MiFID II clock is ticking for financial services to adopt new tech

When we think customer service we think Amazon, First Direct and John Lewis.  We don’t think Ryanair, Sports Direct or TalkTalk, which according to a poll, are among the best and worst respectively for customer service (2017). The reason we remember the best is because we remember positive experiences.  Afterall, they’re what keep us coming back. What do the best have in common? They rely on cutting edge technology and big data to create personalised, fluid and enjoyable experiences that offer trust and transparency.

With the introduction of MiFID II fast approaching, the clock is ticking for the EU financial services industry which is seeing major regulatory disruptions to the way it uses technology to interact with its customers.

As of 3rd January 2018, companies that deal with financial products will be expected by EU law to capture, maintain and store all communications involving a transaction, or intended to involve a transaction, between buyers, sellers and intermediaries for up to 7 years. These changes aim to promote cross border business, increase market transparency and improve investor protection. Such a shake up calls for a serious technological revamp to the IT landscape of insurance firms, which has noticeably fallen behind other financial services when it comes to the customer experience.

Banks have improved their mobile and digital offerings and gathered additional data to provide a more personalised customer experience. As a result, more customers are engaging in personal interactions online and with call centres, allowing banks to tailor their services.

Insurance firms could learn a lot from banking, and do more to show that they are responding to customer’s requirements

...said Joe Heapy, co-founder of Engine Service Design. He argues banks provide a more personalised experience through the use of data, and have enhanced their mobile and digital service offerings.

Taking out a policy or making a claim, for example, should be made as easy as possible with customers able to access the information they need and execute forms quickly. Customers should also have transparency and visibility of claims and personal policy information. Distributors also need on demand access to information and the ability to present it to customers in a seamless way, whether online or over the phone.

Andrew Brem, chief digital officer at Aviva says, “Buying insurance is ridiculously retrograde, with endless questions resulting in a quote.” He believes, “We’ll be moving to a world where those questions are basically unnecessary. With the use of big data, we are discovering interesting and accurate predictors of risk that do not involve asking people questions.”

When it comes to buying insurance, trust and transparency are pivotal factors in determining the quality of the customer experience. This is something the insurance industry in particular has struggled with, especially since the likes of the PPI scandal in the UK. While 89% of companies expect to compete primarily on the basis of customer experience, the insurance industry is ranked #4 worst sector for customer service in 2017.

Amazon plans to exploit this industry deprivation and investors should be worried. Largely because people like Amazon and it already means everything to everyone, but more importantly, because Amazon’s got the tech.

Industry leading artificial intelligence is testament to Amazon’s investment in technology, which has already brought voice-activated speakers to households. It’s hugely popular Prime service would fit well with the monthly subscription payment model, which is becoming increasingly offered by insurance providers. It’s clear, Amazon does not compromise its efforts towards using technology to create an unparallelled customer experience. A superlative reputation for clear communication - in the form of package tracking, straightforward returns policy and customer service reviews would fill a significant gap in the industry, placing Amazon light years ahead of most existing insurance providers before it’s even entered the game.

According to a recent GlobalData survey, 18 percent of people would buy their motor or home insurance from Amazon before they’ve even begun marketing or offering it. According to GlobalData Analyst, Patricia Davies, this should incentivise existing providers to get ahead quickly to avoid being relegated to the role of a price-driven risk carrier at the back end. 

So, how can providers can get ahead?

The digital universe is doubling in size roughly every two years. This exponential growth is attributable to a variety of factors including, new and cheaper solutions to store, manage and process data (i.e. the cloud), a substantial rise in computing power, a decline in related costs, the ubiquity of the internet and the proliferation of online devices.

Millennials, whose exposure to digital technology and innovative platforms from an early age have made them the first generation of “digital natives,” are beginning to move into their peak earning and spending years and have become an influential segment of the population. Their high expectations for technology-based services, convenience, transparency, speed, regular engagement, and a personalized experience that reflects their needs are defining how products and services are delivered.

To stay agile and competitive in today's digital world, insurance companies need to leverage the explosion of advanced data and analytics. Migrating to an IT infrastructure that supports the digital needs of customers, upholds government regulations such as MIFID II, and automates daily workflows is key to this transformation. This will help boost risk transparency, reduce the number of unknowns within risk models, curtail everyday accidents, mitigate damage, decrease underwriting risk, offer personalised premiums, expand insurability and create novel insurance products and services.

