Insurance firms must be quick to adapt to changing consumer expectations (2024)

Insurance firms must be quick to adapt to changing consumer expectations (1)

Helsinki, Finland. As the global insurance industry continues to adapt to a changing market, Nordea Life Assurance Finland is focusing on modernisation&nbsp

Insurance | Wealth Management

Interview with: Pekka Luukkanen, CEO of Nordea Life Finland

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The European insurance industry has been through a challenging few years; pressure is being applied to both the assets insurers manage and their capability to ensure returns on investments. In this difficult environment of negative interest rates and greater customer expectations, insurers are finding they need to innovate in order to survive.

Whereas insurers were once able to count on their cash to be a steady revenue stream, the highly challenging global economic climate has proven to be a risky environment in which to invest. Adding to insurer’s difficulties was the introduction of the European Union’s Solvency II regulations at the beginning of this year. They are a stringent set of rules governing capital requirements and the levels of risk insurers are able to expose themselves to. While designed to give customers extra confidence in insurers and modernise the way regulators supervise the industry, they have made competition a far more challenging task.

It is clear that not all companies will survive the current climate

In order to remain competitive, insurers are finding ways to offer more compelling products that can meet the changing expectations of customers. With Millennials expecting a more immediate and dynamic service from their insurers, some companies are struggling to modernise their offerings. This is a particular challenge for insurers who are still relying on outdated and inefficient data systems. In 2016, modernisation has become the key to survival.

Despite the challenges, the sector is presenting significant opportunities as well. World Finance had the opportunity to speak to Pekka Luukkanen, CEO of Nordea Life Finland, about Finland’s insurance sector, and how the company is taking advantage of digital technologies to stay ahead of competitors.

What are the biggest challenges for the insurance business?
European companies have been struggling with initially low and now negative interest rates for almost eight years. It is clear that not all companies will survive the current climate, especially since forecasts show that no significant changes to interest rates are to be expected in the next few years. The companies that have been unable to adapt in time, or have done the same thing for too long, are now in trouble. Unfortunately, the number of these companies is set to grow in the near future. An alternative scenario is that EU-wide insurance sector regulations will be loosened with the aim of providing relief to some companies. This would not be an easy decision: neither is it a desired development.

In general, it can be said that the prolonged period of low interest rates is making it harder to gain returns in the investment markets, forcing many insurance companies to develop their operations more rapidly than before. Challenges to operations are posed by stricter regulation, which despite its aims does not always improve the protection and service experience of customers, but instead makes operations more complex and increases costs for insurance companies.

In addition, operations are affected by demographic factors, such as an ageing population and longer life expectancies. This will increase indemnity costs for certain types of cover, including serious illness and permanent disability, in risk life assurance policies. Generally speaking, customers changing to doing business digitally will pose obstacles to companies operating legacy IT systems, thereby limiting their competitiveness. This means that those who simplify their operations will have a competitive edge.

What are the biggest opportunities for insurers?
A low rate of risk life assurance uptake, together with the inadequacy of social security will increase demand for the product. This is especially the case in Finland. Moreover, there is still a great need for saving and preparing for retirement, and in this area, the insurance sector will continue to play a key role. Companies with modern IT systems can take advantage of the acceleration of digitalisation in their operations. Insurers will be able to offer better customer experiences by analysing customer needs in more detail than before.

How is it that Nordea Life Finland differs from its competitors?
Nordea Life Finland has modern IT systems and, as the only major operator in Finland, it will have a single core insurance management system in the future. This will give us an overwhelming competitive edge, enabling us to carry out agile system development to reconcile great customer experiences with regulatory requirements. In addition, Nordea Life Finland has the best and most efficient insurance distribution channel, namely Nordea Bank Finland. Nordea Life Finland has also been able to renew its operations far better than its competitors and to adjust its business operations to meet the challenges of the operating environment, an example of which are the effects of Solvency II regulations. The company has also managed to improve the general quality of its operations, including in the European Foundation for Quality Management and ISO 9001, much better than its competitors.

