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Avi and Shefi Ben-Hutta are the siblings behind Coverager, the insurance industry’s essential source for intel and analysis. In this podcast episode, they explain the five elements of modern insurance and why insurers should revisit their assumptions about millennials.

Highlights

• According to Coverager, modern insurance has five distinct elements: convenience, fairness, utility, flexibility and social responsibility.
• Modern insurance customers—especially millennials—have many options for insurance, and that creates additional challenges for customer engagement. In addition, technology can amplify personal characteristics, such as price sensitivity or preference for good service. Carriers that are cognizant of this can connect with customers more effectively via digital channels.

Five elements of modern insurance, with Coverager

This is the second portion of our conversation with Shefi and Avi Ben-Hutta, the siblings behind the insurance news site Coverager. Last time, we talked about how they sift through industry PR to share insightful analysis. In this episode, we talk about their five tenets of modern insurance, assumptions about millennial customers that should be questioned—and how incumbents can distinguish themselves in a crowded marketplace.

The following transcript has been edited for length and clarity.

Hi, I’m Eagranie Yuh. Welcome to the second part of my conversation with the folks behind Coverager—best known for their slightly snarky, often humorous and always insightful insurance newsletter.

Shall we get started? 

Shefi Ben-Hutta: Let’s do it.

On your website you reference a talk that you’ve given, in which you describe insurance as a “rarely differentiated product sold to a generally indifferent customer.” I’m wondering if you can break that down for me.

SBH: The whole idea is that insurance is a commodity. And our premise is based on two things:

• The customer is indifferent to insurance. The average consumer can’t differentiate coverage from coverage, or carrier by carrier. It’s just a contract, a piece of paper. You are dealing with a customer that simply doesn’t care. If the customer hated insurance and you were trying to convince them to love insurance, you might have a shot because there is a thin line between love and hate. But if somebody is indifferent it is so hard to get them to the other side, and that’s why you can’t engage. The one exception is healthcare; people absolutely hate healthcare so you might get them to love it because there is usage there.
• Insurance is a zero-sum game. When we say it’s a war, it is absolutely war. If an insurer wins a policyholder over, someone lost. I mean, what are the odds you are going to get two car insurance policies? And how often will people shop?

Let’s talk about personal lines, because this is where the majority of innovation is happening. And also, let’s be specific. So what I just said may be not as relevant in the UK because in the UK, price-comparison websites rule.

But here in the US, it’s the wild wild west. You have so many segments of consumers, so many different habits, so many different behaviors, that the smart insurers are micro-segmenting and speaking someone’s language––not everybody’s language, that already has been taken. That’s the, “15 minutes can save you 15 percent or more.” You can’t be that. So it’s a matter of what can you be? And sometimes it’s as simple as coming up with a message that’s relevant to an audience.

But again, the audience is indifferent. So how do you get them? How do you acquire? I mean, this is why it’s called customer acquisition. You don’t attract in insurance. Nothing in insurance is attractive.

On Coverager, you’ve written about the five elements of modern insurance. I was wondering if you could share those with our audience.

SBH: Sure. So, before that, what happened is we started to cover modern initiatives and whether they were venture-backed—founders coming without insurance expertise, building from scratch an insurance brand. And then vice versa: we’ve seen incumbents create insurance brands, new insurance brands. Right.

But there were recurring themes, and they’re what led us to these five elements.

• Convenience. We always start with convenience because it drives innovation. Everything is about, “How do you make something simple? How do you make something fast?” And we’ve seen people talk about hassle-free insurance, instant, all that––by now they all sound the same, but convenience is the first element.
• Fair. When you can’t offer the cheapest price, you offer a fair price. Fair is kind of tricky because it’s really hard for me to explain to you what fair means, because what is fair to me may not be fair to Avi, but companies are using that term to lure folks in. For example, Root is fair; Trov is built on the concept of fair.
• Utility. We’re seeing insurance companies go beyond the core value of insurance: offering to sell you solar panels, offering a way to build rent credit, offering somebody to take care of your pet while you’re away. This is about moving an insurance customer to an insurance user by giving them something of value that they can interact with and building a positive association to the brand.
• Flexible. A lot of times this speaks to the notion of subscription-based services, which we’ve seen a lot of new entrants offer. This is a subscription, cancel any time; maybe on a monthly basis, maybe on a weekly basis. Maybe it’s the idea that you don’t pay a down payment. But all these elements really speak to the modern consumer because, again, the modern consumer doesn’t have as much money as prior generations.
• Social responsibility. This is things like B Corp companies, companies that are created for social good. And the idea is, “Can you incorporate a scheme in which your policyholder feels like they are in charge of where the money is going, or where some of the premium is being allocated to?”

