While insurance carrier M&A activity reached a 15-year low in the first half of 2024, experts are cautiously optimistic about 2025, forecasting a resurgence in dealmaking activity in the new year. Both deal size and volume are expected to trend higher in 2025.
Carriers wanting to achieve revenue growth, diversification, expansion, or cost efficiencies can succeed through strategic M&A activity. However, one of the most critical — and often overlooked — aspects that can make or break the success of an insurance M&A is the details of the user experience. Remember that 70-90% of mergers and acquisitions fail, making it even more critical for insurers to focus on the key aspects of an M&A.
For carriers who are considering inorganic growth, it’s important to include a careful evaluation of the insurance customer user experience (UX) as part of due diligence. Today’s insurance landscape is competitive, and customer loyalty is often fragile, so thoughtfully integrating the merging companies' user experience must be done. A seamless user experience means a policyholder can navigate between multiple policies and coverage lines they may now have with one insurer following an M&A—but missing this critical step is costly and negatively impacts the M&A.
Insured.io recently worked with an MGA that had completed multiple acquisitions over a few years. The result of this M&A was a fragmented hodgepodge of technology systems, including seven distinct policy systems, some legacy and some next-generation. This presented a clear challenge for the MGA when attempting to build a single, unified brand and a consistent customer experience for their policyholders.
By implementing a unique data strategy, the insured.io team successfully unified the MGA’s Policyholder data and customer experience while maintaining the disparate systems. This allowed them to focus on servicing customers rather than the complexities of a massive internal technical project.
Insurers focusing on strategies to create an integrated user experience can help ensure a smooth transition during M&A activity.
Come Together: Focus on UX Integration
When two companies merge or one is acquired, they often bring different processes, systems, and workflows to the relationship — along with different cultures and customer journeys. This dichotomy can be devastating to the success of the merger or acquisition if not appropriately managed.
The customer is at the center of the insurance workflow and should also be at the center of an M&A transaction. Their expectations around how they interact with their insurer are grounded in the user experience, encompassing everything from the intuitive design of online portals to the ease of reporting a loss or checking a claim status. During the dealmaking process, it’s easy to lose sight of how this transaction is supposed to bring your customers more value. And they will notice if they get lost in the shuffle. Studies found that 80% of customers say companies should focus on the customer experience during an M&A transition. Other research proves that user experience is critical for retention, with SMS messaging increasing retention rates by 52% when used to notify policyholders of upcoming cancellations.
A significant concern during M&A activity is the inherited technical debt from the acquired company. Systems and processes differ, even within the same organization, and many smaller companies have disparate technology solutions filled with patches and legacy fixes. These different solutions can become information silos, impeding internal processes and creating a disconnected customer experience that makes it difficult — if not impossible — for the newly merged company to promote a unified brand identity.
While the ultimate goal of any M&A is data unification, consolidating policies into a single system takes time and resources. This time investment means insurers must build a customer experience strategy to account for this. Change needs to happen quickly to support a successful M&A with transparent benefits to the UX.
An insurer’s failure to integrate differing user experiences during a merger or acquisition can lead to a confusing or misaligned customer journey that causes dissatisfaction, complaints, and brand loyalty erosion when customers feel confused or neglected during the transition. Policyholders may feel the new company no longer meets their expectations.
To avoid these challenges, follow these steps:
Step 1 — Get Aligned on UX
Every M&A is driven by a set of strategic goals, whether to expand into new markets, diversify products, or improve efficiency. Aligning your combined UX goals with these overall business goals is the first step in consolidating the user experience during an M&A.
Step 2 — Understand the Current State of UX
Perform a comprehensive UX audit across both companies to evaluate the current user experiences. The goal is to identify differences, gaps, duplications, opportunities, and best practices from both companies. During the audit, insurers should review these key components of the customer experience:
- Digital interfaces, such as websites, mobile apps, and customer portals
- Omnichannel customer service channels, including IVR, call centers, and email support
- Claims processing systems and back-end workflows
- Billing and payment systems
Step 3 — Visualize a Unified Customer Journey
The next step is mapping out a unified customer journey to create a seamless path from start to finish. The new customer journey must be easy to navigate without disrupting the existing experience customers are familiar with. Account for the current structure of the inherited systems and any plans for future expansion of the UX to build a strategy that can leverage existing internal processes while improving the policyholder experience. Find ways to preserve the best of both approaches while allowing for future considerations.
