Life insurers struggle with customer experience – Capgemini

Life insurers struggle with customer experience – Capgemini | Insurance Business New Zealand

Insurance News

Life insurers struggle with customer experience – Capgemini

Others in the segment face rising dissatisfaction and lagging growth

Insurance News

By
Kenneth Araullo

The Capgemini Research Institute’s World Life Insurance Report 2025 highlights ongoing challenges in the life insurance industry, particularly in meeting modern customer experience expectations.

Legacy technology is cited as a key barrier to progress. However, a small group of life insurers globally have managed to deliver significantly improved customer experiences, earning “best-in-class” status.

The report noted that these insurers have achieved a 38% higher Net Promoter Score (NPS), an 11% lower expense ratio, and 6% higher revenue growth compared to their mainstream competitors over the past three years.

The report also notes the pressures life insurers are facing, including high inflation, economic uncertainty, and waning consumer interest. Between 2007 and 2023, market penetration in mature markets declined by 33%.

Customer dissatisfaction is prevalent, with half of policyholders expressing disappointment with their experience, particularly in areas such as product offerings, onboarding, servicing, and claims processes.

Challenges arise throughout the customer journey. During onboarding, 35% of retail policyholders find insurance terms too complex, while 27% are dissatisfied with lengthy application processes. After purchasing a policy, 25% of both retail and group customers report frustration with long wait times, and 23% are displeased by the lack of self-service options for making policy changes.

The claims process, often impacted by limited digitization, poses further challenges. One-third of retail policyholders face difficulties with complex claims applications, and 27% cite a lack of empathy during claims handling.

Younger customers’ demands

The report reveals that younger policyholders, aged 18-40, experience more frustration throughout the insurance journey compared to those aged 41-60. Issues include slow and complex onboarding, limited communication channels, and insufficient self-service options.

Additionally, younger customers demand more claims flexibility, with 42% pointing to inflexible payout structures as a key concern, compared to 26% of older policyholders.

While insurers acknowledge the need to redesign onboarding, servicing, and claims experiences, only 9% have developed processes that capture data from multiple sources to deliver personalized experiences through preferred customer channels.

Samantha Chow (pictured above), global leader for life insurance, annuities, and benefits at Capgemini, noted that life insurance is moving from a “must-have” to a “maybe” proposition. She emphasized that insurers must move beyond a product-driven approach to focus on customer engagement, particularly with younger generations.

“Many insurers are struggling with legacy technology or investments that have failed to deliver the target returns. The path forward is a customer-centric transformation that draws inspiration from the best-in-class by embedding AI-augmented, human-touch service into core processes,” Choe said.

Efforts to improve customer experience have stalled for many insurers. According to the report, only 41% of insurers met or exceeded their transformation goals. Initiatives were often hampered by unexpected integration challenges, a lack of alignment with business objectives, and insufficient skilled resources.

Generative AI in insurance

Despite these setbacks, a small group of best-in-class insurers have embraced new technologies, including generative AI, to enhance customer service. These insurers have automated many aspects of underwriting and claims processing, enabling more efficient onboarding and improving the overall customer experience.

For example, 78% of best-in-class insurers have automated underwriting processes, compared to only 15% of mainstream insurers, and the same percentage offer policyholders access to self-service portals, versus 13% of other carriers. Moreover, 56% of best-in-class insurers provide AI-assisted claims services, compared to just 3% of mainstream insurers.

The report also highlights the transformative potential of generative AI but notes significant talent challenges. While 67% of best-in-class insurers are ready to leverage generative AI, only 25% of mainstream insurers are similarly prepared.

A shortage of skilled talent, particularly in areas such as behavioral science, experience design, and AI prompt engineering, remains a significant hurdle.

The success of future transformation efforts will depend on insurers’ ability to effectively implement new technologies and attract, develop, and retain the necessary talent. Those that can combine advanced technological tools with skilled professionals will be well-positioned to lead the industry toward a more customer-centric approach, it was stated.

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