What challenges does the insurance industry face today?

Being relevant is critical. People get excited about getting a new smartphone or tablet. They don’t wake up every day and say, “I can’t wait go look at my auto insurance contract.” Consumers are looking for this industry to keep pace with the rate that technology is advancing, but the product doesn’t lend itself easily to that. Second, the way business is done has changed. Previously in the financial service world, when you needed to deal with your bank account, you had to walk into a bank. Today, you can do banking online, mobile, or in the call center. Insurance companies need to create a seamless omnichannel experience, while also giving customers the opportunity to walk into an agent’s office.

To what extent does the industry address these challenges via advertising?

Competition is fierce among insurers in the advertising space. In the old days, if your parents were with a certain company, you went with that company. As technology advances and customers have access to more information, the way companies differentiate themselves and their products has evolved. The auto insurance business is one of the biggest categories for advertising investment—with insurers outspending adult beverage companies—in an attempt to reach consumers. It feels like everywhere you turn, you see auto-insurance ads. It’s incredibly important that the message connect with the target customer.

How does that affect the way an insurance business is run?

Historically, insurance companies have been able to run the core business profitably at very thin levels, because they could achieve an acceptable return from their investment portfolios. In today’s economic environment, there continues to be strong pressure to effectively underwrite exposures without relying as much on investment income. Underwriting must be managed with vigilance.

How does a company stay competitive?

An insurance company should continually evaluate its products to ensure the features and service level resonate with the target customer. The old way was to go into a lab and mix up the test tubes and say, “Here’s the product.” Now, through research and consumer insights, it’s easier to develop products and services that better fit the target market, and to create a much better experience with an agent at the center of the relationship.

So consumer research is important?

It has become a significant part of how insurance companies should operate. Using research and big data to gain insight into customer behavior is critical. Take, for instance, the area of billing. It’s not just about how often customers want to be billed. It’s about how e-bills and payment options are presented. You need to create a level of experience that is tailored to the customer. The customer relationship component of the business equation has grown exponentially. A company should constantly look for ways to exceed customer expectations. In the past, if regulation required that a notice be sent out one way, you did it that way. Now you still comply with the regulation, but you package it in a different way—maybe you are out in front of the information with a text message or an e-mail. It’s more about customer focus than business process focus.

Are there specific initiatives or platforms that allow you to do that?

Because even the forms sent to customers, either electronic- or paper-based (and a large majority of people still want their insurance information on paper) are important, it’s crucial to have a platform for communicating with customers. The key to its success is flexibility. You must be able to make changes based on feedback, which ties back to big data. So a sophisticated communications platform provides a common look and feel across all products. For example, ensuring that branding is in the same spot allows a company to highlight discounts and place agents at the center of everything by prominently displaying their names and contact information.

Big data also allows companies to send relevant messages to customers. For example, if a customer has a teenager who will soon be eligible to drive, a company could remind them that it offers a good student discount. Another reminder could be sent about ways to prevent potential losses as a home ages, such as changing washer hoses. This system allows insurance companies to remain relevant to the customer in a friendly, customer-centric way.