Insurers have to decide what their strategy will be as the new insurance value chain starts to take shape.

In this new connected world with its empowered and much more demanding consumers, it’s already apparent the focus of business is shifting away from providing products and services as best it can to providing solutions to customer issues. This is actually quite a profound shift because it means a greater degree of customer-centricity, and it almost certainly means that the insurer will have to collaborate with companies outside of its industry to provide these sorts of solution.

Here’s an example. Say an insurer provides a customer with a heart-rate monitor that is worn all the time, with the aim of helping the customer to build up a picture of her overall health, perhaps with the idea of reducing premiums. The customer need may involve reduced premiums but it’s actually much more likely to center on improving health and promoting longevity. Just getting some data about her heart rate is nice, but it’s far from enough.

In other words, the life insurer would want to network the monitor so it could aggregate the data and analyze it, comparing it with broader medical data, in order to provide the customer with an interpretation of what the data means.

But that’s still not enough. The insurer needs to help the customer take appropriate actions: find a trainer or fitness coach, find a medical specialist if that’s indicated, get advice about diet, get a better deal on the right kind of fitness gear, get advice on different types of sport or exercise, find a yoga or meditation class to reduce stress. The list could be longer, but you get my point: the insurer will need to team with other companies to provide the solution. In the process, the nature of the insurer’s business—what it actually does—would change over time.

Taking this option would be to become a digital life insurer, which has a number of implications.

The alternative would be to leave that to somebody else, and opt to become a utility provider of low-cost products—a manufacturer of insurance products with distribution totally handled by another company. This can seem attractive because it allows the insurer to remain very much in its comfort zone. My personal belief, though, it that this would be quite a demanding environment in which to prosper.

Next time, a look at what being a digital life insurer might entail.

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