To Be or Not to Be Digital - That Is the Question in Australia and New Zealand
April 16, 2019| Von Rob Frank
Region: Australia and New Zealand
Life and Health insurers in Australia and New Zealand are ready to take their next big step in using Behavioural Economics (BE) to improve loss duration.
BE is about increasing interactions with customers and trying to encourage changes in behaviour, attitude and belief – by giving the customer small nudges. Carriers in the region have been quick to explore the potential offered by BE techniques, particularly in relation to Income Protection (IP) insurance claims, but the effort has yet to translate into tangible developments in day-to-day claims management.
However, the strategic application of BE to claims handlers’ use of digital technology could change all that.
Today, IP claims activity at most insurers revolves around the use of the telephone for gathering information, building trust and establishing a rapport with the claimant. It’s where motivational interviewing (MI) found its place in the claims process. No longer was a claims specialist’s function restricted to merely obtaining information. The ability to influence mindset, elicit behavioural change and resolve ambivalence in a collaborative manner became a focal point of the claims specialist’s role.
We propose integrating BE with MI as a best practice embedded in claims management, making BE complementary to MI but, at the same time, a standalone component.
Simple interactions that increase the number of touchpoints with the insured could be a good place to start, establishing a partnership approach to restoring health and a return to normal activity. And using technology in its simplest form to “nudge” the insured toward changing attitudes and beliefs may be a good amenable method.
SMS text messaging is becoming a common form of communication between insurers and their customers and with good reason. Surveys suggest that given the choice between texting and talking, more people prefer to text, even over emails. This is particularly true of millennials who indicate a strong preference for receiving text messages from businesses - instead of phone calls, which they regard as more intrusive.
Remember, however, that text messaging should be used on a limited basis, at particular stages during a claim, rather than as the default method of communication. Therefore, the strength and benefit derived from strategic use of texting is preserved and not lost by overuse. From a global perspective, standards of data privacy regulations differ, so insurers should check their local laws before using text messaging during the claims management process.
One suggested point in time to employ text messaging is when the claims specialist knows that the insured is due to attend a non-routine medical appointment, to have tests or is having an operation. A short message wishing them good luck and asking them to let the claims specialist know how the appointment went would be appropriate. This message acts as a social cue, creating an understanding that the claims specialist is concerned for, and thinking of, the insured. Using the BE principles of pre-commitment and reciprocation, it also presents an opportunity for a prompt update from the insured on the outcome of the appointment.
A milestone in the claimant’s progress could represent another opportunity to send a short message to highlight and celebrate the milestone. For example, this might relate to an improvement in his or her medical condition, the reduction in symptoms, an increase in functional capability, the completion of treatment or a rehabilitation programme, or the cessation or reduced use of medication or assistive devices.
Yet another idea is sending a message asking the claimant if he or she is aware of the additional benefits within the policy and urging the insured to make contact if he or she wishes to discuss things further. This avoids the insured seeing the insurer as simply seeking to close claims or escape obligations under the policy, which would create an adversarial situation where previously the two entities enjoyed a positive relationship.
Harnessing technology with BE is an alternative approach to both understanding and influencing the drivers of customer behaviour. It adds emphasis to the factors of expectation and belief, which form part of that behaviour.
We know that many of our customers’ behaviours are driven by unconscious decision-making processes that are not always rational; BE acknowledges and addresses this issue, too. It therefore makes sense for insurers to use behavioural economics principles to understand and solve problems that have both a commercial and social impact.
The customer base of the Australian and New Zealand life insurance industry seems likely to be receptive to the BE-digital technology approach. Not only has the region seen an increase in the number of older customers - who have an appreciation for a more personal experience in communication - but it has also experienced a rise in the number of tech-savvy clients, particularly millennials - who are accustomed to interacting online and expect most transactions to be high-quality digital experiences.
Digital technologies offer significant opportunities for insurers in relation to both groups. Incorporating digital solutions enables insurers to engage, support and empower their customers during the claims process. In short, when BE is used correctly, it can be a cost-effective tool for implementing positive change.