Maria’s two requests of me
María asked me to comment based on 1) being a banking customer (what do I want or expect from my bank) and 2) as a manager. My reply as a banking customer was too long to put on her LinkedIn post so I wrote a LinkedIn post referencing Maria’s post with my comments as a banking customer.
For her second request, I am not providing my comments as a manager. I decided to comment on her post from my two-decade career of being a technology-focused insurance industry analyst (albeit by mentally changing the title of her post to be focused on the insurance industry rather than on the banking industry).
First, Maria’s Post
Maria Mioduszewska posted on LinkedIn the following banking post titled “Quo Vadis Digital Banking (part 1)” on December 3, 2019. The following is her post exactly as she wrote it (although I made a few small editing changes for the sake of (my) readability and added the green highlighting):
“We can probably all confirm that currently a customer-centric approach in banking industry is obvious even intuitively, without taking into account the results of surveys and scientific reports. It is forced by still growing competition and higher customer awareness and allowed by fast development of Fintech solutions.
Thus, I wonder if the real goal of the banks is to create customer segments of the size of one person. Could the banks operate like Spotify or Netflix one day? I do not exclude such an option, however it is a long-term dream vision.
Being pragmatic, I am interested in what the banks need to improve in customer service now and in coming 5-10 years. What will be the next milestone in digital banking journey?
I would focus more on the quality of CX, than on the decrease of the client categories. Would you agree?
Currently, CX in banking is still not on the highest level. The service has not been fully adapted even for the groups of clients. The client needs are translated mainly through his personal track in the banking software system. Is it enough?
What is your opinion on all these matters?”
A dozen matters in Maria’s post
Maria asked “what is your opinion on all these matters?”
I identified a dozen ‘matters’ or ‘concepts’ packed into Maria’s post (but I probably missed others):
- Digital Banking
- Customer-centric approach
- Development of technology solutions for banks by startups
- Adoption by incumbent banks of the startups’ technology solutions
- Customer segments of one
- Spotify or Netflix being role (business) models for (digital) banks
- How (digital) banks can improve on customer service now
- How (digital) banks can improve on customer service in next 5-10 years
- What will be the next milestone in the digital banking journey
- Quality of CX
- The (quality) level of CX in banking currently
- The adequacy of banking client needs being translated through his personal track (I assume Maria means through the banking core systems) in banking software systems.
To my Ovum & IDC Colleagues
My colleagues at Ovum and Financial Insights (IDC) are probably laughing that I have now written the terms “bank” or “banks” more frequently in this one post than in all the reports I wrote during all the years I worked with them.
But I invite any of them to provide their opinion on any or all of Maria’s matters. Yes, I know: that’s why clients subscribe to your banking technology advisory services and / or hire you for a consulting gig.
As an aside, I still don’t know why the insurance technology research / strategy area had to report to either banking technology or financial services technology analysts at Financial Insights (IDC) or Ovum.
As a global, trillion-dollar industry, the insurance industry can stand on its own, thank you very much. Not to mention the facts that the customer dynamics, marketing dynamics, and competitive dynamics of the insurance industry (regardless of major insurance line of business) don’t share much, if anything, in common with banks (or investment management firms). Oh wait, I just mentioned those facts….
The perspective(s) from a technology-focused insurance industry analyst
For the rest of this post, I am going to comment as if Maria’s post was titled “Quo Vadis, Digital Insurer?” I’ll let Maria, other banking professionals, and banking technology analysts note for themselves what the banking counterparts are to my opinions below.
Before commenting on the 12 concepts listed above (as a group and not individually), I want to meander a little bit. I’m doing this to establish 1) my personal analyst insurance industry focus and 2) to provide some background about insurance company business systems and their (implicit) ability to enable insurers to become digital insurers.
Focusing on customer-centricity since the start of my insurance career
I have focused on customer-centricity for decades that began when I worked in the insurance industry from 1973 to 1984. During that time period, I was fortunate to work in marketing / market research / operations research departments in almost every major insurance line of business. (Except for reinsurance or workers’ compensation.)
For me, the insurance customer was, and still is, the person who pays the premium and fees.
That does NOT include the agent, broker, or MGA: all critically important participants in the insurance value chain of activities to get, service, and keep customers. Important participants, yes. Customers, no!
