A recent article (1) highlights
Prudential’s agents’ unhappiness with
‘digitisation’ of their business. The 2 main questions are whether this
unhappiness is founded or not and what impact this has for the future of the
insurance industry, especially in line with the emergence on Insurtech.
The complaints centre on the fact
that Prudential is making available to customers via online channels the same
products that agents offer to their prospects, including the
basic/workhorse/most popular ones. Prudential management has been quick to
state that the agents returns will not be affected.
So what is the most likely
scenario?
Just think of it this way, if, without premiums going up,
Pru is able to finance a digital platform, maintain it, and still pay agents
full commission on sales they have nothing to do with, then it must mean that
the premiums Pru customers are paying today are too high since they can pay for
the extra costs of the platform...
Assuming that is not the case, so why would Pru be losing
money? It is possible that Pru believes that agents do a terrible job of
cross-selling products, and therefore the platform would pay for itself based
in sales of products they wouldn’t otherwise have sold.
I worked in the insurance industry for a while, and of
course there are customers who are more or less abandoned by agents and left to
their own devices. Agents most often focus their efforts on a few customers
whom they believe are more likely to buy or people they are closer to. But this
doesn’t mean that simply having a platform where these less served customers
could reach out to pru and make purchases would generate enough business (minus
agents’ commissions) to fund the platform.
I would think that what agents are really worried about is
the ‘customer ownership’. Again from my experience in the industry, agents
believe it is them who own the customer relationship, not the insurance
company. When an agent leaves, there is a process to deal with these ‘orphan’
accounts; they are basically reassigned to another agent, usually from the same
agency.
It is possible that this may change, with the insurance
company choosing to serve these customers via the platform rather than
reassigning to agents, effectively having the insurance company now own the
customer.
Furthermore, the company could enrol customers directly via
the platform, removing agents from the picture for simple products, and using a
pool of trained agents for products that require it.
In fact agents could fear that their role in the insurance
industry will change drastically, and there may be a need for fewer of them, to
act more as product specialists than engaging in the whole range of activities
they cover today.
Does that mean that digitisation is not a good thing for
agents?
The answer is no.
Digitisation is important, but it must be part of a transformation
of the organisation towards being data driven. I believe that, in order for an
organisation to become truly data driven, all its component parts have to be
more or less equally data driven – like
a chain whose weakest link determined its strength, the least analytically
mature component of an organisation determines its overall maturity and how far
it is from being data driven.
I am an outsider, and I have no clue how analytically mature
Pru is. However, as a customer of Pru, I get to see some of it. For example, I
have received calls from Pru agents/agencies I have had no prior contact with,
asking me about my policies with them; this should not happen. Usually only my
agent or his agency should have access to what I purchased, not other agents/agencies.
To me it means their databases are not that secure. The best part is that when I told my agent to complain to HQ, he basically said it happened all the time... So I am a bit skeptical
about how data driven the organisation is.
Anyway, that being said, I think it would have made more
sense for Pru to work together with their agents, rather than take the approach
they have, which leads to some legitimate fears among their agency force.
Pru itself has said that Singaporeans are under insured (2),
so if despite the personal attention that agents can give to their customers,
these are still under-insured, what makes Pru think that the customer would by
himself/herself buy from the platform?
Singapore is a relatively mature economy, insurers have been
here for ages, and even then people are still under-insured. People do not
decide to under-insure themselves, it’s most likely a matter of education, and
that’s where the agent, if properly trained, can bridge the gap. People usually
learn better in small settings; just like another Singaporean institution, the
private tutor helps students in 1 on 1 or small class settings rather than in
giant classrooms (or even worse on youtube videos...)
Basically, to me, agencies like Pru, still need their agency
force to be on-board, they have a crucial role to play. (And my friendly agent
would hit me with his hockey stick if I said otherwise). Education, and really
doing proper financial planning for their customers is key. Sure there are
stuff that can be bought ‘over the counter’ like travel insurance and are
hugely successful (4). But not every insurance product is in that category.
Does that mean then that the platform is useless?
Of course not. I have even written how the whole insurance
process could potentially be run on the cloud (3), so I get the importance of
digitisation. To me the platform and analytics should support the agent and
enable him/her to serve his/her customers better.
Properly built analytical models should give an idea of not
only the potential need of a customer, but also the right timing. The simple
way of working with agents to serve customers would be to:
- Inform the agents of whom, among their customers, is a good target for a specific offer now
- Allow the agent to personally contact some of the customers he/she wants to, get a commitment accordingly and a simple easy to use feedback loop.
- Contact the rest making reference to the agent if customers want to take action.
As a Pru customer, I have received SMSes that make me
offers, sometimes they include my agent’s contact details in case I want to
follow up. Well, none of their offers interested me; and the best part is that
my agent knows that. We meet up once a year of so, and go over the policies,
life… and he knows I do not need more coverage for now.
Is that all there is to digitisation or becoming data
driven?
No. Far from it.
Insurance companies are made up of many parts, and the
selling is only a small part of it. For example, once the customer decides to
buy a policy (whether it is via a platform or an agent) how quickly is the
policy sent back to the customer for take up?
Ideally this should all be straight through processing,
especially for existing customers whose KYC (Know Your Customer) is still
valid, all that’s needed is to get the customer to confirm the validity or make
necessary updates. Then the insurer should have the validated data of teh
customer and can proceed with the application proper.
Electronic forms are the best; while the platform should
have this feature by default, it takes little to provide agents with the
equipment necessary, a tablet for example (issues like online or offline are
dependent on the specific market) with in-built checks to ensure all
information necessary for an application is available and in correct form.
Then with correct use of technology, standard cases can be
approved almost instantly; I have reproduced a diagram from my blog (3) below:
In such a case, underwriters need only work on exceptions.
Using technology and analytics in this way makes the policy issuance process
much more efficient, customers get their coverage faster and agents can focus
on educating and selling rather than to have re-works, and the organisation
gets policies in faster and or good enough quality. A win-win-win situation.
Similarly the claims process can be automated, again I would
refer you to my earlier blog (3).
So the question is, has Pru done all this?
Well it has tried (5), but while this is a good beginning,
this is far from customer centricity. Basically Pru gives discounts on premium
if no claims are made. The interesting thing is that customers might choose the
game the system, pay for small ailments rather than claim, enjoy lower
premiums, and hit the insurer on the big ticket if any. I wonder whether
behavioural changes have been taken into account in pricing: no claims doesn’t
necessarily mean healthy, and incentivising gaming of the system is not usually
a good idea. People are not stupid. Instead of piecemeal attempts, customers
should be engaged, the organisation become customer centric rather than
organisation or product centric as seems the case above.
And I didn’t even get into data driven customer centric product design...
Sorry if this sounds like Pru bashing, it wasn;t my
intention. But I see this episode as a case of an attempt at digitisation
without looking at the big picture of being data driven and customer centric. I
am sure Pru is not the only insurer in this situation.
As long as there is no
effort by insurers to become truly data driven and customer centric (and this is a
process, not a single big bang), they will be vulnerable to more nimble
technology driven players, picking off specific profitable segments, and that
would be a double loss to the traditional insurers.