On the social responsibility piece, insurance companies are known for charity and charitable events and obviously they support communities. I think when you incorporate doing good into your core offering, then that message resonates more. You’re seeing a lot more people––a lot more millennials––remember that Lemonade donates to charity, as opposed to Travelers. And we all know that Travelers donates a lot more. But you have to speak your customer’s language and know what would resonate with them.

Do you feel like the modern consumer is necessarily a millennial? Are these terms interchangeable or do you think that there are characteristics of the modern consumer that happen to be quite common among millennials?

Avi Ben-Hutta: So, I think that you could have a modern consumer that is probably a 45- or 50-year old that use a smartphone and obviously a computer, and they can do anything that a millennial can do.

I do think that when it comes to millennials, there are certain defining characteristics. As a millennial I can say that we all have struggles, especially financial issues. We grew up in a world before technology, but then we also have a world with endless options that’s so convenient.

It’s been shown that that when people have a lot of options, it’s not always great. So a few statistics:

• In 2017 more people quit than, I think, in the recession and 2008. And it’s not because they were fired—they just have the confidence that they can find a better job.
• With e-commerce statistics, the average e-commerce conversion rate was 2.6 % in the US in 2018. Imagine having a store in the real world and out of 100 people that come into the store not even three people buy.
• Or look at retail return rates. When you buy stuff in the real world then the return rate is 10%, but online the return rate jumps to 30%. When we buy stuff in the real world, if you want to return this, you’re gonna have to sit in traffic, go into the store, deal with retail staff. But on the other hand, when you buy from Amazon all you need is a label—and sometimes you can even call FedEx or UPS to come pick it up, and there is no guilt.

We’re seeing this with a lot of insurance companies. If you look at the most successful insurtech companies, they’re all lead-gen sites. EverQuote which went for an IPO, QuoteWizard which was acquired for over $300 million, and what they do is they give people options. Options to compare multiple quotes without the need to visit multiple sites.

So I think the number one thing insurance companies need to understand about millennials is that they have options. And to have options for a product like insurance, which is rarely differentiated, that is not good. Not good at all.

There’s an unflattering stereotype of millennials as being entitled, fickle or silly. Do you think there are any assumptions about millennials that may need to be revisited, specifically from the point of view of an incumbent looking to attract new customers?

SBH: The most important thing to remember—and you said the word so I’m going to piggy-back on it—is that they’re not silly at all. And they will go out of their way to understand what they’re purchasing.

I think that the average consumer is a lot more insurance-savvy than some insurers think. They have access to the Internet, they have access to social media and they know how to ask good questions when they want to. They know how to differentiate between a legacy insurer and someone new. They know to ask, “Well, what’s claims like? Why is the price low?”

I mean, don’t expect too much, because if your underwriter can’t explain it, then customers can’t understand it. And sometimes I do come across insurers that think their BOP is all that mighty, so you have to bring it down to the customer’s language. But you do have to work with a premise that if you guide them, they will buy. It’s a matter of building confidence, especially in personal lines.

ABH: There is an assumption that some insurance companies still have, that millennials want to engage with insurance. So I would say forget that assumption––that is not true. That is not going to help.

The other thing people are not talking about is that technology is an enabler of our personal characteristics. If in the real world we would go into a store and say, “I tried this but I’m not sure if this is my size or color,” this will go to the extreme when you buy online. I see this with my wife: she buys and buys and buys and she returns and returns and returns.

Your personality, combined with technology, is taken to the extreme. If you’re a suspicious consumer, you are going to do a lot of research to find the right product. If you’re not insurance-savvy then you’ll take the time to understand.

Insurance companies need to think, “Well, how was in the old days?” We had customers that are price sensitive and the ones that are not; the ones that are looking for an experience and the ones that eat peanut butter and jelly for lunch every day. So think of that, then say that technology will help that person achieve his or her goal.

That should be your assumption: that we’re still the same people and technology makes it easy for our personality to go to the extreme.

I’d like to look at another element of the millennial conversation, which is that for many years now the insurance industry has been facing this talent gap, where it’s not an attractive industry for younger people. With this influx of insurtechs, do you feel like that is attracting more people to insurance and might that lead people into the incumbent insurers?

ABH: I definitely think that insurtechs are attracting millennials. We see that. Most insurtech founders, I would say, are millennials, and most of the people that work for insurtech companies are millennials. It’s great benefits, great culture, without the politics of a traditional insurer. Insurance companies should adapt that mentality either by supporting insurtechs or building that innovation in-house, because that will be a good way to attract millennials to work for insurance companies.

