From Uber to Air BnB to Spotify, the power of a customer-centric and digitally sophisticated approach to business has been demonstrated repeatedly in recent memory. Insurance is not immune from this trend. Growing ranks of industry entrants are aiming to transform the insurance distribution chain.

Accenture research analyzes 196 insurance tech companies. These firms attracted US$4.9 billion in investment between Q2 2011 and Q1 2016. A solid majority of them, 56 percent, focus on distribution and marketing.

With digital platforms augmented by analytics, these entrants can scale quickly and threaten the traditional distribution model. They are generally turned off by the capital and regulatory requirements of underwriting. But they do want to own the customer experience, and their use of analytics gives them an edge in this.

Over 75 percent of insurance customers surveyed by Accenture report that they would change providers for more personalized services or tailored product offerings—and 38 percent of customers even say they would pay more for these benefits.

At the core of the operating models of these new players are powerful, multi-industry partnerships. These relationships are redefining the insurance distribution ecosystem. For instance, many auto dealers and manufacturers now offer insurance as part of a car-buying or car-sharing package. Retailers are increasingly linking insurance purchases to reward programs.

Established insurers urgently need to form such partnerships. Accenture research shows that 72 percent already have or are planning to. But attractive alliances are inherently finite. It is essential to move quickly and decisively. This is only possible with a deep understanding of the new entrants’ true intentions and capabilities.

In the fintech space, new entrants are using industry-leading technology to create disruptive product and service offerings. Companies like insureon can offer customers quotes in under 15 minutes with customized services in over 800 industries.

Other entrants are partnering with retailers to leverage point-of-sale convenience with brand promise to boost wallet share. For example, the upmarket UK department store chain John Lewis now offers insurance products underwritten by a panel of leading British carriers. These products incorporate the famous John Lewis brand promise: “never knowingly undersold.”

Point-of-sale convenience is also driving partnerships with auto dealers and manufacturers. For instance, Allianz provides seven days of complimentary car insurance to customers after they purchase a BMW car. Mileage is tracked with BMW’s ConnectedDrive, and the customer is invited to extend their coverage when the week is up. Since launching this global partnership in 2009, Allianz and BMW have tripled their customer insurance business.

Overall, these new entrants are leveraging low-cost digital channels, point-of-purchase touch points, and a superior understanding of the customer base to change the distribution ecosystem of insurance.

The industry is already responding to this challenge. Accenture research found that 59 percent of carriers are prioritizing a more customer-centric distribution model, and 48 percent either have built or plan to build a customer-centric hub that uses data and analytics to improve the service experience.

But many still hesitate to take more ambitious steps. Join me next week when we’ll go over five key points for insurers looking to create customer experiences that match these disruptive new entrants—or even surpass them.

 

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