Few startups have shaken their industries as much as Airbnb did with travel. The decade-old startup has transformed how people book travel. With an NPS score of 74, the company is one of the most beloved companies in the world. Behind this score is a deep focus on giving users a world-class customer experience. Here is a conversation between Brian Chesky, the CEO of Airbnb, and Reid Hoffman on this topic:
One part in the conversation really caught me attention (transcript below):
Brian Chesky: If you want to build something that’s truly viral, you have to create a total mindf*** experience that you tell everyone about. We basically took one part of our product and we extrapolated: what would a five-star experience be. Then we went crazy. So a one-, two-, or three-star experience is, you get to your Airbnb and no one’s there. You knock on the door. They don’t open. That’s a one star. Maybe it’s a three star if they don’t open, you have to wait 20 minutes. If they never show up and you’re pissed and you need to get your money back, that’s a one-star experience. You’re never using us again. So a five-star experience is you knock on the door, they open the door, they let you in. Great. That’s not a big deal. You’re not going tell every friend about it. You might say, “I used Airbnb. It worked.” So we thought, “What would a six-star experience be?” A six-star experience: You knock on the door, the host opens. “Hey, I’m Reid. Welcome to my house.” You’re the host in this case. You would show them around. On the table would be a welcome gift. It would be a bottle of wine, maybe some candy. You’d open the fridge. There’s water. You go to the bathroom, there’s toiletries. The whole thing is great. That’s a six-star experience. You’d say, “Wow, I love this more than a hotel. I’m definitely going to use Airbnb again. It worked. Better than I expected.” What’s a seven-star experience? You knock on the door. Reid Hoffman opens. Get in. “Welcome. Here’s my full kitchen. I know you like surfing. There’s a surfboard waiting for you. I’ve booked lessons for you. It’s going to be an amazing experience. By the way, here’s my car. You can use my car. And I also want to surprise you. There’s this best restaurant in the city of San Francisco. I got you a table there.” And you’re like, “Whoa. This is way beyond.” … So what would a ten-star checkin be? A ten-star checkin would be the Beatles checkin in 1964. I’d get off the plane and there’d be 5,000 high-school kids cheering my name with cards welcoming me to the country. I’d get to the front yard of your house and there’d be a press conference for me, and it would be just a mindf*** experience. So what would 11-star experience be? I would show up at the airport and you’d be there with Elon Musk and you’re saying, “You’re going to space.” The point of the the process is that maybe 9, 10, 11 are not feasible. But if you go through the crazy exercise of keep going, there’s some sweet spot between “they showed up and they opened the door” and “I went to space.” That’s the sweet spot. You have to almost design the extreme to come backwards. Suddenly, doesn’t knowing my preferences and having a surfboard in the house seem not crazy but reasonable? It’s actually kind of crazy logistically, but this is the kind of stuff that creates great experience.
Now, if the above sound unrealistic to you, you’re missing the point. Airbnb knows there is literally zero chance of any customer being greeted by Elon Musk. However, outlandish the whole exercise might seem, it helped the Airbnb team identify what moving the needle on customer service would mean. It eventually helped birth Airbnb experiences, the company’s most unique value proposition to its guests.
The conversation also got me thinking about insurance. It is no secret that the industry isn’t exactly renown for being customer centric or transparent. Hardly so. Thus, I naturally wondered what an 11-star experience for insurance might look like. But I realized before I could identify what a 11-star experience might be, I needed to consider the earlier levels. As such, I have decided to imagine the eleven stars of customer service for an insurance customer. Here is how they might look:
1-star experience: You have to fill a physical form and send a physical letter to an insurance company to get a quote. You receive a quoted price a week later. Starting an insurance claim relies on snail mail too. The insurer then replies to your filled claim form with a bunch of support document requests. Ultimately, there are multiple rounds of correspondence for purchase and/or claim. If you’re lucky, the claim is accepted
2-star experience: You can now buy an insurance policy over the phone. Claims processes can also be started over the phone but still require sending most ‘proof’ documents via mail or fax.
3-star experience: You can now start the insurance purchase process over the internet. Quite frequently, you still get directed to talk to an agent on the phone to complete the purchase process. The call generally lasts 15-20 minutes and might involve the agent trying to up-sell you a bunch of related products. A claim can now be initiated via email but an agent typically calls you back to log the details of the claim. Claims processes typically close within 30 days.