One lesson I learned and relearned is that customer-centricity is not free, whether enabled by CRM systems, wrapped up in a CX philosophy supported by CEM systems (customer experience systems), or embedded in customer clouds. The perfect customer system doesn’t drop down from the heavens immediately ready to use and make customers, agents / brokers, and insurers’ lives easier. There is no magic bullet or even a silver bullet for that matter.
To be effective, an insurance customer-centric system must be a fusion of customer-facing and operational systems (i.e. a blend of front-and-back office systems). I have a strong hunch that the insurer’s financial systems (including reinsurance ceding and assumed capabilities) should be part of the fusion.
To be effective for whom? To be effective for:
- agents / brokers (inclusive of agency / broker firm owners, principals, administrative staff)
- carrier staff in every insurance department / functional area
- reinsurance staff within the insurance carrier
- reinsurance professionals that the carrier has ceding and assumed interactions
- third-party contractors (including independent claims adjusters, medical / healthcare staff providing rehabilitation services, and property remediation providers, and auditors.)
Business SBUs and associated software turfs abound
A brief forensic analysis of the business SBUs in an insurance carrier will quickly reveal the ‘machinery’ that keeps an insurance company in motion. I’ll let you pick your favorite insurance line of business (individual life and annuity, personal lines P&C, commercial lines P&C, and yes even my ‘won’t touch it line of health insurance’).
And what is that ‘machinery?’ The ‘machinery’ stands as a testament to the decades-long (hundreds of years long for many insurance companies, actually) longevity of the insurance company, including but not limited to: silos of systems, data marts, some data warehouses, collaboration / messaging / communication systems, a data lake (if the insurer has gotten ‘woke’ and began using Big Data and Data Science capabilities, and any number of clouds (some private, some public, perhaps a hybrid cloud or two?) and any or all involved with some mix of quoting / rating, pricing, underwriting, billing, claims management, Customer Service / CRM / CX / CEM, and agency management / producer productivity / sales management.
Accompanying the panoply of all of the above software systems (built and maintained for different product lines during the insurer’s existence and, at times, brought in to the CIO’s shop through M&A [each with their own plentitude of different software systems and solutions as a ‘gift’ to the acquiring insurer to integrate and maintain] is a rat’s nest of data flows that are not in the required shape to integrate with, well, with anything.
The data elements flowing in, through, between, and out of an insurer’s business systems are not standardized (I’m thinking of definitions / descriptions that are agreed upon by everyone within the insurance carrier or more generally within the insurance value chain encompassing agencies / broker firms and third-party contractors), nor cleaned, nor accessible because not everyone knows where to find these data (whether within digital business systems or hard-copy documents and forms stored in file cabinets and desk drawers).
I’m hopeful that people reading this post will correct me and tell me what I wrote above is no longer true or what parts are no longer true.
Now a statement truly based on my ignorance of banks, their products, their manner of go-to-market, and their customers:
I believe that if someone were to conduct a quick forensic analysis of a bank and compare the results to a similarly quick forensic analysis of an insurance carrier they would discover that the insurance carrier has more lines of business (including more products that the insurer has discontinued but must still maintain [to comply with insurance regulators and whatever insurance contracts the insurer sold the customer] until the last customer of the discontinued insurance product leaves on their own or dies), more customer-facing systems, more back-office systems, more channel / distribution management systems, more of a challenge with the data, and just, well just more challenges facing an insurance CIO / CTO than their counterparts in banking.
Customer interaction frequency
After the sale of an insurance policy, there is very little interaction between a customer and the insurance carrier. I am not slighting the amount of time that an agent or broker invests to make the sale or even to upset / cross-sell an existing customer.
I fully realize that my statement above really fits into a “variation of a theme” depending on the insurance line of business. Personal lines P&C are ‘fast nickels’; commercial lines P&C, which is essentially a relationship business, can take many months (or years) to build and sustain a relationship (and sales); and individual life insurance sales can also take many months and repeat visits (but not as much involvement of a salesperson’s time as closing and sustaining a commercial P&C client. Long Term Care sales are probably a piece of purgatory to a sales person from the viewpoint of how long the LTC sale takes to close.
But again, after the sale there is very little interaction between the customer and the carrier unless we are discussing (a P&C) first notice of loss and subsequent claim adjudication. As the old insurance quip goes: “a claim file grows faster than a 2-year old.”
