Customers Insurance - Essay Example

Outline Report On Small Customers’ Insurance Risk Assessments 1. Summary of Proposal The examination of Our Company’s current Insurance Product portfolio, services and related business offerings shows that our current overall service offering is quickly, easily, and hence cheaply, adaptable to serve the proposed new market segment that is composed of smaller enterprise, sole trader and personal clients, with one key exception. These clients completely lack a means of quickly and easily assessing their own Insurance Risks, which, as we all know, are crucial in choosing the right insurance product. Until now, as we have been dealing with larger enterprises, those customers have enjoyed their own Risk Management teams and related software applications, and hence been able to identify and assess their own Insurance Risks, and hence choose the appropriate product. It is this which distinguishes ‘small clients’ from the larger corporate enterprises Our Company has been concentrating upon until now, regarding their internal capabilities, particularly their capacity to identify and respond to changes in the business environment and new risks. What is therefore needed is a means to provide both potential and actual small enterprise, sole trader and individual clients with a simple means of determining such Risk Assessments, which they may use to determine their own Insurance Risks. As well as the benefits to such customers, encouraging our smaller enterprise, sole trader and personal clients will save our own consultants much time and effort in determining such risks, leaving them free to ‘close the sale’. As well as the direct benefits to such customers, encouraging ‘smaller’ clients to carry out their own insurance risk assessments will constitute both a marketing and sales tool for Our Company in and of itself, which will reduce our ‘spend’ on advertising to this market segment. That said, Social Media such as Facebook and LinkedIn are now far more widely used than conventional advertising platforms by ‘smaller’ customers, so focusing our marketing and sales effort on Social Media should therefore be very seriously considered. It must also be recognised that our competitors will be proceeding in a similar manner - on the other hand, if they are not, Our Company will have an immediate, and perhaps decisive, competitive advantage, at least temporarily! This Outline Proposal constitutes the Executive Summary for a much more extensive document which will set out the detailed requirements for the proposed personal Insurance Risk Management facility, which will be compiled should the Board consent to this project. 2. Addressing The Small Customer Market Segment For Insurance Products In order to address this new market segment, Our Company will need to fundamentally review it’s Customer Relationship Management (CRM) procedures, particularly in view of ‘small client’ purchasers of our products, particularly small business enterprises, sole traders and individuals. When determining their own Risk Assessments such potential clients differ fundamentally from our existing portfolio of large corporate clients, in that they have much less capacity to identify and respond to changes to existing risks and new risks in the business environment. In addition to this, small business enterprises, sole traders and individuals, lacking even a meaningful fraction of the commercial and financial resources available to our existing corporate clients, will be paying particular attention to a particularly competitive price for our products, which will relief on the ability of Our Company to achieve this in terms of our portfolio of insurance products responding to price reductions offered by our competitors. This, in turn, mandates a dramatic re-casting and potential improvement in the CRM offering made by Our Company, which means that, we will need to pursue objectives, other than profit maximisation, to attract and retain such smaller clients - we can depend on our competitors doing this! This had been particularly well highlighted by Anderson [Anderson, Brett The Insurance Industry: A New Customer Policy. CRM Magazine. October 2000. Web. 6th March 2014]. Anderson's initial point is that the main cause of poor CRM towards 'small clients' is "red tape", that is to say, our existing procedures will discourage such clients. We must therefore do our utmost to do away with the various boundaries and dependencies expressed by the portfolio of agents, brokers and call centre representatives. Moreover, Financial Conduct Authority (FCA) regulations place a whole variety of conditions and restrictions on how these products can be positioned or sold to small clients in particular. Many within the insurance industry admit sotto voce that all this has given the insurance industry a particularly poor reputation for service - the negative business connotations of which are all too obvious! Anderson therefore implies that the first step is to eliminate the agents and brokers, and streamline our call centre operation. The second should be to enable us to 'package' particular portfolios of our products tailored for each individual client, without them having to do any explicit work themselves. It is therefore all too clear that our overall CRM goal must be to cultivate each and every relationship with 'small customers' over the long term - which may well require a fresh approach towards how we operate, which, incidentally, will also benefit our relationship with our existing customer base, and cease to emphasise the agent side of the sales transaction. In our efforts