How are you meeting changing customer needs and expectations?
Customer expectations will increasingly focus on the service experience and a customisable service package. Customers are no longer satisfied with just having an insurance product; needs arise after the product has been bought and customers will increasingly emphasise the benefits they gain from their insurance solution. This change is already very clearly visible in how customers do business with us: they want a full-service package that is available at any time, any place. There will no longer be any demand for traditional service concepts in insurance solutions that are not deemed absolutely necessary. In this kind of competition, the winner will be the service provider that is able to not only exceed customer expectations, but to demonstrate clearly to the customers the benefits they gain and, overall, to manage the flow of information available on its clientele as a whole.

How important is digitalisation in doing this?
Digitalisation offers the chance to do business with the insurance company at any time, anywhere. But it also requires simplification of the insurance solutions offered. Services must be extremely easy to use; every click or minute spent on accessing the service package becomes more important from the customer’s point of view. Digitalisation creates the expectation of the possibility for customers to personalise the service experience, which means we are no longer able to serve customers with exactly the same concept, just like many companies have done with traditional service models.

What are the benefits of migrating to a single insurance system?
A single core insurance system provides Nordea Life Finland with a unique competitive edge that enables us to develop our services extremely quickly and nimbly, with a focus on customer experiences. Moreover, a single insurance system will simplify the company’s operations, as every change needs to be implemented only once, unlike in a situation where we have many systems. The existence of a single, modern system also makes digitalisation development easier since it would be extremely difficult and expensive to build new service concepts into the old systems.

Likewise, what are the benefits of automating company processes?
Raising the rate of automation speeds up the handling of simple, high frequency tasks, freeing up employee resources for duties that require thinking and creativity. In addition, automation improves quality by minimising the risk of human error, thus lowering the overall operational risk. Moreover, a higher rate of automation enables us to comply with regulatory requirements without the need for additional resources since, for instance, all the work resulting from reporting requirements does not have to be done manually.

What are your plans for the future?
By pioneering new technologies we can devote more resources to improving the customer experience. We seek growth and are expanding into business areas where we can best take advantage of our strengths. For example, we have recently submitted a licence application to the Finnish Financial Supervisory Authority for establishing a captive non-life company that will complement our current risk insurance offering. The new company, being a subsidiary of Nordea Life Finland, will utilise our newly developed core insurance system. My prediction is that, five years from now, life assurance operations in Finland will look very different from today.

In the future, our company’s goal is to further increase our efforts in boosting growth in risk life assurance and to further develop insurance-linked saving through digital means in order to meet our customers’ changing needs. Our personnel, who are committed to their goals, will play a key role in these efforts. The company’s permanent goal is to continuously improve quality, which will continue to be channelled into great customer experiences.

Insurance firms must be quick to adapt to changing consumer expectations (2024)

FAQs

What do customers expect from insurance companies? ›

Insurance customers want to reduce risks in their lives and are willing to use risk-prevention services from insurers. This preference is most pronounced among millennials, affluent customers, urban customers, and families with children.

How do you change customer expectations? ›

Employ technology.
  1. Engage your customers through messaging. Before the pandemic, 89% of customers wanted the option to message businesses. ...
  2. Make your customer experience personal. ...
  3. Reduce friction. ...
  4. Offer ultimate convenience. ...
  5. Employ technology.

How customers expectations may change over time? ›

Expectations based on past experiences

Switching from brand to brand has become a lot easier nowadays. With more choices, access to information and an increasing preference for trusted brands, people are more likely to shop around to find the best differentiated experience possible.

What are the factors affecting customer satisfaction in the insurance industry? ›

The primary objective of this research was to study the factors influencing customer satisfaction. As per the results of factor analysis, five factors were identified namely: Trustworthiness, Competitiveness, Add-Ons, Peace and Coverage, and Customer Responsiveness.

