Our Thinking

The valuation of a life and pensions business was traditionally done by actuarial measures, but now the focus is increasingly based on valuing customer service. This of course does not replace the financial measures but the recognition is that competition compels life and pensions firms to treat both IFAs and end customers well for long term relationships and hence financial value.

There is also a realisation that before spending on good customer service was seen as a cost. Now it is recognised that bad customer experience costs much more that the investment required to improve it in the long run.

We set out our discussions around five areas: what attracts customers to the provider; the changes in channels and customer journeys observed recently; how employees are being engaged; the level of customer centric culture found; and finally, what challenges remain.

1. What attracts customers to the provider?

A common issue with all the providers met was that in general there is little or no direct contact with the customer base hence creating a large pool of customers that providers do not know a lot about. As is typical of the insurance industry in general when contact is made it is infrequent and may only be at moments of either policy closure or distress and need. The primary route to the life market is through independent financial advisers (IFAs) or advisory firms, with pensions typically being dealt with either also through IFAs or via employers, rather than the individual. The market is now changing with customers often wanting more of a say in their own affairs. Only by understanding the customers better is it possible to address this trend and also target a greater share of wallet.

Most customers had personal relationships with advisors and this was the reason for initial contact. As their trusted advisors retire the customers still have a need for advice and are now coming to the provider directly more often. Having said that, in general end customers are still most often led to the product by advisors. Products are therefore often tailored towards the adviser sell. Some providers do not have particularly strong technical support teams, e.g. inheritance taxation so this is often supported externally. It is a complex environment, and the customer or IFA relationship is often made more complex by a plethora of systems, many of them legacy, with differing processes and procedures for product groups.

One provider we met had a discussion focus on heritage business, which covers a closed book with around 4.5m customers. Hence their marketing message is one of retention rather than attraction. The retention message has been tuned as a “reconnect” theme. This is managed by an “engagement and awareness” structure. The intention is that the business will reconnect with the large heritage base in a way that gradually engages via increasing steps of awareness over a number of years. In this back book of business customers remain (passively) for many years and so there is, in general, no urgent need to use push forms of marketing. The provider believes that retention and good customer experience is becoming interlinked and the key to success. Retention is often regarded as a “hanging on” approach to customers, e.g. not unlike mobile operators or utility companies where retention teams are dedicated to presenting immediate incentives to remain. This firm believes that retention and service improvement are very much interlinked, the focus on better service will by default increase and maintain retention.

Another provider wanted to be more responsive and use a core customer centricity strategy as a competitive differentiator. Customer Centricity is now one of their top four corporate priorities, with a significant amount of effort and management focus. It is also being firmly embedded across the global business.

What attracts customers to that provider? Customer views are framed by their last experience. Hence they have developed a focus on excelling in:

• Product competitiveness
• Relevant, clear communication
• Service experience
• Being easy to do business with

2. Channels and Customer Journeys

As selling is generally only via intermediaries customer ownership issues and difficulty in reaching and influencing end customer prevail, as clients usually buy into personal brand of IFA’s rather than seek out products specifically. There are limited touch points with customers, so it is difficult to get brand presence in the customer’s mind. Within that framework one provider in particular is starting to get much more tuned into what client wants. Initially Net Promoter Score (NPS) analysis was done on intermediaries only, but this has now been pushed out to include some end customers. This provider is keen to provide specific support services to intermediaries, IFA’s are already very customer centric, so they need to understand what end clients want and be bolder. NPS data is being used in one case to drive analytics and change programmes, and this is expected to drive development activity going forward.

What has become clear is that “one size does not fit all” regarding IFAs. There have been efforts to segment IFAs served to better focus on needs and areas that differentiate services, a positive move.

The interaction channels most observed at interviews are phone for inbound and paper for outbound. This is based on tradition and also customer preference. Disproportionately less use of electronic channels than may be expected was seen. This may be not only an issue with the preferences of customers but several providers acknowledged that their online channel was not as good as they wished it to be.

There is a push for plain language : this has two thrusts : a) clarity and b) a prompt for action. An example of engagement across the management team around this was with a Head of Legal. He was asked to sit on the Customer Centricity Council and is now really engaged with customer centricity. This has prompted an initiative to drive plain English and use of writing guidelines in all customer documentation, which is real progress when compared to the industry in general. There is a very different customer approach speaking to an IFA vs. an elderly person vs. a young person – it’s a little bit like combining B2B and B2C channels. The difference in customer approach manifests itself particularly in the written context. Previously, the style was too business or technically focused for end customers. There are now two distinct styles emerging to accommodate both sets of needs and this is a softer skill for employees to understand and empathise with the different styles.

In addition to the change of language, use of referral questions at the end of a customer engagement (e.g. key NPS measures are easy to business with, value add, personalisation rating, knowledgeable on products) help to clarify how well the provider did.

Personas are also in use in the industry, albeit at an early stage of adoption, and are being embraced as a way of communicating the customer values to employees. This creates fictitious yet realistic “caricatures” of real customer groups as a way of testing propositions and experiences.

Journey Mapping : one provider recently initiated a customer journey mapping exercise – a three day workshop to see processes from the customer’s perspective. This was a big effort and commitment but with very satisfying results that will expand to all areas over time. They are not trying to standardise across geographies, but some key global initiatives e.g. the Empathy Board (see below) and key data measures are being used everywhere.

There are many customer feedback loops in the industry and they should be encouraged more, this also helps get a better view of customer assets as well as their needs.