At Telefonix, we understand how this transition impacts a business. Having nurtured businesses through technology transformation specifically, we have helped those companies to measure and improve the customer experience, especially in the heavily regulated environments of insurance and finance.

Here’s our insight on how insurance companies can turn this around.

The backend insurance technology infrastructure in most large and mid-sized insurers is a maze. This is because most insurance legacy systems have been in place for 30-40 years. Often a complex of multiple core systems, today they are outdated, exhausted and generally inadequate for delivering the service that customers expect. Despite the lack of technology systems to exploit it, the vast amount of data stored on legacy systems in the insurance industry has made IT management reluctant to move.

But for the IT manager, the move from legacy to new business systems needn’t be complicated. It has never been easier to move to a different range of cloud, on-premise or hybrid IT and telephony solutions to meet different regulatory, security and customer experience needs.

The role of the IT Manager has changed.

The key is to think of the IT Manager as your Customer Experience Manager too. One change in your technology can make a huge change to the entire customer experience, and as a result, customer satisfaction and loyalty. The IT Manager’s new goal is to match business operations with the best technology to deliver a world-class experience to the customer. This has brought IT front and centre of the business according to Vic Bhagat, CIO of Verizon Enterprise Solutions.

There couldn’t be a better time to replace your legacy technology system, as we wrote in our recent blog. Cloud, on-premise and hybrid telephony is extremely easy to roll out across your company without any interruption to your business, with simple features and user portals that help you deliver a personalised and unique experience for each customer across all channels, every time, combined with customisable reports to help you measure and improve the results of your customer relationships.

Here’s 5 benefits of switching your decades-old legacy system over to an upgraded cloud, on-premise or hybrid IT and telephony system:

1 - Ensure compliance with regulations

Record conversations with voice clarity and call authentication, maintain recordings for up to 7 years with search and replay functions and have the ability to copy to authorities when required to meet MIFID II and PCI compliance. Cloud telephony and call reporting solutions also comply with the strictest security and customer data protection regulations.

2 - Stop asking your customer unnecessary questions

Answer any customer enquiry with a pop-up on screen with all the information and history about that customer, so you can provide better answers with all the context you need, identify up-selling opportunities and make your customer feel known and valued when you integrate your telephony with your CRM system.

3 - Direct customers to the right agent for their query

Direct customers to the right agent at the right location across multiple offices or subsidiaries by controlling the call paths through one central, online portal set remotely from anywhere with cloud telephony systems.

4 - Make improvements based on customer insight and patterns of data

Gain valuable insight into every step of your customer’s journey on every call with customisable call recording, reporting and monitoring and learn from each customer interaction. An integral part of modern broking systems is the management information they produce. Meaningful information can spot data patterns and forecast future performance, allowing brokers to assess everything from employee training to strategic decisions about the business.

5 - Lower costs

Replacing legacy IT systems can reduce costs by 15%, eliminate redundant platforms and processes and lower maintenance costs. Increasing the use of intelligence and automation can further reduce costs by up to 80% compared legacy manual processes.

Don’t let the BA customer experience disaster happen to you!

The Engine Design study cited airlines as the worst rated for customer service - high-profile incidents perceived as poorly dealt with by airlines are likely to have contributed to this. Engine’s co-founder Joe Heapy said, "British Airways’ IT meltdown and the United Airlines’ passenger incident were the most high-profile examples in an industry that seems to be struggling to look after its customers.

We live in an era where value and service trump price. If the service is that good, customers are prepared to pay a premium. When asked, “How would you like the experience to feel when interacting with a brand/company?”, respondents stated that more than anything a service should be “worth what I pay for it” (55%), closely followed by being “stress free” (53%) and to make them feel “valued as a customer” (48%). These three responses have been consistently the top 3 since 2014. 

To survive and thrive in the digital world, Insurance companies must modernize legacy systems. Leveraging new technology will improve their product offering, refine the customer experience and generate significant improvements in their cost base, whilst ensuring compliance with new regulations. Embracing digitalization eliminates the need for manual processes, freeing up resources to expend on innovation and customer service-facing services. Such a technological advancement, which directly correlates with an improved customer experience, will have a positive impact on retention and new customer penetration.

Talk to us for a range of options to suit every business size designed for the insurance and finance industry.

We have over 30 years of experience in creating customer experience and compliance solutions that have given businesses a competitive advantage in the battle to win customer loyalty and trust.

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