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Customer forever and ever How can behavioural economics further improve our customer interactions? Aline Avedikian, 17 October 2019
Customer forever and everHow can behavioural economics further improve our customer interactions?
Aline Avedikian, 17 October 2019
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Lawyer
“Make plastic toothbrushes illegal”
Economist
“Make bamboo toothbrushes cheaper”
Marketer
“Here are the advantages of bamboo vs plastic”
Behavioural scientist ?
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Behavioural economicsA simple description
Why
Because human beings are not always rational.
We are prone to bias.
How
Change the context to nudge the customer in a different direction.
Use A/B testing and measure the impact.
What
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Economics Psychology
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Behavioural economics can be applied to boost engagement at every customer touchpoint in the insurance value chain
20% 3% 3% 10%
SalesUp to 20% uplift in sales
Open rates, click rates, up/cross-selling, increasing response rates
RetentionUp to 3% absolute reduction in cancellations
Reducing missed payments, reducing cancellations
UnderwritingUp to 3% increase in disclosure
Encouraging more accurate disclosures, increasing completeness
ClaimsEffects up to 10%, but varies
Reducing claims padding, increasing disclosure honesty, decreasing turnaround time
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It costs 7 times more to acquire a new customer than to retain an existing one.Scott Gillum, “Mining the Gold in Existing Customers”, Forbes, 8 August 2011
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Why do customers lapse?The Economist’s answer
Changing consumer needs
Jumps in premium levels
Lack of re-pricing and re-design
Lack of direct interaction
Wrong advisor incentives
Weak macro-economy
Swiss Re Institute Sigma No 6/2017, “Life in-force management: improving consumer value and long-term profitability”
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Why do customers lapse?The Behavioural Scientist’s answer
The customer perceives insufficient value for the
price paid
People overvalue the present and undervalue the future
Insurance is bought on emotion, and emotion wears off
People tend to believe bad things will not
happen to them
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So how can we go with our customers from just surviving to thriving?
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Loss aversion, positive framing,
focus on value
Improve the customer touchpoints you already haveExperience in a Spanish bancassurer’s retention call centre
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0%
10%
20%
30%
40%
50%
60%
70%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Sav
e r
ate
Use
of
rete
nti
on
to
ol
Training
New script
Refresher
New incentives
Refresher
Discount Save rate
Value emphasis
Experience in a bancassurer's retention call centre
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Get future-fit:Millennials want personalisation and digitalised
service.
Keep testing, new approaches, new communication toolsA health insurer leaking customers and impacted at multiple touchpoints
No SMS sent.
Renewal letter sent as usual.
Control
9.1%
Easy process
It’s easy to renew and
you can do it right now!Just click
here.
6.8%
Social norms
Did you know?
9 out of 10customers choose to
renew with us.
7.8%% customers not renewing:
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Customers can be more loyal after
proactive contact from their insurer
Add new proactive and positive customer touchpointsA credit life provider with no touchpoints other than cancellation/claim
10.5%
15.8%
17.4%
19.9%
After phonecall
After email
After SMS
No contact
Lapse rates
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Why do Behavioural Economics and Customer Engagement go together so well?
Experience
BE works!
Swiss Re’s Behavioural Research Unit (BRU) started 2013 and has conducted >150 trials, 30 countries, 40 clients
Increasing interest in BE from industry bodies as a tool to understand/influence consumer welfare (e.g. UK’s ABI)
Economics
Small cheap changes, big returns!
E.g.
• Large Spanish bancassurer: extra 5000 policies saved, EUR6m value created
• US post-level term market, multiple clients: USD500m value created
Ethics
Insurance is a complex product requiring the customer to make multiple decisions.
Customer mindsets and behavioursdetermine success.
It is right and good to help your customers navigate this complexity as their situations change over the long term.
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The insurance experience is often dreary.
You can make it delightful!
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Thank you
Aline Avedikian
Contact us
Heald Alternative Solutions & [email protected]+41 79 816 2901
Follow us
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The information and opinions contained in the presentation are provided as at the date of the presentation and may change. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for its accuracy or comprehensiveness or its updating. All liability for the accuracy and completeness of the information or for any damage or loss resulting from its use is expressly excluded.