to re-balance these relationships (and hence improve our profits), we must are turn to CRM technologies in order to capture and exploit 'small client' knowledge and to enhance the overall customer experience. When doing this, we must pay particularly careful attention to integrating CRM policy-management applications with our software applications that focus on business intelligence and transactions. We must avoid at all costs what Anderson calls 'silos' within the specific business units, which own and maintain those systems. We must therefore take care to facilitate communication between the systems that manage, for instance, motor and domestic fabric and contents policies, making it easier for us to gain a comprehensive view of a given 'small client' and hence his or her value to Our Company. Anderson is also most specific regarding the competitive risks posed to Our Company when addressing this new market segment, specifically that the main clearing banks are now free to sell their own insurance policies, which makes our overhaul of our CRM processes and procedures all the more urgent. While CRM solutions have helped to balance the scales in favour of companies like ours in the struggle with our direct competitors for ownership of the customer relationship, the lifting of restrictions on the ability of banks and other generalist financial institutions to sell insurance products increases the competitive risk - and potential opportunity! Another aspect that we will have to take account of is mergers between our direct competitors and clearing banks, particularly international institutions like Citibank, who appears to be trying to establish a meaningful prseence in British markets by offering the whole range of insurance and financial services, combined into end-to-end financial service offerings. These combined entities require that we implement whole new systems for marketing and maintaining the latest generation of financial services products. We must, as a matter of urgency, fully exploit the Internet as a medium that allows us to utilise social media channels such as LinkedIn and Facebook - only the channel is new, the content is the same! It appears that many of our direct competitors have been notoriously slow to adopt the Web as a channel to potential customers offering commoditised products. We appear to have a major competitive opportunity by thinking of customers no longer merely in terms of revenue, but as a step toward the Web-based world of self-service, which is where LinkedIn and Facebook will be particularly useful. That said, we must pay the greatest attention to actual and prospective FCA regulations in this area. Anderson concludes that it is certain for insurance buyers is the fact that they, the people who purchase policies, must become the targets of long-term relationship building and dramatically improved service, elevating the importance of the client over the agent. This will be of particular importance when addressing small enterprises, sole traders and personal policy buyers. Anderson's arguments are further reinforced by the concept of relationshiop marketing, as outlined by the Business Insights Staff [Customer Relationship Management Strategies in Financial Services. Financial Services Management Report. Business Insights Magazine. [No Date Cited]. Web. 6th March 2014]. This article introduces the concept of Relationship Marketing, which, upon examination, is clearly the way forward. Relationship marketing is based first and foremost on focusing our efforts on customer retention and customer loyalty, rather than on individual sales. Furthermore, to do this requires that individual 'packages' of our policies are put together for each 'small' client. This will in turn require an emphasis upon higher levels of service that are very carefully tailored to the individual customer, not only in terms of our products but in terms of the whole 'customer experience'. It follows on from this that all within Our Company must share a commitment to achieve the highest level of customer contact, with each contact being used to capture information to build the relationship. This sound like a truism, but, as Anderson makes clear aboive, this has been greatly neglected in the insurance industry until now! It is to be hoped that this results in a high level of customer commitment, most notably repeat business! 3. Addressing Small Clients’ Need To Conduct Their Own Risk Assessments Examining the portfolio of available information regarding addressing the new market represented by small enterprises, sole traders and private individuals, the clearest difference between these categories of potential (and actual) client) is that they, by definition, cannot maintain their own Risk Assessment capability, and will therefore be reliant on Our Company’s customer service staff to conduct these Risk Assessments for them. The most expeditious way of doing this will be publishing a free-to-use software application, that such clients may run on their smartphones or tablets, that provides both industry-standard risk management algorithms and an expression of our range of insurance policies, both in terms of features and conditions, and price. That said, before setting out a detailed specification of such an application (to be the subject of a further, more detailed, Report, if requested), it will be necessary to set out an overview of the current state of play regarding personal insurance risk assessment. Beckman [Beckman, Keith. Risk Management For The Individual : The Key To Life Insurer Success In 2020 and Beyond. [No Date]. Web. 6th March 2014] explains