How do insurance companies measure customer satisfaction? ›

By testing your innovations, you can evaluate their impact and viability, as well as identify potential risks and benefits. To measure client satisfaction in insurance, use surveys, Net Promoter Score, Customer Satisfaction Score, and Customer Effort Score.

Why is it important to adapt to changing customer needs? ›

Customer expectations have changed

The way you interact with your customers and fix their issues will determine whether they stay with your brand or jump ship”. Knowing and anticipating your customers' needs so you can give them an exceptional, seamless experience is key.

How to adapt customer service to different customers? ›

How do you adapt and respond to changing customer needs and preferences?
  1. Know your customers.
  2. Listen to feedback.
  3. Monitor trends and competitors.
  4. Innovate and experiment.
  5. Train and empower your staff.
  6. Measure and improve.
  7. Here's what else to consider.
Jun 14, 2023

What are the 5 main customer expectations? ›

There are five identifiable types of customer expectations: explicit, implicit, interpersonal, digital, and dynamic performance.

Why is it important to manage customers expectations? ›

Proactively setting customer expectations helps predict what problems customers will encounter and ensures that the company has a chance to prevent service deficiencies. This translates to increased loyalty and trust from your customer base.

What are the four main customer expectations? ›

4 Levels of Customer Expectations
  • Level 1: ACCURACY. The first of the 4 levels of customer expectations ask some clear and simple questions - Do they get what they asked for? ...
  • Level 2: AVAILABILITY. Second, is the product or service there when they want it? ...
  • Level 3: PARTNERSHIP. ...
  • Level 4: ADVICE.

Why is it important to meet or exceed customer expectations? ›

Increase brand loyalty: Exceeding your customers' expectations can inspire them to make future purchases from the brand. Influence product sales: Customers who have high expectations about your products or services may choose to shop with the brand, helping you increase profits and meet sales goals .

How to increase customer satisfaction in insurance industry? ›

How to improve customer experience in insurance: 10 proven strategies
  1. Streamline the onboarding process. ...
  2. Provide a personalized customer journey. ...
  3. Offer self-service. ...
  4. Implement a digital claims processing system. ...
  5. Provide online quoting tools. ...
  6. Ensure documents are mobile-friendly. ...
  7. Offer educational content.
Oct 31, 2023

How can customer satisfaction be improved in insurance? ›

Enhance Data Security and Privacy

Enhancing data security and privacy is the key to improving customer service in insurance companies. Customers trust insurance companies with sensitive personal and financial information, and companies must protect that data from unauthorized access or breaches.

Why is customer satisfaction important in insurance? ›

Importance of Customer Experience in Insurance Industries

A positive customer experience sets insurance companies apart in a competitive landscape and builds lasting customer relationships, leading to brand advocacy and business growth.

What do people want from insurance companies? ›

Consumers expect prospective insurance companies to provide the following: Personalization - they want to be more than just a policy number. Unbundled pricing for each component – they want to pick and choose the level of coverage but at bundled prices. Appreciation – They want to feel appreciated and understood.

What do clients value most from insurance agents? ›

Excellent Customer Service

The way your company treats a customer can make or break their experience. Provide personalized and responsive customer service to ensure that policyholders always feel valued.

What is an expectation of an insurance agent? ›

One of the primary expectations from your insurance agent is expertise and knowledge. Insurance is a complex industry with various policies, coverages, and regulations. Your agent should have a deep understanding of these intricacies and be able to provide you with clear explanations and guidance.

How do I convince my customers for insurance? ›

How to Convince Customers to Buy Insurance
  1. Tip 1: Understanding Customer Needs.
  2. Tip 2: Building Trust.
  3. Tip 3: Effective Communication.
  4. Tip 4: Addressing Concerns.
  5. Tip 5: Personalized Approach.
  6. Tip 6: Demonstrate Value.
  7. Tip 7: Offering Incentives.
  8. Tip 8: Follow-up and Support.
Jan 23, 2024

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