First published in ITIJ 106, November 2009
Nicholas Thurlow, co-founder of Text2Insure, explores the growth of mobile phone technology as a key communications tool, for businesses to ignore at their peril.
The pervasive role of the mobile phone in today’s society is almost beyond comparison. Perhaps only the basic utilities could match the mobile phone worldwide in terms of the market penetration achieved by any commoditised product. In the UK, mobile phone penetration is over 110 per cent and 78 billion text (SMS) messages were sent in 2008 – a 38 per cent increase on the previous year. Furthermore, the number of text messages sent each day in 2008 was 216 million and the 10-year compound annual growth rate of data revenues in the UK mobile sector is 12.5 per cent, driven almost entirely by income from SMS. For one significant section of society, the mobile phone has existed for almost all of their lives and the statistic for this demographic speaks for itself; 95 per cent of 16-24 year olds send approximately 100 text messages every month.
Around five years ago, the insurance industry began taking tentative steps towards using mobile phones as communications tools. Our company commissioned a broad research study about usage habits, which revealed that over eight million people in the UK would consider using their mobiles to buy insurance and, in 2005, Text2Insure worked with its first partners to access this channel efficiently.
"in the UK the number of text messages sent each day in 2008 was 216 million"
It is important to note that travel insurance has to be available across a wide variety of platforms, whether through a high street broker, call centre or direct through the internet or, increasingly, through the mobile platform. Pioneering insurers should see mobile phones and SMS technology as a complimentary channel, providing them with an additional way to provide good service and value. With the customer journey having numerous touch points, the opportunity to integrate and connect with customers at any one of those points through their channel of choice is extremely valuable to ensure a seamless customer experience.
Pros and cons
The option of communicating with customers via their preferred channel, illustrates the main benefits of using text messages and, eventually, other mobile applications. By satisfying this need, insurers are offering convenience and seizing the opportunity to enhance the customer experience. The type of ‘anywhere, anytime’ communication that mobile phones can offer is peerless. It is highly flexible; the user is never tied down in terms of how or where they have to send or receive information. Similarly, from a travel insurance provider’s perspective, access to new market segments are opened, and having this additional channel means that better allocation of resources can be applied according to customer preference. Using mobile technology could, for example, reduce the need to earmark cost with an agent in a call centre.
If there is a downside, it is the fact that mobile technology, texting in particular, has to be used with greater relevance. In the early days of text message marketing, some users of this technology were far too liberal in how they contacted clients and, at the very worst end of the scale, would be mobile spamming. Research in 2008 claimed that 66 per cent of UK mobile users had received spam text messages. This statistic also underlines the importance of the first rule of marketing; know your customers and target their needs correctly. A welcome text message sent at the correct moment could mean the beginning of a valuable customer relationship or the affirmation of an existing one. The immediacy of SMS means you have a very good chance of actually getting hold of people and grabbing their attention. What you mustn’t be seen to do is abusing that relationship; if anything is out of scope or beyond the timeframe required within that relationship, it could be damaging.
Insurance by text – practical examples
A key component of the successful use of texting is the ability of the SMS service to tie into legacy systems. For example, if the travel insurance distributor is an airline, that firm will have much of the necessary data already required to make an insurance quote. They know who is in the party, how long they are travelling, how old they are, the holiday destination and what types of activities will be done during that period. In 2008, Text2Insure carried out a pilot project with a Dutch travel company that augmented its after-sales process at a number of touch points, inviting customers to take out travel insurance cover. Firstly, they would be encouraged at the point of sale, either in a branch or call centre; if the original sale was entirely Web-based then a range of offers would be suggested through that channel or through email contact. Finally, for customers who had provided their details, an SMS-driven travel insurance reminder and quotation service was enabled so that clients would receive a message shortly before their trip, or even at the airport. All that was required in response to the SMS, which asked if they would be interested in taking out a policy, was to reply ‘yes’, which would activate a policy. The travel operator had payment details already so that the premium could be charged immediately, documentation would be emailed or posted to the client and the policy number with emergency contact details would be texted to them. It is worth pointing out that there are slightly different rules in Holland than those applied by the UK financial regulator on how SMS can be used as a selling tool, but the premise is easy to follow.
The Dutch case study was highly successful with market-leading conversion rates with 10 per cent take-up through the SMS channel. It is also a useful demonstration of texting being used both as a communications application and also as a transactional platform – transactional being quote and buy, as well as claims notification. Communications services that insurers could consider enabling over an SMS application include policy confirmation, policy reminders, or other customer service messages, which are growing in sophistication all the time. For example, insurers can send VCF Files to customers’ mobiles which automatically populate their contacts book – an extremely useful tool for travel insurers sending details of emergency contact numbers and so on.
