Insurers eye self-service

Self-service is a wonderful method for reducing costs and improving service. Just ask Dell, MultiChoice, Airports Company of South Africa, Barnes & Noble and Amazon.com. They are five companies that have found the benefits of self-service:

* Dell was able to allow buyers of PCs to choose and customise their own machines online, before ordering and paying for them. Dell then modified its internal and back-end processes and supply chain to support the ability to assemble and deliver people's PCs faster and more profitably than competitors could.
* MultiChoice used speech self-service to allow DSTV subscribers to fulfil the bulk of service requests, resolve decoder requests themselves, and remove the burden of three-quarters of mundane calls to live agents. Caller wait times were dramatically reduced, while customer satisfaction levels soared.
* Airports Company of South Africa went the same route, connecting its flight inquiry system to a speech self-service system so people could service 95% of their inquiries themselves. The range of benefits experienced was much the same as those of MultiChoice. These two companies represent among the best examples of technology-enabled customer self-service in SA.
* Barnes & Noble and Amazon.com created the potential for people to browse online, viewing and reviewing millions of books before making their selection. This obviated the need for bricks and mortar, creating instead "clicks and mortar" retail outlets, whose success has in some cases exceeded that of traditional outlets.

The theory, and in some cases the practice, is that by removing layers which add cost and complexity but no value, services and goods can be delivered at a lower cost. This is often the case with middlemen, such as insurance brokers, who skim a significant percentage of the overall value of transactions off the top, but without adding value to the transaction.

The ensuing process is known as disintermediation, and it has had a massive impact on the world in the last decade. It works best in commodity markets, where low-value, high-volume goods can be sold with little consultation or value-add.

Now, the insurance sector is targeting many of its products for precisely the same treatment, looking to go direct via the Internet, traditional resale outlets or via cellphones. The principle is sound, but the thinking a little flawed.

First of all, when it comes to Internet-based self-service, of necessity it applies to the top end of the market where people both have easy access to the Internet and know what they want.

It is also useful in enabling policyholders to manage aspects of their engagements with insurers: payments, upgrades, the issuing of contracts, claims, inquiries, data updates and the like.

For the rest of the market, especially the lower end, which is significantly under-serviced and hard to reach through traditional channels and impossible to reach through the Internet, the cellphone presents itself as the instrument of choice.

Given that the bulk of South African adults have a cellphone, this makes perfect sense.

However, the first rule of this new channel is that insurers must keep it simple. If in any way they make the sale of insurance products through this channel as complex as it is currently made out to be, it will not work. So processes and the overall approach to marketing, selling and communication need to change.

The first rule of this new channel is that insurers must keep it simple.

Freda du Toit is executive director at SDT Financial Software Solutions.

Secondly, insurers need to understand the needs of this new market. From my experience, we in the insurance market don't have a clue as to what people really want. We've made too many assumptions, and they are not necessarily valid.

As an example, we know that millions of people in the lower end of the market buy funeral policies, but not other products. Why is this?

One reason is that everyone knows the consequences of dying without adequate cover. They can clearly see the benefits of having such a policy in place.

Accordingly, people in the lower end of the market need to be sold, and passionately, the benefits of investing in specific instruments, such as life insurance. These benefits need to be explained clearly, as right now they are too intangible in this market sector, where short-term considerations often have priority.

One way is to begin at grassroots, and start with children at school. Children should be made aware of the importance of buying the right instruments early in their lives, investing wisely, and staying the distance with their investments.

Any person who has invested for three decades or more knows the power of compound interest, and of remaining invested.

While at it, insurers would do well to consider changing the back-end systems and the processes that allow them to go to market. That would have the benefit of reducing cost and boosting return on investment, key issues for people investing small amounts and seeking decent returns.

* Freda du Toit is executive director at SDT Financial Software Solutions.