I also know that I’m not stating anything that insurance, banking, and investment professionals (whether vertical industry analysts, journalists focused on any of these three industries, and people working within any of these industries don’t already know: customers have the highest degree of interactions with their investment firms, have the second-most interactions with their banks, and have the least amount of interactions with their insurers.
Regardless of the paucity of interactions that an insurance customer has with their carrier (or their agent or broker for that matter), the ‘quality’ of that interaction should always be extremely high. (Discussing what the attributes of a ‘quality’ customer service experience needs to be written in another post.)
My comments on Maria’s LinkedIn post
This brings me to the point to provide my comments on Maria’s LinkedIn post (taking the 12 matters or concepts I listed above as one complete set rather than discussing each matter individually).
Again, please remember my caveat: I am considering her title to be “Quo Vadis, Digital Insurer?”
What a ‘digital insurer’ is to me
First, what do I think a ‘digital insurer’ looks-and-feels like? I wrote a post October 21, 2019 discussing my take on a ‘digital insurer’: https://rabkinsopinions.com/2019/10/21/the-digital-insurer-capabilities-reality/
The essence of that post is that a ‘digital insurer’ would have no physical artifacts anywhere, that there would be digital artifacts throughout the insurer’s operations, that data will be the life-blood of the ‘digital insurer’, and that each insurance professional working in a ‘digital insurer’ would have to be an orchestrator of the firm’s workflows while simultaneously behaving like a jazz musician riffing off of the workflows. I also suggested that insurance professionals working in a ‘digital insurer’ will ‘subscribe to and stream from’ shared data flows to accomplish specific objectives.
I believe it will be many decades from now before most insurers are ‘digital insurers.’
However, an insurer doesn’t have to be a ‘digital insurer’ to provide a quality customer experience. I agree that it would be extremely helpful if the insurer was a ‘digital’ insurer to provide a quality bespoke customer experience: a ‘digital insurer’ would be more able to treat each customer as a ‘segment of one’ which every insurer should be doing currently.
Whatever you want to call the ‘quality’ of the customer service most of the insurance industry provides to its customers, it ain’t good. And that statement itself overstates how ‘good’ the customer experience is. There are a few insurers such as USAA and AMICA that always come to mind during discussions of insurers offering quality customer service. Given the thousands of insurers in the US, that is an abysmally short list.
Initiatives to consider to offer a quality customer experience
Insurers have a long road to travel to improve the quality of their customer service. Some of the initiatives insurers need to implement over the short and medium-term include, but are certainly not limited to:
- Establish an overarching customer-centric vision for the insurance company
- Constantly communicate the customer-centric vision throughout the entire insurance company, its subsidiaries, all the producer channels it uses to reach, sell and service its markets, and all of the third-party contractors participating in the insurer’s value chain to service its customers
- Create a customer-centric business-focused architecture
- Create a customer-centric technology architecture that supports the customer-centric business-focused architecture
- Decide whether to build or buy (or both) the requisite solutions to bring the customer-centric technology architecture to reality
- Ensure that customers, producers, and 3rd party contractors can access their authorized parts of the customer-centric solution on an anytime, anywhere, and anyhow real-time basis
- Rationalize / reduce the number of distinct, unique instances of their core administration systems (i.e. policy administration, billing, claims)
- Rationalize / reduce the number of silos, data marts, data warehouses, data lakes, and clouds being used to operate the insurance company
- Create standard terms and definitions for each data element flowing into, through, between, and out of the business systems and solutions
- Create a system to clean data elements flowing into the business systems and solutions
- Partner closely with the firm’s agencies, broker firms, and MGAs on data standards and definitions for all data elements of systems / solutions shared by the insurer and all of the producer channels.
Customer-centricity is a never-ending journey
Insurers have, as I mentioned before, a long road to travel to become customer-centric. It is a never-ending journey for an insurer, digital or not, to always be able to provide a quality, bespoke experience to every customer.
I’d like to hear your comments about insurers’ ability to offer their customers a quality customer experience.
1 thought on “Maria Mioduszewska’s Digital Banking LinkedIn Post: Fulfilling Her Request for My Comments”
Outstanding response Barry. Your use of the word “forensic” is perfect to capture all the elements of the insurance experience and the challenges to digitize it. The other myth you tackle is WHO is the insurance customer. I have seen many people struggle to provide a straight answer for fear of not offending the agents/brokers. You have it right and to sustain it you must deliver value to that customer. Many challenges ahead but a much greater number of opportunities to transform the industry