Costs of doing business
The vast majority of us are aware that SMS has become a cheap and abundant method of communication. Most individuals in the UK using either contract or pay as you go mobile phones will have SMS services bundled into their package and, with SMS such a ubiquitous tool, the perceived cost is very low in consumers’ minds. For a company using the application, bundles of text messages can be purchased for just a few pence, however researching suppliers is vital in this instance as the primacy and relevance of text message marketing is beholden to the reliable delivery and receipt of messages. There are a vast number of different ‘gateways’ that bulk SMS service providers can use to connect to the UK networks and reliability of these services varies enormously. Overseas gateways, where the SMS is dispatched from abroad, tend to be far less reliable than sending directly using a UK network.
Establishing the potential for two-way dialogue is also important but, ultimately, it’s down to a straightforward volume metrics calculation; if you send out 1,000 text messages per month, you will pay more per text message than if you send out ten times that amount. For a workable service, the insurer or white label brand will pay less than 10 pence per SMS. In comparison to someone answering a phone in a call centre or processing communication by post, it’s an extremely good value for money tool when used correctly and, as mentioned earlier, conversion rates can be high.
Crystal ball gazing
The mobile phone is beginning to gain traction, with travel insurers like Fortis using it as a complementary marketing and servicing application for consumers who are ready to move in this direction. We have to accept that familiarity breeds favourability. As we witnessed on the Web, there were a number of businesses who failed to gain any traction in this channel during the early days until many of them began to recognise that it is a marketplace suited to research and the aggregation of services. On the Web, smaller brands can compete with much larger ones on a more even footing when they utilise the channel effectively – through the application of search engine optimisation, for example. The mobile channel could exaggerate this effect, creating even greater transparency amongst providers who must concentrate on delivering a first-class product in the most efficient and effective way.
SMS is a key component today, but the broader mobile channel will gain even greater significance in the future. One of our key drivers within Fortis is to increase customer service and value, while driving down cost and improving access to our products. Clearly, the mobile channel will be a way of assisting customers in obtaining quotes and finding out information about insurers more readily, and will also help insurers reduce their processing costs. The next evolution will be in how applications are developed to allow travel insurers to provide their customers with value and services that they actually need over their mobile phones. 3G or ‘smartphone’ penetration is currently touching 20 per cent in the UK, according to the Mobile Data Association, and Fortis has already enabled a number of services for mobile-specific websites using the dot.mobi domain. There is also the potential for downloadable applications to these smartphones. However, whilst these are all very exciting developments, caution at this stage is advisable as the majority of the population is still without access to these platforms.
"a welcome text message sent at the correct moment could mean the beginning of a valuable customer relationship or the affirmation of an existing one"
Most of the applications on 3G phones provide a real-time service, so if we return to the airport scenario discussed earlier, we can see that one of the difficulties of issuing last minute insurance quotations is that underwriters want to feel confident that the client is not already lying on a mountain with a broken leg. Obviously while we would, of course, endeavour to provide some appropriate assistance to this person, it is essential that whatever information is passed to the insurer to validate the policy can be checked by underwriters to ensure a policy is being priced correctly, as well as help eliminate fraud. The initial concern amongst travel insurers who have yet to adopt mobile technology is that this is too easy to do. However, as technology moves on at pace, most people are aware of the GPS capability that smart phones are equipped with – an application from the insurer which allows confirmation of GPS location to validate the customer’s whereabouts would be highly pertinent.
No one can dispute the influence mobile phones have on our lives. As an insurance business, we need to find ways to embrace the technologies currently in the marketplace and those being developed. If we choose to stand by, then we will miss an opportunity and, perhaps, harm our businesses. When everybody in the country of a certain age has never known life without mobile communications, you then begin to think about the proportion of the country that accepts it as a primary, if not the key, method of communication. As mobile Internet access rises we will also have to work to find applications that can add value to the overall customer experience. The predictions are that eventually more people will be accessing the Web via mobile phone than by PC. This is evidenced further by a UN report published in October 2009, which suggested that 500 million people access the Internet via their PC and 600 million via mobile Internet. For those people who make mobile Internet their channel of choice, process flows need to be shortened and improved. Some people will still want to walk into a branch, but the insurance industry should be able respond to a customer’s needs through their own channel preference, not via channel the company itself would prefer to sell through.
 Informa telecoms and Media 2009
 Mobile Data Association 2008 UK Mobile trends report
 Ofcom Communications Market report 2008
 Informa telecoms and Media 2009
 Cloudmark Ltd 2008
 Standard file format for sending contact information for a person or business