This blog is part of series exploring the nature of customer-centricity. Read the preceding blog.

Bearing these emerging threats in mind, insurers have to take a very considered strategic decision regarding the business models most suited to this new customer landscape.

The first option is to keep on keeping on. This would mean retaining a dual focus on manufacturing and distribution. An additional consideration is that in some countries, regulatory initiatives will tend to force companies to split these capabilities anyway.

Alternative strategies would be to focus on being a specialist distributor or a specialist product manufacturer.

The latter option might seem the easiest for many insurers, and the most in line with what they consider to be their core competence. The challenge here will be to develop the right quality of working relationship with the customer-facing organizations or entities to obtain the segmentation information they need to fuel product refinement. Without that link, insurers would be robbed of the “design oxygen” they need to keep their products relevant.

A drawback of this approach would be the diminution of the insurer’s own brand. The products it develops would most probably be branded by the customer-facing company, and so its brand would exist only in the B2B space. In other words, the trend would be toward commoditization, with insurers becoming product factories. For them, success would be utterly dependent on their ability to produce the product at the lowest possible cost.

There’s much to say against this option. In the short term, it avoids the pain and expense of transforming the business model, but the long-term prospects appear bleaker. Low-cost product manufacturing, whether it’s garments in Bangladesh or insurance products in France, is a low-margin, high-volume business, with everything that implies.

Microinsurance business models might indicate the potential for third strategy to evolve. This strategy would be to become an intermediary focusing on product development, policy administration and claims. At the front end, such an operator would use a mixture of various distribution channels or direct sales. At the back end, it would partner with risk carriers. Examples of this enhanced broker model can be seen at or For an in-depth examination of small-ticket insurance, read Big opportunities in small-ticket insurance.

2013 Digital Insurance Survey EALA: Insurers commit to digital transformation as a lever of high performance
Read the survey report.

Most insurers intend, it would seem, to undertake the digital transformation required to retain successfully that all-important customer interface, and so their brand differentiation—whether as specialist distributors or more customer-centric digital versions of their current selves. One of the standout findings of Accenture’s 2013 Digital Insurance Survey was that 78 percent of executives in Europe, Latin America and Africa believe their firms will increase investment in the digital transformation of their sales and distribution over the next three years. This investment is quantified at €30 million ($40.6 million) for property and casualty insurers and €21 million ($28.4 million) for life insurers. Read the survey report.

These are substantial investments in anybody’s language and they are driven, of course, by expectations that the income from digital channels has the potential to more than double between 2012 and 2016, from €12 billion ($16.2 billion) to €25 billion ($33.8 billion).

It will be a long and complicated journey, to be sure, but by developing a new business model, insurers will develop both the ability to understand their customers better and then to act on that understanding by tailoring a desirable customer experience, one that meets their needs and thus breeds loyalty. The core of this digital transformation will be a dramatic shift in focus from product development to solution creation.

3 responses:

  1. Thomas, when you’re next in London it would be great to meet up. I’m in the middle of a digital transformation programme at a large personal lines insurer and I think you’d find it interesting to hear my experiences.

    1. Stu, please contact me at my e-Mail address or mobile +41 79 540 5552 to have an initial discussion on your project. Sorry that my response took so long, I only became aware of your comment on my blog very recently.



  2. Personally I believe that a commitment to serve the best interests of the client at all times including proper education about the products, genuine personal interest, and good follow through are keys components to any business that provides a service or product for the purpose of providing a service.

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