Uncovering the Elements of Value in Commercial Insurance

This article originally appeared on Forbes.com.

How can commercial insurers deliver more value to their customers, and thereby earn greater loyalty?

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The question is devilishly complex. For one thing, carriers often have distant relationships and little contact with their business customers, especially when customers work through brokers. Even when carriers do have regular contact, many do not know exactly what their customers value or where they should be steering investments to improve their value proposition.

But insurers can win the battle to differentiate and earn customers’ advocacy. The battleground has shifted away from specific features and pricing of policies to elements at the relationship level, like being easy to do business with. And some companies have begun to apply a scientific lens to aspects of the value proposition that previously were difficult to quantify.

Bain & Company has identified 40 "elements of value" in business-to-business (B2B) markets—fundamental attributes of a company’s offering in their most essential and discrete forms—that lift value propositions above commodity status and benefit customers in particular ways. Think of a pyramid of value categories. At the base of the pyramid, a company must offer the table stakes of meeting specifications, at an acceptable price, with regulatory compliance and ethical standards—no surprises there.

Above table stakes, we group the first level of elements as functional, such as scalability or cost reduction. At the next layer, we encounter more subjective elements that make it easier to do business by raising productivity (time savings, decreased hassles) or by nurturing a beneficial relationship between the parties involved (responsiveness, expertise). Moving up, the elements address more individual priorities, whether they are personal (reduced anxiety) or career-related (reputational assurance). At the top of the pyramid are the inspirational elements vision, hope and social responsibility.

To understand these elements in commercial insurance, we recently conducted a survey of more than 1,300 US buyers and brokers. When we asked customers what they want from their carriers, buyers put a high value on a fairly predictable list of elements: risk reduction, cost reduction, availability, stability and reduced anxiety. However, when we derived what aspects prompt loyalty to carriers, other elements proved to be more important: product quality, expertise in the customer’s business and responsiveness—clear areas of opportunity for carriers.

Businesses working through a broker generally viewed their carriers less favorably than those who go direct, with the value perceived being distributed across carriers and brokers. Since brokers typically are the first point of contact in any interaction with customers, carriers get relegated to a secondary status. For example, half of customers said they are highly likely to switch carriers on their brokers’ recommendation, regardless of how happy or how long they may have been with their carrier.

Yet here carriers can still add value. Among customers with direct carrier experiences, we analyzed 10 key episodes that customers go through. Carriers that provide significant support at three episodes—an initial risk assessment, ongoing risk management advice and monitoring a claim—can delight customers. These carriers earn an average 20 percentage points higher than average on their Net Promoter Score (a key metric of loyalty), which is a big gap in an industry whose Net Promoter Score in the US averages about 10. And the benefits of a high Net Promoter Score flow through to company economics, as customers who are promoters tend to stay longer with their carrier, spend more and recommend the carrier to others.

Not only do these moments of truth offer an opportunity for carriers to earn greater loyalty, but technological changes make it increasingly possible to shine at those moments. Zurich scores highest in our survey as being significantly involved in risk assessment, in part based on its digital applications and tools. Using Zurich’s Risk Advisor, customers can undertake their own on-site risk assessments and generate practical risk-mitigation actions from the results. They can also develop scenarios to see how changing the ratings and implementing Zurich’s risk-improvement actions will affect the overall risk.

Carriers have a different set of elements to focus on with their broker partners. A carrier’s availability, for instance, is the most important element in creating promoters or detractors among brokers. Liberty Mutual excels here, far outscoring competitors on availability. The company strives to provide a wealth of resources through the online VantagePort portal, which features claims reporting, secure file sharing, loss control resources, case studies, customizable reports and more.

The challenge for carriers is to systematize availability in ways that add value to brokers while using staff time productively. They will need better tools to sort the urgent, high-value inquiries ("I have a customer who needs a quote by tomorrow") from the lower-value inquiries ("Make these small changes for the next policy renewal") that, over time, should be automated.

Executives at commercial carriers and brokers face dozens of potential options when trying to decide where to allocate scarce resources on marketing, customer service, or adding IT system features or analytic capabilities. The mix of objective and subjective priorities, and the different perspectives of end customers and brokers, can be tricky to untangle. Once managers identify which elements of value matter most to each set of important stakeholders, they will know precisely where to invest in order to stand out from the pack.

Darci Darnell, Prameet Jamnadas and Eric Almquist are partners with Bain & Company.