SBH: My view is slightly different. I agree it’s about culture and benefits, of course, and your paycheck, that’s a must, right. But I also think it’s about making sure that employees, whether it’s for start-ups or incumbents, have meaningful work. Some insurers still struggle with mundane tasks and bureaucracy and getting approvals. This is probably where insurers should focus more on their efforts to streamline their operation and to attract more talent.

ABH: It also depends on the role. I know someone that works as a technology coach at a big mutual insurer selling life insurance and financial services products, and obviously when you try to recruit financial representatives that work on commission, it’s very difficult and the retention rate is very low.

I think that if you still want to rely on financial reps and agents, you’ll need to figure out a better way because it’s going to be very hard for them to be just on a commission-based model. In today’s world, people do not answer their phone or answer their email and the best salespeople today go work for Salesforce, they go work for Accenture, they work for the companies that reward them the most for what they can bring in. To be a salesperson and in insurance, that’s not an easy task and that’s not very rewarding. So incumbents need to rethink the entire model.

SBH: On a positive note though, you can work in insurance and have so many different roles. And just looking at my career, doing business analysis and product management, and I travelled and met people and interacted with agents and reinsurers and God knows, now we’re writing for Amazon. Who would have thought? I mean, I didn’t think that. I think you can be in insurance and not feel like you’re working in insurance, which is absolutely a plus.

That leads me to another theme that I’ve noticed on your website, which is this notion that insurance is already, or is at risk of becoming, invisible. Can you talk about that?

ABH: So we believe, or I believe––I don’t know if Shefi believes it 100% yet––but we believe that the way they are today, insurance companies have no right to be consumer-facing brands. You cannot compete for consumers’ attention with a product that lacks the five basic human senses and isn’t meant to be used.

What motivates people?

• There is instant gratification. Let me sleep outside an Apple store and get my hands on the newest iPhone because I have nothing better to do.
• There is quality. Think of shopping for an engagement ring. You don’t want to take a risk and buy from Blue Nile. You don’t know what you’ll get. So you go ask your friends, “Do you know who can sell me a good engagement ring?”
• There are emotions. This is relevant for insurance, and I like to give a different example. Shefi doesn’t like it so much. But think of your mother-in-law. It’s not very convenient to visit her for Thanksgiving, but you don’t want to fight with your wife.

SBH: I absolutely do not like this example. For the record.

ABH: But that’s the thing. It’s not convenient, but there are a lot of emotions at stake and you go out of your way to try to have the best time of your life. Usually it doesn’t happen, but you try your best.

And that is what insurance companies need to do. They need to find a way to get people to care enough not to go to Google, to care enough to say on Expedia, “No, thank you. I want travel insurance, but I have someone else offering it. It’s gonna take me another five minutes and I’m okay with that.”

So if you’re able to get to that level of connecting through emotions, I think a lot of insurance companies will have success. And this is specifically for the mutual insurers, the ones that really do care about their community and really do give back. Obviously a big part of that is agents, the ones that go to the soccer game or go to church on Sunday.

Emotions win. They win anything, really. It’s such a powerful force, but it’s so hard to get it right. And that’s what insurance companies need to do, because there is no way they can win with convenience and being digital. It’s not about being first or quick, or 90 seconds to quote, or 60 seconds or even a perk. If you can’t be the number one on Google, if you can’t have the biggest partner, if you can’t be the cheapest, you need to start thinking about emotions.

Thank you so much for taking the time to speak on the podcast, Shefi and Avi. This has been a really interesting conversation.

ABH: Thank you for having us.

SBH: It was fun.

ABH: Very fun.

Summary

• Coverager has a thesis that customers are indifferent to insurance—and that makes it difficult for insurers to engage customers.
• New insurance products typically leverage one of the five elements of modern insurance, as identified by Coverager: convenience, fairness, utility, flexibility and social responsibility.
• Carriers that understand what motivates their customers can create better connections. In particular, emotional connections and one-on-one relationships—such as those established with agents and brokers—can help break through the noise.

For more guidance on adapting to change in insurance:

• Learn why leaders who can build market-leading ecosystems will ensure they are the disruptors, rather than the disrupted.
• Read Accenture research on how to address the talent crisis in financial services.
• Find out why customers want carriers to provide more than just insurance.

That wraps up our conversation with Shefi and Avi Ben-Hutta from Coverager.

In our next episode, we’ll welcome Jennifer Fitzgerald to the podcast. Jennifer’s the CEO of Policygenius—not to mention one of Fast Company’s 100 most creative people in business for 2018. We’ll be taking a behind-the-scenes look at Policygenius, and some of the business decisions that have taken the insurtech from a start-up of five—to more than 200 employees. Until then, you can catch up with previous podcast episodes here.

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