There is also a difference in how products are being serviced. Pensions are primarily advice, where e.g. protection products are open to a more active selling approach, something that the market is calling for.

3. Employee engagement

Employee engagement is key to customer centricity. Some customer centricity training has already been delivered by those interviewed. Every employee trained now has a customer centric goal in their objectives. This includes those not obviously in a front-end customer role, e.g. for Finance it could be around the swift provision of data that will have a positive effect on the customer experience downstream, even though there is no direct customer contact.

In some organisations Customer Champions have been identified across the business and are taking a different view. A good example of this is that there are now people saying in project meetings “that’s not very customer centric”, and it is then being taken seriously. A good strategy that was observed at one provider was a marketing policy that all strap lines and internal marketing should be focused on the customer. Customer feedback is posted verbatim on the walls for all to read, both good and bad. This is to demonstrate a sense of openness around customer performance.

Measurements include:

– Retention

– Customer Experience via CSAT

– Outbound written monitoring, this is transactional based. Reasonable response rate but often slow

– New outbound survey underway, by channel and based on actions

– Customer Effort Score is also a newly emerging technique – regarded as being quick and flexible

Recognition schemes are in place for good customer service. A “Customer Principles” workshop was recently held by one firm – this gave the opportunity for staff to listen to customer recordings and then work on these cases with problem solving practise.

Other examples of employee engagement are:

• Running a quarterly ‘Love the Customer’ week
• Giving “Wow Awards” for great service
• Team mixing to share their experiences
• Job swaps between countries for Customer Services Week creating an international feel around the customer space. Places for this are allocated based on a good customer experience competition where it must be demonstrated that customer focus is particularly strong

4. Level of culture embedded

The Voice of the Customer approach is now getting much greater engagement, and regulators are also pushing this agenda. Some firms noted that a “customer virtual seat at the table” is used sometimes in senior meetings; this is a powerful way of reminding decision makers that the customer should be able to hear what is being discussed and planned without the need to translate an internally-facing strategy into something that can be of appeal to them too.

It’s important to have a way of identifying and working on the most important customer issues. This has been achieved at one firm as follows: a person is responsible for understanding telephone feedback, complaints feedback, correspondence feedback etc. Each then collects feedback loops and identifies the top 10 issues. This is then worked out through an action plan, with at least five things underway at any time to ensure steady progress. The top five items are part of the executive feedback loop so change can be seen on a regular basis.

An example of this is previously Freephone numbers were not offered. By analysing feedback from this it was realised that there was a lot of negative sentiment about this in the advisor community. This has now been changed with positive response.

The ideal of embedded customer culture is the when someone calls it is answered by someone who knows the area well. In one firm this is a special team, the Commitment Team, who work on “Moments of Truth” interactions such as retirement options, critical illness claims and other non-transactional areas where the handling is critical to customer perception. It is not a call centre and cases are handled end to end by one person when possible.

Examples of non-critical transactions are transfer outs of policies or exit/surrender where there is no claim and it is more procedural. Other dedicated teams handle these.

The customer journey is split operationally into:

• New – Advisors, i.e. independent
• Claims – Commitment Team, builds specialist knowledge of each area and are trusted experts
• Other – Response Team, deals with process failures, goal is value and can enable change

The firm started this journey around eighteen months ago. There have been good results so far, but still a long way to go, particularly with some systems and processes. The biggest visible change has been at executive level. There is now a half hour slot at every executive session focusing on changes to and challenges with the customer approach.

There were two specific high level corporate initiatives noted in our interviews that appear to work well:

• Empathy Programme – this involves the whole senior executive team. It is pro-active and directly focused at the level of the end customer experience. For example, the programme allows senior managers to listen to actual customer calls and sees individual complaints and how they are handled. This demonstrates what is and isn’t working without these pain points being potentially masked by summarised management reporting figures.
• Customer Centricity Council – this is monthly and cross-company: it directly reviews real complaints, successes, TCF tracker etc.

Organisationally, one firm has a head of Customer Centricity role in place, a positive step and a way of ensuring that change will be embedded from the top down.

5. Successes, challenges – some areas of attention

• Single Customer View is still hard to achieve for all interviewed due to legacy IT.
• Online channel is often recognised as not being the best experience.
• More aware of intermediary customer (IFA) issues e.g. file sizes on website were taking a long time to download, now are easy to access with file compression and this is a big win with IFA’s
• Mini-councils (often local) in place for customer issues, and use of customer champions
• “Customer in the Office” internal programmes e.g. operations office has customer posters, verbatim quotes etc. displayed prominently around the office, physically “bringing the customer into the office”
• Further training programmes required to better understand who are the customers, internal and external
• Longevity of data and also M&A activity , creates data quality challenges
• Continued drive to drop the jargon when speaking to customers, keeping it appropriate for type of customer. Customers of all types now call one contact centre, this integration is on-going over the last two years and has been a big reskilling exercise. A single view of advisors, creating alignment to operations, only now starting of the end customer piece

In the words of one provider “A measure of sentiment is taken across one business every year, customer satisfaction level has been improving. “Customer words” have become more in evidence across the business and the general feeling is that although the journey is not finished, we are moving towards a much more customer centric organisation.”

In summary, all providers interviewed have embraced customer centricity, and having overcome some initial reluctance to engage across the organisation are now seeing benefits in the programmes and have the ultimate goal to make customer centricity the operating model, rather than a bolt-on programme that runs for a limited period before reverting to the way business was done in the past.