MARKETING MANAGEMENT: The SAME PRODUCT, but the SAME SERVICE?

As an industry, we all sell basically the same product — coverages developed around what actuaries want rather than what customers necessarily want. In that respect, the property and casualty insurance industry is far from renowned in the public’s eye for dedication to customer service, especially once the “initial sale” has been concluded.

Each year we deliver to customers this incomprehensible policy document with a bill for thousands of dollars and then disappear unless a claim is presented — at which time our procedures and rules make even the most straightforward loss a major drama. We certainly don’t have a relationship with our customers — in fact, research shows that 70% of them cannot name their insurance carrier.

While most companies have traditionally left the relationship aspect of the business to brokers, even this level of personal interaction has deteriorated as medium and large-sized brokerages have advanced to become large conglomerates. It is therefore unsurprising that over the past decade the insurance transaction has become increasingly impersonal — the consumer ultimately suffering the consequences.

The reality is that broker resources have been stretched to the limit — particularly against the current backdrop of cut-throat pricing on auto insurance (which accounts for the “bread and butter” of personal lines operators). As a result, customers have come to view insurance as a commodity selected according to the lowest price. The impact of technology on product distribution and development has largely been fingered for the advancement of new entrants into the p&c market (thereby aggravating the price war) and the subsequent deterioration of interpersonal relationships. However, ironically, technology can now be utilised to rebuild and create higher levels of “customer relationship” — at least for those companies willing to.

The good news

The good news is that few industries are as well prepared for the “customer relationship management revolution” (CRM) as Canada’s p&c industry. Every insurance organization currently possesses a tremendous amount of customer information — literally an untapped “pot-of-gold” in terms of developing and retaining business. Information, if effectively managed, can be used to deliver highly personalized communication, thereby allowing insurers and brokers alike to add value to their customer relationships.

Mark Cox, the director of business development at Optus Corporation, astutely observes that maximising on regularly scheduled communications with customers is a critical marketing tool. Such communications include policy renewal notices and monthly/annual statements. These interactions with the customer are a golden opportunity to develop and enhance relationships, he adds. “Every piece of communication that leaves your company plays a role — these pieces either enhance your customer relationships or deter from them.”

Product qualities

Chubb Insurance Co. of Canada is an example of how a company has refocused its communication material to become more customer-focused. Recently, Chubb reintroduced a product, “Masterpiece” (which is aimed at the more affluent end of the personal lines market) to better position the company in the eyes of its discriminating clientele. Masterpiece is a broad-based coverage product, incorporating various value-added services including exceptional claims service. The problem was few customers actually read their policies, therefore they were unaware to the comprehensiveness of the coverage. Few of them also experienced claims in any given year. How could Chubb reinforce the value of its product over that of its competitors?

In response, Chubb re-designed its policy document. Printed on cream coloured stock in an attractively bound booklet, each policy was 100% personalized for that client. If a customer had a secondary dwelling, Chubb would explain what was covered in plain language and in a format that made sense. If a customer didn’t purchase the coverage, no mention was made of it. The result was an extremely functional document allowing customers to view their entire insurance portfolios and actually understand what they had purchased.

Susan Vella, the Canadian personal insurance manager at Chubb, says the company’s success with the “re-packaging” of the product cannot be questioned. “Despite tremendous pricing pressure, we have not only maintained our position in the marketplace but expanded it. We currently have a retention rate in excess of 95% where the industry averages 77%.”

Cam Shapansky, president of Information DesignWorks, the marketing consulting firm that worked with Chubb to develop its Masterpiece product, adds “customers told us in focus groups that they want to be able to understand their insurance. They get upset when a company doesn’t communicate clearly…Our approach is to make the customer feel they are more than a policy number, that the company wants them as a customer.”

Commercial packaging

CNA took a similar approach as Chubb when launching a commercial coverage package “OneWorld” in the Canadian market. “Our brokers told us we were offering a unique product. We wanted to utilise these ‘unique qualities’ as a marketing edge, to bring it to the attention of customers,” comments Adam Briklyn at CNA, Canadian Operations. “We knew customers were generally dissatisfied with the material they received from their insurers — our approach was to distinguish the product by producing simple but accurate packaging of the policy information. We wanted to have an impact on customers by convincing them that OneWorld was a departure from what traditional companies were offering,” Briklyn explains.

The result is a commercial package that instantly provided CNA with a customer-friendly brand on which to base future products and services. “Brokers were overwhelmed with the response they received from customers. We literally redefined customer expectations, making it more difficult for a competitor to step in with a more traditional policy design. Picture having a typical policy in one hand, with its mess of endorsements and schedules all stapled to contract pages. In the other hand, you have a concise, personalised document — the decision becomes one step more removed from price,” Briklyn states.