurance carrier—yet excellent claims service doesn’t guarantee customer retention.  Half the consumers who reported a poor claims experience indicated they were likely to switch carriers, but so did a third of those who had a good claims experience! What did the respondents say would have improved their claim experience?  Speeding up the claims process, and communicating more effectively.
As shifting customer expectations reshape how customers approach their claim “defining moment”, I think it will be intriguing to watch how insurers deal with customers who know what they want and are willing to change carriers to get it.
Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on Property Casualty insurance claims and operations. He can be reached at or through

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