The ‘determining factor’ that will make consumers ‘stay or quit’ an insurer

The way claims are handled is a “determining factor” in whether consumers will stay at or leave an insurer.

That was according to Roi Amir, chief executive of Sprout.ai, who told Insurance Times that customers were expecting more from firms over claims handling following a shift in the use of technology.

For example, firms within the industry have been using artificial intelligence (AI) to bolster the way they can carry out tasks.

One of them is insurtech Lemonade, which was the first Insurtech UK member to be granted a carrier licence by the Prudential Regulatory Authority (PRA).

Earlier this year (16 June 2023), the firm used its AI chatbot to pay out a claim in the UK without any paperwork in just two seconds.

Amir revealed that research Sprout.ai had conducted showed that some 89% of customers would leave an insurer if they were to receive a bad claims experience, while 62% would stay should they receive a good one.

“What we found out is that the claims experience for consumers is a determining factor as to whether they will stay or quit an insurer,” he said.

“The service expectation of customers today is increasing.”

Tools

As a result, Amir stressed that all insurance firms needed to have the right tools in place in order to bolster their claims service to avoid problems.

For example, he noted that Sprout.ai had seen cases where a claims handler has had to look at hundreds of pages of policy documents, claims forms and support documents in order to make a decision.

“Getting to all this information is very time consuming and costly,” he said.

“So, putting the right tools in place in order to extract this data accurately saves a lot of time for the claims handler.”

Aside from insurtechs such as Lemonade, several insurance firms have started to experiment with AI to bolster the way they can carry out tasks.

One of them is Zurich, which revealed earlier this year (27 March 2023) that it was exploring how it could use AI technology for tasks such as extracting data for claims and modelling.

“If you have the right tools in place to make your people more effective, you can reduce the combined operating ratio and save money in your operation,” Amir said.

“The insurance industry is very low margin and competition is very high, so making the process more efficient, while providing better service, is key.”

Regulation

Amir’s comments came as new rules imposed on the industry by the FCA in recent times have meant that the service firms provide is more important than ever before.

One such piece of regulation are the personal lines pricing rules, which came into force last year (1 January 2022).

The new rules mean that insurers can no longer differentiate on the price charged to homeowners and motorists based on whether they are new customers or renewing their policies.

And the Consumer Duty regulation, which came into force earlier this year (31 July 2023), requires insurance firms to review their products and services against a new standard of fairness, with companies measuring, analysing and benchmarking their performance across different metrics.

David Lever, senior customer experience strategy manager at RSA, told Insurance Times that a strong consumer experience was a ”key differentiator in a competitive market” and could strengthen a firm’s overall position in the sector.

“Providing an exceptional customer experience throughout the end-to-end customer journey will keep existing customers and attract new ones,” he added.