A conversation with Forrester’s Ellen Carney on the evolving role of insurance and why providers must adapt to survive
Insurance as we know it is changing from a stand-alone, point-in-time purchase to a fluid, dynamic solution that should seamlessly fit into consumers’ lives. Moving forward, insurers need to reimagine how they create and deliver value to customers, who are increasingly expecting more relevant, personalized, and simpler ways to access the coverage they need to protect themselves financially.
In our latest episode of UNBIND with Bindable (and the first one hosted by Bindable CEO, Bill Suneson!), we were joined by Principal Analyst at Forrester Ellen Carney, whose research centers on the technology decisions that financial services firms are investing in, including the integration of emerging technologies with legacy systems to drive better digital experiences and improved operational efficiency.
The episode focused on the shifting expectations people have for insurance and how insurers, to keep up with the competition, must: rethink business models, reimagine processes, and recruit the next generation of talent to better leverage available and forthcoming technology to meet evolving customer needs.
Since Bill and Ellen have known each other for a long time, it was an overdue conversation that we’re delighted to have captured and share. Read on for an abbreviated recap of the episode, or you can also access it through your favorite podcast provider or watch it on our YouTube channel!
An accidental career
Reflecting on her journey into the insurance industry, Ellen said she has "the coolest job on the planet." While acknowledging that becoming an insurer and analyst covering the insurance sector wasn't initially a deliberate career choice, Ellen emphasized the unique and fulfilling nature of her role.
"Like a lot of analysts, it's been an accidental career. No one sets forth and says, 'I want to be an analyst when I grow up.' Likewise, no one ever says, 'I want to be in insurance when they grow up,' right? That's kind of how it works."
Yet throughout her 17-year journey in the insurance industry, Ellen has developed a deep appreciation for its role in society as an important entity that helps people at the worst moments in their lives, something that both she and Bill agree makes insurance a noble profession.
The importance of customer experience and trust
In the realm of financial services, trust reigns supreme. At Forrester, Ellen has a focus on unraveling the intricacies of trust through the US Financial Services Customer Trust Index Rankings. Although customer experience (CX) and trust both impact revenue, there's a distinction between them; having a great CX doesn't necessarily equate to high levels of trust from customers.
Ellen pointed to USAA as a consistent leader in the rankings since 2016. Notably, 36% of USAA members consider themselves devoted, indicating high loyalty compared to the average of 26% across the industry.
According to Ellen, the core of customer experience is “about how customers perceive their interactions with the insurer – the satisfaction derived, the problem-solving efficacy, and the overall ease of engagement. Loyalty hinges on these factors."
Similarly, trust, she noted, hinges on fundamental behaviors exhibited by insurers – dependability, empathy, and accountability. "Insurance companies must not only be reliable but also demonstrate empathy and accountability, especially given the high degree of regulation in the industry."
Furthermore, Ellen stressed the significance of trust in consumer behavior, noting that consumers who trust a particular brand are more likely to trust affiliations with that brand. She shared that 77% of consumers with high trust in their brand are inclined to trust other companies affiliated with that brand, compared to only 31% of those with low trust.
As such, Ellen suggested that non-insurance brands could leverage the trust people already have with their individual insurance companies to expand their offerings to include insurance and gave the examples of embedded insurance experiences with car dealerships, home goods stores, or even mortgage companies.
However, the challenge for non-insurance brands is that insurance is fundamentally a relationship-based business, unlike many transactional brands, something they must keep in mind when entering the space. However, an organization like AAA (known for their empathetic roadside assistance) offering insurance coverage highlight the potential for trusted brands to succeed in the insurance space.
The role of agents
When asked about the challenges faced by the InsurTech movement, particularly in light of historic losses in the personal lines of business, Ellen identified two key factors contributing to these challenges.
