My last blog touched on a subject that is actually very important when it comes to understanding the real opportunity that the right kind of innovation can open up. So, with your indulgence, I’d like to focus on it a little more.
The basic point is that one should not confuse product innovation with what I’ve been calling radical innovation. Of course, coming up with great new products is very much something insurers (and companies in every other industry) has to do. But, as I’ve argued, insurers face the challenge of disintermediation by new entrants who understand it’s all about packaging a solution for customers, not just selling them products.
It’s a brave, new world of industry convergence, in which some will own customer relationships and others will be pure manufacturers of products and services. As an automobile aficionado, I find it fascinating that today the big marques are outsourcing more and more of the vehicle manufacture to others. They are much more focused on building a brand that will attract customers, and using the vehicles, in effect, as a sales platform for a whole range of services. This trend is impelling the marques (or “manufacturers”) to bypass their sales channels to build direct relationships with customers—a trend that has obvious application to insurers!
To prevent disintermediation and to retain the link with customers, insurers will have to come up with solutions to lifestyle or business challenges that include insurance but so much more as well. One way to think of it is coming up with a comprehensive package that not only insures against a risk but offers ways to mitigate it—and then to cope with the fallout if the risk actually materializes.
One great example of this way of thinking is the assistance trend that is being adopted by some forward-thinking companies. It’s not a new concept, but it’s becoming mainstream under pressure from customers especially in mature markets. It’s quite a simple idea, and one that’s always been implicit in the insurance transaction: if your luggage is lost or your car stolen, we won’t just pay you out, we will help you deal with the loss by offering concierge-type services, like car hire or guidance on where to buy a new coat in a foreign city.
The insurer provides a solution to the problem, not a product. It’s all about putting the customer at the center of everything.
Another great example of this solution-based thinking is one particular South African insurer. Its health insurance is linked to a program designed to help customers manage their health better. It’s an extremely innovative and solution-based approach, with many different components. For example, gym membership is discounted and attendance at the gym earns loyalty points. The company has a deal with local supermarkets in terms of which purchases of fresh and healthy products also earn points and qualify for cash rebates as well. Undergoing certain screening tests also earns points.
This type of approach integrates the insurer into the customer’s lifestyle—and provides a great platform for cross-selling as well, as the company is successfully doing.
Radical innovation at this level translates into loyal customers and high profits. It also requires a customer-centric business model and a willingness to work with partners to create an ecosystem able to supply solutions.
In my final blog of this series, let’s talk a bit about how to build a corporate culture that nurtures innovation.