It is not difficult to find examples of insurers and pension companies that are investing heavily in improving the customer experience. This may vary from enhancing the call center experience to improving brand image, access, and communication, or simplifying products. Executives are focusing on how to change the interactions in this traditionally conservative sector and are investigating how technology can help achieve more intimacy and better results.
In general, to understand this customer experience focus, we first have to discuss the nature of the insurance and, more specifically, the pensions business. Insurance is something of a strange business. When customers purchase an insurance policy, they are not purchasing a physical product or even a service. What they are purchasing is a promise. The insurer is promising that in return for prompt payment of premiums, if an event occurs that harms the policyholder, the insurer will compensate the policyholder. The critical point here is that, from the view of the policyholder and in the absence of a claim, the insurer has done nothing to earn the premium. The critical service only takes place in the aftermath of an accident, storm, or another unfortunate event. No event, no service. It is this policyholder view that makes customer experience so critical.
For pensions, it is even more complex, as there are no claim incidents. People pay premiums for their pensions and only have the benefit of their pensions savings at a certain age, which means pensions are never relevant. That, combined with the low number of interactions and their (perceived) complexity, means few people are very interested in them, despite their huge impact on their standard of living after retirement.
In countries like the Netherlands, with an aging population, and global low-interest rates, the old defined-benefit pensions are being fast replaced with defined-contribution pension models where the financial outcome had become insecure. The situation also leads to a creeping pensions age and an increased opportunity in the free market for additional products and services. On top of that, If market dynamics change because of legal changes, it becomes even more important to meet the customer “where they are” and differentiate based on customer experience.
But how do you reach people and educate them about their pensions? How do you create a sense of urgency that they should be interested and take action?
New technologies can help. For example, they can help outbound communication based on what we know about people: “Your pension age is 20 years from now. Do you want to live comfortably? Do this check!” They can also help improve existing relationships and make them more personal and relevant by providing insights, forecasts, and simulations so “tomorrow becomes today” for the customer, and they feel helped and in control of their future financial situation. This, in turn, may increase interest in additional modern, simple-to-understand products and services.
Current cost and complexity, along with upcoming changes like the new Pan-European Personal Pension Product, increase the pressure on companies to modernize and service the customer better. One of the main challenges facing insurance companies today is that their systems and processes are not optimized for the end customer.
Technology upgrades are an important step in this process. Insurers and pensions companies are investing heavily in modern core systems to support new processes, interactions, and workflows. These core system transformations are deeply touching all aspects of insurers’ or pension companies’ business, and these core processes have a large impact on the company’s cost base. Another common place to start with this transformation is customer communications. Modernizing communications, so each one is timely, personal, relevant, and delivered to the customer’s channel of choice, is one way to quickly improve customer experience.
Learn how SAP products for the insurance sector can enable you to integrate core operations and customer engagement to make pensions relevant in a way that suits the customer.