Other parts of this series:
- Creating New Models for a Digital Customer
- Emerging Business Models for Insurers: The Virtual Insurance Advisor
- The Everyday Risk Coach: Reducing Risk and Rewarding Customers
- Broadening the Customer Base with “Plug & Play” Insurance
- The Ecosystem Orchestrator: Giving the Customer Broader Options
- The Peer-to-Peer Network Operator: Tapping into new customer pools
- Insurance distribution: The need for change
With insurance startups, new players and innovative peers all competing for business, established insurers have to move, and quickly.
Over the past weeks, we’ve discussed five emerging insurance distribution models made possible by innovative technologies and new data sources. Insurers may adopt more than one of these models, and will probably do so while maintaining traditional business lines. But the need for change is real; disruption is taking place now.
Customers’ expectations are transforming and competition is growing at an increasingly fast rate. Since 2010, more than $6.3 billion has been invested in insurtech, with $1.6 billion just in 2016. The number of deals is also increasing, with 216 recorded in 2016, up from 140 in 2015 and 102 in 2014.
Most of the investments in insurance startups come from consortiums of private equity and venture capital investors, but insurance companies are now establishing their own corporate VC funds and joining the insurtech explosion.
At established insurers, project lifecycles and product lifespans are compressed and there is a compelling need to keep up or risk falling by the wayside. Speed is becoming a competitive advantage.
The models we presented all have advantages and disadvantages. “Everyday Risk Coach,” for example, can engage and retain customers, but is expensive to establish and maintain. “Plug and Play” is a relatively inexpensive way to expand customer reach, but it lacks intimacy and may not deliver the insights to grow those relationships. For that reason, we believe high-performing insurers may engage in multiple models simultaneously or may blend the models, while continuing to transform their core distribution capabilities. A multi-speed approach is inevitable.
Liberty Mutual, for example, is pursing the “Everyday Risk Coach” model, focusing on the connected home in partnership with Vivint and Nest. It also uses a “Virtual Insurance Advisor” strategy by partnering with Amazon’s Alexa to allow customers to ask questions about insurance terms, locate a nearby agent, or request a quote simply by talking to Alexa. This is also an example of Liberty Mutual plugging into Amazon’s Alexa ecosystem consistent with the “Plug & Play” model. Over time insurers will further evolve their chatbots and voice bots, infusing them with empathy and personality that is consistent with their brand positioning.
For most carriers, there is strong value in a “phygital” hybrid distribution model, where insurers continue to optimize the cost and efficiency of their physical distribution networks –a core strength, but also a significant contributor to their cost base –at the same time as they invest in and test new models, some of which may be integrated with their distribution networks but others which may not. Customers are not all the same, and while many will welcome a digital and mobile experience, our research shows that others continue to prefer to buy insurance from an agent or broker.
Organizations need to do a lot of groundwork before they can move forward. Each carrier must examine its distribution assets, brand positioning and customer-segmentation in light of its current business strategy, target markets and existing capabilities to determine which models are most appropriate. For many, the plan will involve a balance of transforming the core while innovating in the new: a multi-speed approach.
Profitable growth is the goal of every company, but the requirements to meet that have changed. Facing an increase in the pace and intensity of innovation, high performers elevating their game.
- Read “The Future Of Insurance Distribution: New Models For A Digital Customer” Accenture.
- Read the first post in this series: “Creating New Models for a Digital Customer”
- Read the second post in this series: “Emerging Insurance Business Models: The Virtual Insurance Advisor”
- Read the third post in this series: “The Everyday Risk Coach: Reducing Risk and Rewarding Customers”
- Read the fourth post in this series: “Broadening the Customer Base with ‘Plug & Play’ Insurance”
- Read the fifth post in this series: “The Ecosystem Orchestrator: Giving the Customer Broader Options”
- Read the sixth post in this series: “The Peer to Peer Network Operator: Tapping into New Customer Pools”