Firstly, at the onset of “InsurTech 1.0,” there was a misconception among tech enthusiasts that the insurance business could be easily disrupted by technology alone, leading to overestimations of what technology could achieve within the industry without the right expertise. Secondly, there was an initial belief that technology could replace agents, which proved to be unrealistic.
In fact, as Ellen and Bill discussed, the role of agents continues to thrive. Even with the allure of fast digital processes, Ellen has seen a notable preference among Gen Z for agent assistance, underscoring the value of empathetic human interaction. Plus, for the time being, limitations surround AI-driven chatbots in understanding and responding appropriately to customer needs, highlighting the unique ability of humans to interpret signals and cues during interactions.
Ellen emphasized the concept of the "digital agent" where agencies embrace digital tools and platforms to enhance customer experiences. This includes robust contact center capabilities, CRM systems, mobile apps, and bidirectional texting features to meet customers' digital expectations.
Looking ahead, “InsurTech 2.0," will likely involve a better synthesis of digital capabilities with the continued involvement of human agents, emphasizing the importance of how insurance products are distributed. Product providers should seek to provide an omnichannel experience where agents can seamlessly transition between digital and offline interactions, ensuring a simplified and effective customer journey with minimal friction. As pointed out in the conversation, it’s important to note that a distinction should be drawn between digital agencies, which offer personal support, and aggregators, which simply sell customer information; the former being key to driving better customer experiences.
Distribution opportunities
Both Ellen and Bill have been involved with the Professional Insurance Marketing Association (PIMA), a trade association for insurance and financial services leaders in the affinity market. When asked about the potential behind affinity marketing, Ellen agreed it has a strong future, especially during times of uncertainty. She emphasized the pivotal role of affinity relationships in supporting both consumer and small business needs, citing examples such as the over indexing of life insurance purchases within the affinity market. People tend to look to others like them to find answers and solutions to the needs they have.
Ellen also touched upon the concept of embedded insurance, acknowledging its increasing prominence within the industry. Drawing parallels between embedded insurance and traditional affinity marketing, Bill noted the heightened complexity associated with embedding insurance in diverse products. For instance, you can’t expect a sales associate at Pottery Barn to sell home insurance alongside curtains – even though it makes sense that a person shopping at Pottery Barn would be interested in buying home insurance.
Ellen further delved into the potential success of virtual agencies attached to non-insurance brands or adjacent industries like mortgage companies, car dealerships, or financial institutions saying the concept of digital bolt-on agencies to these adjacencies is seen as critical. However, the challenge again lies in ensuring that individuals facilitating these transactions are knowledgeable about insurance and can guide customers effectively. Licensed professionals who understand insurance needs and processes are deemed crucial for the success of these ventures, particularly in navigating complex decisions and providing necessary coverage, such as binders at closing. There are inherent challenges in seamlessly integrating insurance offerings into such transactions, which underscores the need for strategic alignment and streamlined processes.
The future of talent and the industry
The conversation wrapped up with the impact of InsurTech and digitization on talent recruitment within the insurance industry. Ellen pointed out that there's a high demand for specialized talent, such as prompt engineers and generative AI experts, with competitive salaries being offered. The insurance industry has embraced technological advancements, particularly in areas like AI, to enhance customer service and efficiency, albeit with caution. While there's been rapid adoption of technology, much of it is focused on assisting human professionals rather than direct customer interaction.
Ellen’s advice for those considering a career in insurance is that if you’re looking for a favorable work-life balance, along with the opportunity to make a social impact by helping people, insurance can be it. It’s a rewarding and diverse field that provides ample opportunities for learning and growth, particularly in areas like data analytics and technology.
Ellen also shared some final observations for what’s top of mind for insurance leaders moving forward. There has been a shift away from the previous emphasis on straight-through processing in claims towards a recognition of the importance of building relationships with customers. This underscores the nuanced decision-making required in insurance organizations. After all, insurance is fundamentally a relationship business, and it's crucial not to miss valuable opportunities to connect with customers whenever possible.
Interested in checking out Bill and Ellen's full conversation?