When we contemplate the term “innovation,” we typically envision disruptive innovation—technologies that significantly change the landscape of a service or product. But it is really sustaining innovation, or continual improvements in product suites, that typify most industries. In recent years, sustaining innovation has given rise to powerful tools that insurance companies can use to minimize the “friction” that frustrates consumers and create new and more seamless customer experiences.
For insurers, the proliferation of friction-reduction technologies has become a double-edged sword. New solutions have the potential to eliminate or minimize service and performance issues that have caused headaches for customers for decades. At the same time, adjacent industries have already adopted new technologies that have resulted in elevated customer expectations. The result? Customers are likely to have less patience with insurers that are slow to address pain points in their customer experience, forms processes, and claims handling, among other processes.
Across all industries, 45% of consumers say they’ve stopped doing business with a company due to a poor experience, and 47% say they are willing to spend more money to receive a better experience or service. As the rise of artificial intelligence allows first-movers to rapidly elevate the quality of service they provide, insurance companies of all sizes should embrace technology to reduce friction and enhance experiences for customers as a core strategic priority.
A potent mix of technologies
Companies have always used technology to make both internal and customer-facing processes more efficient. What’s different now is that next-gen technology is allowing companies to eliminate friction to an extent never before possible.
This progress is not being driven by any single new solution. The industry has historically seen different waves of innovation that gradually displaced manual processes. Early on, tech stacks involving optical character recognition (OCR) and robotic process automation (RPA) were game-changers for automating repetitive processes. Later, cloud computing and API development allowed for increased interoperability and automation at scale. Now, companies are layering the next evolution of AI into this mix. It is now easier than ever for a disruptive innovation in one market to be applied to an adjacent industry. The interaction among all these solutions will hopefully propel the industry to a new era of frictionless processes.
Eliminating pain points for short-term gains
Removing friction from the customer experience will require both short-term and long-term strategies. In the short term, insurers should target the most prominent and persistent pain points that have plagued insurance company customers. For example, one of the biggest complaints from customers is that they are required to fill out the same information repeatedly in different forms.
Until recently, pre-populating forms with data already provided by the customer was a complicated task. Data is often stored in different formats in separate systems. Over the last few years, however, most large insurance companies have undertaken comprehensive data management overhauls designed to normalize and centralize data across the organization. Once companies have this “single source of truth,” they can tap into usable, reliable data for any and all uses—including pre-populating forms.
Today, companies are also harvesting data by feeding images of paper documents into natural language processing solutions and other AI applications that can parse non-harmonized data to identify and understand specific information, like pinpointing first, last, and middle names from various documents, and determining if a phone number is a cell phone or a home landline. Using these techniques to reduce the friction associated with duplicate paperwork can have a positive and immediate impact on the customer experience.
Long-term transformation
Insurers must also consider how AI and other technologies are transforming customer experiences over a longer horizon and set IT budgets and strategies to keep pace.
In general terms, companies should constantly be looking for ways to apply AI internally to reduce friction and make workflows more effective. For example, think of something as simple as a forgotten password. Most of us have had the experience of clicking a “Forgot Password” link and waiting for a reset email that never arrives. I, myself, often abandon a site when that happens in utter frustration, as I suspect others do as well. A function as basic as this can be rearchitected leveraging AI.
Pattern detection algorithms on a user’s expected versus actual behavior, in addition to downtime detection, should result in a better experience. Did the user abandon their journey in frustration? Platforms should be able to course-correct by detecting these behaviors and triggering the next-best action. Correcting these issues is just one example of how removing friction from back-end systems can improve both customer experiences and business results. By preserving customer satisfaction and minimizing client attrition, such operational IT investments can deliver big ROI in the long term.
These initiatives will become even more important over time as insurance companies build out the omnichannel models needed to meet the expectations of today’s customer base. According to the results of Broadridge’s 2024 CX & Communication Consumer Insights, 90% of consumers want companies to honor their channel preferences, but only 31% think companies do a good job at that task. Allowing customers to interact with the company through their preferred channel of print or digital will require effective integration of all the company’s internal platforms.
The landscape of competing for customer attention is more competitive than ever. Consider the nouveau consumer; within two seconds, consumers make a decision whether or not to engage with a 15-second TikTok or Instagram video. In this world of microsecond decision processing, if content fails to hold a user’s attention, they immediately move on to other content. In such a setting, traditional long-form financial statements or insurance forms will not cut it. Going forward, borrowing from the social media industry, insurers will have to deliver content that is personalized, easily digestible, and engaging. Examples may include personalized videos explaining benefits or streamlined account statements that highlight the most important information.
Next-gen customer experience
Beyond these new types of content, the interaction of cloud computing, APIs, AI, and other innovations are unlocking new opportunities for insurers to revolutionize the way they interact with customers. These emergent technologies support what’s known in the industry as “data federation,” or the ability to pull data from separate providers, harmonize it, and integrate it for use. Going forward, insurance companies will use this capability to access both internal data warehouses and external companies and data sources for functions across the organization and business lines—from confirming data on a claims form to verifying physical addresses and driver licenses from policy applicants and even double-checking the certification and credentials of doctors and other providers.
As technology has evolved, the lines between hardware and software are becoming more blurred, resulting in truly seamless experiences for customers. It is typical for a user to replace their physical wallet with their phone; we now live in a world of digital identity cards, mobile wallets, and keyless entry for vehicles. Adjacent industries have been able to greatly improve due to the ubiquitous nature of new features in mobile devices. Extended to the automobile insurance industry, imagine a world in which your phone detects you’ve been in an automobile accident, automatically contacts your insurance company, and provides back data on where the crash occurred, which vehicle and driver were involved, and other pertinent information. Such a harrowing experience shouldn’t be further exacerbated by a painful insurance process. A future is near where most of these interactions will be completely automated.
Thoughtful deployment of AI
As companies use these technologies to upgrade to a next-gen customer experience, they must avoid creating new next-gen pain points. Chatbots are a prime example. Chatbots were one of the first AI applications employed by companies and used by consumers. The experience for customers has not been great. When asked to define the things that make up a great customer experience, 48% of consumers cite “making it easy to talk to a real person.”
In fact, the replacement of humans by chatbots and other voice and online AI-powered customer service applications is probably one of the reasons ratings for customer experience and service satisfaction have been falling recently, as opposed to increasing due to innovation. Across all industries, the percentage of consumers who believe the companies they do business with need to improve their CX has doubled, hitting 70% this year.
Theoretically, however, chatbots should be a win-win for both companies and customers. The applications can reduce costs, cut down on wait times, and deliver instant answers to customers. But the failure of the earliest version of this technology provides a valuable lesson: As you implement new technology, use the concept of friction reduction as your north star.
In the case of chatbots, a new solution aimed at making customer service more efficient and easier for users actually resulted in more friction and a lower CX for customers. Looking ahead, however, I’m confident that the integration of solutions and systems will eventually result in highly effective, AI-driven self-help solutions that will significantly reduce friction and usher in an era of vastly improved service for customers.
That level of friction reduction will be replicated in scores of places throughout the customer journey, resulting in increased efficiency and lower costs for insurers, and an elevated experience for customers.