in detail that the three primary insurance risks are : firstly Mortality, in terms of premature death and longer than expected lifespan, secondly, Morbidity in terms of disability, extended later life health issues requiring assisted living and long-term care (an obvious opportunity to 'sell' comprehensive health benefit plans), and finally, Investment risk, in terms of the risk of loss to retirement and personal investments. One matter that comes immediately to mind is that Our Company will be very well advised to put together one or more products that 'cover' investment risk. Beckman holds a very pessimistic view of this, but we should not let the opinion of one individual deter us! Beckman makes it abundantly clear that, if Our Company is to prosper in this new (to us anyway!) market, Our Company will need to become personal risk managers for small enterprises, sole traders and individual customers rather than just a place where insurance policies are sold. We must therefore offer a wide range of policies that provide comprehensive risk management services for individuals, families and small enterprises. The products must offer lifetime protection (or, rather, for the duration of the policy). Beckman also strongly recommends that an online and interactive system be implemented that captures the full range geographic, demographic, financial, health and material information. This information must then be used to explain to potential customers the implications of the primary risks they face, both at present and in the future. Potential customers must then be provided with a menu of several possible insurance policies to choose from, with each policy offering protection from all the primary risks, but differing in cost and the amount of coverage provided. All the policies on the menu must be based on the applicant’s risk tolerance and other variables, so that regardless of the policy selected it will provide the best possible coverage at the lowest possible cost. Each policy must therefore be expressed in flexible terms. For example, the amount of insurance would vary over time (possibly reaching zero coverage at some point) and be calculated using factors such as income, family status, other assets and tax (particularly for sole traders and small enterprises) considerations. Beckman goes on to explain that, even after the policy is issued, the risk management system must allow the client to view updated illustrations as circumstances and risk tolerances change. The system must continuously monitor changes in the client's risk exposure and notify the client of any coverage adjustments that may be required. It is to be expected that he actual policy details will vary from customer to customer, but the main objective must be to enable individuals to fully understand the risks they face and provide the most cost-effective way to protect them from as much or as little of a specific risk as they wish. Beckman also reinforces the propositions cited above that, for a risk management process to work as it should, and make sure it is financially sound, a whole variety of potential problems must be taken into account. Firstly, Our Company needs to dramatically improve existing enterprise risk management practices. The FCA, other regulators, the public, and company management must all be confident that Our Company will be able to handle the additional risks they are accepting. We must also take full advantage of a larger pool of offsetting and uncorrelated risks, providing a reduced net risk exposure and an improved ability to absorb future extreme unexpected events. In the conclusion of his argument, Beckman stresses that Our Company's marketing effort must be improved to better educate the potential 'small client' customer base about the risks that imperil the financial health of individuals and small enterprises. For our policies to work in this context, the public must understand it is more effective and less costly to address these risks at the enterprise or individual level rather than in piecemeal fashion through a variety of separate policies. The underwriting we arrange must be flexible and timely, while making the fairest practicable selections. Technology and electronic commerce are advancing rapidly, and Our Company must fully utilise these technologies such as LinkedIn and Facebook in all aspects of the marketing and administration of our policy range. Works Cited Anderson, Brett The Insurance Industry: A New Customer Policy. CRM Magazine. October 2000. Web. 6th March 2014. Customer Relationship Management Strategies in Financial Services. Financial Services Management Report. Business Insights Magazine. [No Date Cited]. Web. 6th March 2014. Beckman, Keith. Risk Management For The Individual : The Key To Life Insurer Success In 2020 and Beyond. [No Date]. Web. 6th March 2014. Further Reading Association of British Insurers. Identifying The Challenges of a Changing World. The Trends Facing Insurers Towards the 2020s and Beyond. Chapter Five. 9th July 2014. Web. 1 Mar 2014 Financial Action Task Force. Risk-Based Approach for the Life Insurance Sector. October 2009. Web, 1 Mar 2014. Dexter, Nick (Chairman), Ford, Chris, Jakharia, Parit, Kelliher, Patrick, McCall, David, Mills, Cameron, Probyn, Alex, Raddall, Phil, Ryan, James. Quantifying Operational Risk in Life Insurance Companies. Developed by the Life Operational Risk Working Party. 26th May 2006. Web. 1 Mar 2014. Pauli, Karen, [Research Director, Insurance, Tower Group]. Optimizing the Value Chain : Collaborative Customer Knowledge in Global Insurance. October 2009. Web. 6th March 2014. Read More