We are in the age of the never satisfied customer. Industry analysts GartnerGroup calculates that across major service industries– including financial services – customer complaints have increased five-fold since 1995.
In Ireland, the number of consumer complaints in the insurance industry rose by 27% last year. In the same industry, according to industry sources, it often takes four weeks or longer for a broker to extract transfer valuations on pension schemes from an insurer.
With this level of service it's no wonder customers are feeling stressed out. And they're not on their own in clamouring for better service. In July 2001, a report commissioned by the British Treasury entitled, "Cracking the Codes for Banking Customers" makes 10 recommendations to ensure banking mortgage codes safeguard consumers more effectively.
The result of an eight-month study of the codes on mortgages and banking, the report says banks and building societies should halve, to five days, the time they take to transfer accounts. It also concludes they should halve, to five weeks, the transfer time for all standing orders and direct debits, with fines payable to customers if schedules are not met. And, most contentiously of all, it calls for league tables, showing how well banks and building societies treat their customers, to be published annually.
Added to growing customer discontent, financial services providers have to contend with a raft of macro pressures. Globalisation, deregulation, encroachment by other business sectors, and the push to increase shareholder value are combining to put unprecedented strain on the industry to improve service levels, increase customer satisfaction ratings and, ultimately, boost profitability.
The challenges then for banks and insurance companies are on one hand to reduce operating costs while on the other hand improve customer service. Obviously it would appear the two goals are mutually exclusive. Yet this isn't necessarily the case. Let's examine a few areas that online technologies are helping to vastly improve efficiencies and customer service.
Getting A Handle On
Take, for example, the claims handling process in insurance, which represents a huge chunk of an insurer's expenses. Indeed, industry analysts calculate claims management accounts for 70% of an insurance company's total costs.
According to a report released by Accenture in April 2001, more than 40% of the time spent in the claims handling process is associated with routine overhead functions that have little or no impact on the outcome of the claim or on improving customer service. In an industry renowned for astute number crunching, it must be pretty galling for CEOs to contemplate how much fat exists in claims management. This must be even more annoying for them when you consider that its labour-intensive business is suffering from spiralling wages.
Let's take a closer look at the process, then. In any typical insurance company claims handling involves huge swathes of unnecessary, time-consuming (and error-prone!) manual intervention. For the customer, who is on the receiving end of this inefficient process, it is even more irritating. From the customer's perspective claims management is a slow, irritating process with practically no transparency. Invariably, when customers phone an insurance company to check on the status of a claim, they'll be passed from pillar to post before they can get an answer to their query.
In streamlining the claims process, the job of the insurance company is straightforward enough. For starters they can eliminate the requirement for unproductive tasks, e.g. photocopying, mailing of files, manual retrieval of information from the claimant or claims department, etc.
They can also make the process more transparent, for the customer and all parties involved in administering the claim, so that communication on a service request can be more fluid. For example, on receiving a claim the insurer's system should trigger a series of automated tasks to kick-start the process.
First, the customer should receive notice (by preferred choice of communication device) that his or her claim has been received. Included in this communication should be a claim number and loss contacts, a pre-set appointment with an adjuster and a request for any additional information required.
If this level of automation were in place it would have a huge effect on customers. Straightaway they would feel reassured that the company is handling the claim in a professional manner and that the need to follow up, to check status or collect additional information is eliminated.
Moreover, the claims process time would be significantly reduced because the other parties involved – e.g. adjusters, supervisors and underwriters – would also receive automatic notifications about the claim at the same time as the customer. And to ensure the process is carried through to a successful conclusion, a series of built-in sub-tasks and reminders would ensure that service levels are maintained at every junction.
This is the kind of sophisticated workflow-powered solution that several savvy insurance companies have in place, and the benefits to be accrued are evident. Canada Life Ireland has implemented a workflow-enabled CRM (customer relationship management) solution across its head office; call centre; and branch network, and is quite effusive about the impact the solution has had in improving its claims management.
"We initially experienced a 70% reduction in calls from our front office to our claims department, which would have been queries about what's happening on a file or what's outstanding and so on. I have no doubt that the quality of service has improved significantly as a result," says Richard Caffrey, Associate Director of Pensions, Canada Life Ireland.