Step 4 — Lean On Technology to Streamline UX
Leverage digital platforms to integrate the user experiences of both companies without causing unnecessary disruptions and incurring high costs. Cloud-based and SaaS solutions can help speed processes along without the need to “rip and replace”. Consider using data integration and automation tools along with digital portals. A unified CRM system ensures customer-facing employees from both companies have access to the same information, which improves response time and reduces errors. Insurers can accomplish a lot with a few resources when they engage with the right vendors and have the tools to meet their goals.
Consolidating self-service portals is a critical step in any merger or acquisition. Once the customer portals are merged, insurers can provide a consistent, intuitive omnichannel experience, allowing policyholders to manage their policies, file claims, and make payments easily. Research shows customers who use omnichannel methods to contact their insurers have a 25% higher retention rate.
Step 5 — Eliminate Brand Inconsistencies
Brand inconsistencies can confuse policyholders and erode trust, threatening to derail the success of the merger or acquisition. The key to successfully maintaining brand consistency while integrating two different user experiences is to identify the core strengths of each brand and ensure those elements carry over into the unified user experience. Research shows UX is just as important as brand and reputation when choosing an insurer. A frequently observed example in the insurance space is a policyholder's disparate experience when an insurer has different log-on instructions depending on the policy type (if your policy starts with 123, click here. If your policy begins with ABC, call us). These separate journeys are common post-acquisition, but they are confusing and frustrating for policyholders. Insurers should instead maintain their focus on consistency in brand and user experience by utilizing technology that allows them to build on the strengths of each company.
Step 6 — Communicate With Stakeholders to Gain Buy-In
Clear and transparent communication with key stakeholders is critical during the user experience consolidation phase of an M&A. Internal teams, policyholders, vendors, and perhaps even regulators must be kept informed throughout the process. Employees must understand the changes and how they impact their roles, and policyholders need to be aware of any changes in user interfaces or customer journeys. Transparency is critical to gaining buy-in from stakeholders.
Step 7 — Focus on Continuous Improvement
When creating and introducing a new user experience to policyholders, insurers should engage in a continuous improvement cycle of testing, refining, and retesting. Feedback from users, key metrics, and usability testing can help insurers make adjustments during the M&A. Because no integration is perfect immediately, adopting an iterative approach allows insurers to make incremental improvements and fix issues when they are identified. This dedication to continuous improvement and listening to policyholder feedback improves the overall user experience by prioritizing the customer journey.
The Biggest Payoff: Customer Loyalty
A thoughtfully designed and executed UX consolidation during M&A will strengthen customer loyalty and streamline operations, leading to the long-term success of a merger or acquisition. Insurers that take a strategic, technology-driven approach to their UX integration can help ensure policyholders remain loyal and satisfied throughout the merger or acquisition. When UX integration is handled the right way, insurers enjoy a smooth transition, increased customer retention, and a stronger brand.
About the author:
Steven Johnson is the Co-founder and Head of Product of insured.io, an omnichannel customer engagement platform for insurance carriers.
External Links:
- https://hbr.org/2020/03/dont-make-this-common-ma-mistake#:~:text=According%20to%20most%20studies%2C%20between,integrating%20the%20two%20parties%20involved.
- https://www.pwc.com/us/en/services/consulting/library/consumer-intelligence-series/customer-experience-in-mergers-and-acquisitions.html
- https://39812339.fs1.hubspotusercontent-na1.net/hubfs/39812339/Insured.io%20eBook%20-%20Revolutionizing%20Customer%20Engagement.pdf?utm_medium=email&_hsenc=p2ANqtz-8Smp3P8AnGfdGYbvLqpfbeM3EDuVY5ARD8yPICFliGPuMngL9PoYQFKaKu4PQI4bABsUD-XWvaohIkEwcv0PorkXZ_Yg&_hsmi=277014961&utm_content=277014961&utm_source=hs_automation
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