Insurers should make full use of their preferred providers

We have worked with many insurance companies, and we keep noticing a major opportunity for an innovative insurer. It would be transformative to the insurer’s value chain, customer experience, and bottom line. Strategically, it would provide a competitive advantage to the adaptive agile insurer.

The innovative idea is for property insurers to leverage the benefits of their preferred provider network along the lines of their cousins in health and auto insurance. Auto and health insurance have strong preferred provider networks, and it’s time for property insurance to have them, too.

When a person is in a car wreck, they call the insurer and are guided to the insurer’s preferred providers. They do not google “mechanic near me”. When that same person is sick, they visit their health insurer’s preferred providers. They do not visit doctors outside their health insurer’s network. When that same person sustains water damage to their home, they google “plumber near me”, and they use a plumber likely outside of their home insurer’s preferred network.

Policyholders in the health and auto insurance industries use preferred providers. Why? Why do these same policyholders not use preferred providers with their other types of insurance? From what we’ve seen working side-by-side with our insurance clients, we have observed that auto and health insurers make a concerted effort at educating their policyholders on the benefits of using preferred providers.

It sounds simple, but easier said than done. Underlying this strategy are new capabilities, processes, culture, behaviors, org structure, budgets, performance metrics, analytics, and technology… and not just at the insurer but throughout the insurer’s value chain, e.g., agents, providers, vendors. And that’s just internal changes. Externally, an insurer must guide their policyholders to change their behaviors, which is no small feat. For an insurer whose claims are serviced mostly out-of-network, this can be a transformational change across the enterprise. It requires a long-term commitment and sponsorship from executives, creative strategic thinking, change management, and analytical rigor.

Still, our analysis supports the hypothesis that the benefits vastly outweigh the effort. The insurer and policyholder will see claims resolved faster, cheaper, and to a higher standard of work. This superior customer experience makes for happier customers, which means improved retention, better word-of-mouth, and fewer follow-on claims. Claims will be processed more quickly with lower overhead and fewer errors, because insurers and preferred providers can standardize and optimize over time.

For the same claims, insurers will pay less for higher-quality work by using preferred providers to do the work. This is where the strategic competitive advantage comes into play, because the insurer can then pass these savings onto policyholders via lower premiums, thereby outbidding competitors.

The strategy to fully leverage a preferred provider network allows a property insurer to deliver a better customer experience for a lower price, reduce a major cost, and streamline a major business process. The property insurance industry is beginning to embrace this idea, and the race is on to be the first firm to implement this transformational change, deliver a superior customer experience, and win in the market place.