Doing It For Themselves
Customer self-service is another area that offers room for financial services providers to reduce unit overheads and improve customer service. The principle is simple enough. Provide a self-service channel that gets customers out of the more expensive channels, let them do the work themselves, and do it online so that the need for costly manual intervention is removed.
Easy concept, but often difficult to properly implement and support. In 2000, GartnerGroup calculated that 37% of companies never responded to email requests. This is an explosive situation, because customers judge you on your weakest link. Just as startling, and evidence of a certain malaise in the type of online service being provided, is the fact that two out of three web shopping carts are abandoned before the checkouts. And this figure is as high as 87% in financial services.
The main problems lie in slow uploading of web pages; overly complex navigation; poor email response time; and inability to complete the transaction on the web (i.e. being asked to move to an alternate channel to finish the operation).
But done effectively the channel offers tremendous benefits. Forrester Research estimates that a call centre response costs $32 while giving access to a self-service internet portal is $1.17. For customers, they can get 24x7 access to their financial portfolios; transfer funds; buy new products; pay bills; and do all their normal financial transactions at their own convenience. Quite a different proposition to being held on the phone and passed interminably from person to person in an organisation or waiting in a queue at a branch for a simple request.
A Matter Of Life
And it's not just in the area of relatively straightforward banking processes that financial institutions are successfully going online. You'd imagine that things don't get much more complicated in the financial services industry than the sales and administration of life assurance. Yet giant insurance company Swiss Re is currently installing a solution that will enable it to sell life assurance on the internet.
Ostensibly, life assurance is a product that needs agents to convince customers to buy. In addition, the speed and efficiencies gained by other industries in servicing online would seem to come unstuck by the need in almost all life policies to run blood and other medical tests after an expression of interest. A stumbling block that causes the acceptance lag-time for life policy sales to take up to a month.
Nonetheless, Swiss Re is planning to offer some simple policies, of up to $250,000, that do not require blood tests. It hopes to approve 60-70% of applications almost immediately, once applicants have answered nine medical questions online. It also hopes to increase the percentage of immediate approvals by completing a deal with a partner that has access to patients' medical records.
The Broker's Portal
Swiss Re's excitng initiative is ruffling the feathers of every broker and independent financial advisor in the land, but the old adage that insurance is a product that has to be sold, not bought still largely holds true. As LOMA made clear at its conference, Planning and Managing E-Commerce in the Life Insurance Industry, 2000: "Face-to-face selling will remain important for many insurance products."
And the internet will be a useful tool for brokers to conduct their business. According to a managing director of one of the largest Swedish brokerage firms quoted in a Datamonitor report, Brokers in European Insurance; Challenges in a Channel under Threat, "online technologies are at the core of brokers' attempts to reposition themselves in the market. They are essential not only to increase the efficiency and reduce the costs of customer management, but also to make brokers more accessible to their clients."
They are becoming indispensable in making insurance companies more accessible to brokers. By offering brokers secure portal-based access to an insurer's network, insurers make it easier for brokers to do business with them. Broker portals enable brokers to carry out a host of activities, from executing rate calculations to submitting new business.
For the insurance company broker self-service means cost savings in a number of ways. UK Insurer Independent Insurance estimate that, as 95% of the costs of an insurance policy are transactional, brokers could be sold policies cheaper if the transaction was completed via the web.
There's also a lot of money to be saved on the administration side, such as reduced call centre traffic, less paper handling, elimination of errors because companies can build in mandatory edits that prevent brokers from proceeding if they've made an error. Added to this is the fact that the insurance company gets to radically improve service levels by speeding up turnaround times on everything from alterations to proposals capture.
American insurance provider Empire BlueCross BlueShield has increased its broker services to offer quotes, rate calculation, proposal creation and enrolment on its broker website. And the brokers have warmly received it. According to a spokesperson from the company, "The vendors just love it. It gives them the opportunity to wow their customers. They feel more in control. They are not dependent on us to be here for customer service. They can come in on Saturdays and Sundays and work with the product."
If only all customer service could run so smoothly.
FINEOS (initially named Managed Solutions Corporation or MSC) develops a new breed of modern solutions that helps banks and insurance companies in streamlining their business towards the delivery of more value and service to the customer. They enable clients to acquire, service and build customer relationships, reduce operating costs and increase product development and maintenance capacity.
Published: Thursday, August 8, 2002