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Peter M.J. Gross

Peter M.J. Gross

Warning Signs in Small Business Insurance

Do Direct-to-Consumer Companies have a Customer-Centric Advantage?

Small business insurance customers are becoming more irritated, and it shows. The JD Power 2021 U.S. Small Commercial Insurance Study found that when compared with their larger peers, small business customers have to make up to three times more of an effort in their interactions with insurance carriers.

The extra aggravation is showing up in their customer satisfaction scores. 

Unhappy customers become big problems when they find alternative providers. One of the major forces driving change in the insurance industry is the emergence of new models that keep expenses to a minimum while emphasizing direct-to-consumer engagement. 

A substantial headwind that has prevented improvement in the small commercial insurance space is the fact that although these clients normally pay lower premiums, their needs can be complex and time-consuming. This makes it difficult for traditional insurers to find scalable solutions while keeping their expenses manageable.

Meanwhile, new tech startups have begun aggressively marketing their small commercial insurance products directly to consumers. They expect that efficient data management will give them an edge in a market that collects premiums worth around $100 billion annually in the U.S. alone.

The Other Use for “Know Your Customer”

The major advantage held by established insurers is their ability to harness the data that is already in their possession; they know how to reach their existing customers and which methods those audiences prefer. 

Information about customers and how to contact them is clearly valuable. For example, firms specializing in investor communications have collected steep fees from public companies and mutual funds due to their knowledge of individual preferences for communication

Understanding how customers prefer to be contacted is useful for assessing whether marketing strategies are effective. Some insurers may find that expensive investments in omnichannel communications are unnecessary when their existing customer base favors a single method of contact. 

Enriching customer information with external data from other sources can provide the foundation for an effective content marketing strategy. When an insurer learns that their clients are building online brands through specific social platforms, it makes sense to address them in their preferred environment.

And current customer data can inform a company’s approach to customer service. If the majority of an insurer’s clients are active on Facebook, it may be worth the effort to acquire the “very responsive” badge that shows their commitment to the platform. 

An Effective Partnership

Insurers can become more customer-centric through partnerships with firms that specialize in increasing the quantity and quality of their data-generated insights. 

A partner that specializes in external data can improve the customer focus of insurers with services like prefill data, which changes the focus of a transaction. Instead of being asked to collect, assemble, and submit data, customers only need to verify existing information gathered from external sources. 

Although external data capabilities can be developed in-house, effective partnerships leverage the expertise of professionals who are skilled at integrating multiple sources of information. The most analytically mature organizations use multiple data sources, including data from customers, vendors, regulators, and competitors.

External data also allows insurers to maintain more accurate customer information. Many insurers base their commercial marketing, underwriting, and verification on credit bureau data that is updated monthly or quarterly, while the pandemic has proven that business conditions on the ground change much more rapidly.  

A further advantage that comes from working with a partner is the ability to build a data ecosystem — a platform that combines data from numerous providers to build value — which has been found to improve customer satisfaction, boost productivity, and reduce costs.

Too Close to Call

New challengers in the insurance space hope that their business models will keep costs down by working more efficiently to find success in the small commercial insurance market. 

However, there’s no real reason why established firms can’t stay competitive by accelerating their underwriting transformation. These companies already have a wealth of existing customer information that can be harnessed to improve their business decisions.

Demyst is positioned to help improve the customer experience with integrated solutions that offer real-time decisioning and reduced operational expenditures. Instead of focusing on a single upstream data source, Demyst maximizes flexibility and efficiency through a catalog of external data providers. Integrating this data through a single API allows Demyst to help organizations identify which sources and attributes will be part of their workflow

The JD Power customer satisfaction survey should be a wake-up call for the insurance industry. Ultimately, the winners and losers will be decided based on who has the best implementation of a customer-centric approach.

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