4-star experience: Insurance purchase can now be done fully online by completing a detailed question set and getting a live price. Claims processes can also be done largely online via web forms and most small claims don’t require any follow-ups. Claims are typically settled within two weeks.
5-star experience: Insurance purchase can now be done online via a super short customer journey (<10 questions). Policy documents are generally only 4-6 pages long and are written in plain and simple English. Claims processes can be initiated fully online via a web or mobile app. They generally close within less than ten days.
6-star experience: The insurer integrates with your third-party data apps to tell you if you are eligible for any additional discounts. The purchase journey includes no additional follow-ups around unnecessary ancillaries or other cross-sells. You can now also cancel your policy anytime without any additional charges or fines. Claims processes can be now started via chatbots and via bots on Whatsapp, Telegram. Typically the claims FNOL process takes less than 10 minutes and most claims are settled within the same day.
7-star experience: Insurance purchases can now be done just as quickly across multiple channels. For instance, customers don’t necessarily need to go to an insurer’s website to purchase insurance. If they’re buying a car, they instantaneously see the best available price from an insurer during the car purchase journey via an api that integrates into the car dealership’s sales flow. The insurer also guarantees that a customer’s price can never go up for a fixed term of ~5 years if you make no claim. Claims are paid and settled instantaneously.
8-star experience: You buy a policy and you get a hand-written thank you letter and a welcome gift from the company CEO. The letter provides breakdown of your insurance premium and guarantees that your price will never go up as long as you don’t make a claim above $100K. The CEO includes his personal assistant’s phone number and asks you to call him directly if there are any issues with the self-serve claims settlement process. Additionally, each year that you stay with the company, you receive a new gift typically worth at least $100.
9-star experience: You buy an insurance policy and the company sends immediately assigns an agent who is available to take your calls 24/7. The agent will now act as your personal financial advisor. He stays abreast of market trends and products and sends you product recommendations. Not only are claims instantly settled but you always get the option to replace your damaged product (i.e. car, damaged good) with a completely new one no matter what the age of your existing product.
10-star experience: Not only is the agent your personal financial advisor, he is also willing to be your personal money manager. He can help you with passive investing strategies and doesn’t charge anything extra beyond the lowest advisory commissions. He will also helps you with any issues around claims and is generally your first point of contact if you need guidance around whether something is covered in existing cover or not.
11-star experience: You buy an insurance policy and the company sends you some shares in the company as a free gift. Additionally, your name is put alongside others customers on a plaque on a large wall at the company HQ and is published in all shareholder letters. The company creates a executive board where all customer-shareholders get a single vote. The vote dictates the future direction of the company and sets aspirational profit levels. Not only do all customers have full transparency on how the company is run, they get to have a vote on future company direction (by direct or proxy vote).
Now you might disagree with the list or debate with whether any of them beyond Level five are even feasible for the whole industry. But just as in the case of Airbnb, that is not the point of the exercise.
However, two things immediately stood out to me by brainstorming the list:
Almost all incumbent insurers are still stuck on 3 or 4-stars of customer service. In developing economics, most still giving their customers a 2-star experience.
I have previously expressed skepticism about whether any of the ‘insurtechs’ are really about much tech. However, it is quite clear that many of these startups are providing a 5 or 6-star customer service experience. Consider the following examples:
Lemonade has thoroughly simplified and significantly shortened the customer purchase process. Around claims, it has significantly expedited the average claims settlement time
Bought By Many has increased transparency in the industry by providing customers a breakdown around premium increases and simplifying policy terms
Knip helped users view and optimize their insurance coverage and gave them personalized recommendations. As such, it acted more like a trusted individual rather than a pure distribution/PCW platform
Vitality has reinvented health insurance by creating a rich ecosystem of rewards and benefits. Vitality customers get rewarded for being healthier and their loyalty and healthy behavior is rewarded with further deals, creating a positive feedback loop.
Perhaps that is the real reason why private markets have been happy to reward these companies with lofty valuations. Even if these companies aren’t creating the next tech ecosystem, they are definitely helping move an industry forward on customer experience. And while it might still not work out for the investors, it will have moved the goalposts for the whole industry on customer service and experience.