As I predicted in my last blog, I believe 2018 is set to be an exciting (maybe pivotal) year for the LP&I industry. Spearheaded by new market entrants and evolving technology, innovation is hurtling ahead across financial services. Areas like payments, long-term savings and life insurance, once secure home turf for incumbent firms, are being claimed by hungry, young FinTechs and InsurTechs, flush with VC funding, lightweight and brimming with bold new ideas.
Traditional players are scrambling to keep up. But they face a big challenge. Unlike their nimble new competitors, they’re still stuck with mindsets and cultures that inhibit innovation and make it difficult to bridge the divide with their next generation of customers: the centennials. And that’s even before I utter ‘that word’… legacy!
Right now, we’re seeing most innovation in the long-term savings space. It’s certainly ripe for change and disrupters have been quick to seize the opportunity to capture centennial customers. Meanwhile, in insurance, protection is crying out for reinvention (particularly given the possibilities created by the IoT, micro-insurance and Open Banking).
Delivering innovation here should be a top priority for incumbent insurers. However, as things stand, they’re still predominantly geared towards traditional major life event sales-triggers like house purchases. This means centennials just aren’t in the frame. If they can’t find ways to attract them soon, firms will lose relevance and hence ultimately lose out on this crucial next wave of business. APE will plummet and capital strain will follow.
So, what does attract this new generation to a brand? Research we’ve conducted with our own centennials points to five key characteristics: relevant, personalised, accessible, engaging and proactive.
These are the top demands of the customer of the future. Innovators that can satisfy them with the right products and services will win out. Right now, disruptors are ahead in the race. To bring this to life, here’s a few examples of innovative propositions on the banking and insurance sides of the industry.
First up, Monzo, which describes itself as “the best current account on the planet” and has their innovation mission centre stage through their slogan, “it’s time for a new kind of bank”. Monzo’s built for the smartphone and in tune with all five trends above. Relevant, because it solves the customer’s needs through instant updates on their balance, fee-free foreign spending and easy payment to phone contacts (no longer any need for card machines to split restaurant bills). Personalised and engaging, because users can create their own monthly budget, and proactive because it sends notifications on spending patterns vs budgets. It’s accessible, because one click of the user’s thumbprint opens an interface that’s clean, intuitive and built based on customer’s feedback.
Next, the integrated savings chatbots of Chip and Plum. Both provide analysis of spending habits and automated savings. Chip operates through a smartphone app, Plum though the Facebook Messenger platform. To analyse their spending, users provide access to their bank accounts and high levels of engagement show they’re happy to trust these companies if the service is reliable and helpful. Chip and Plum meet this need by providing automated controls that enable regular saving without hassling the user, and savings can be regularly reinvested through pre-determined settings. These are innovative financial management tools, integrated into how centennials live their lives.
The next obvious evolution for Monzo, Chip and Plum on their innovation journey is to tackle the robo-advice market space. They are already engaging with their customers in a digital manner and utilising algorithms to provide financial management services. We’re extremely interested in seeing how they progress, but like others tackling this area, such as Evestor, we can be sure that they will keep the five key characteristics central to their offering.
Start-ups like MeetMia and Teambrella show how insurance is being reinvented. MeetMia is a bot that pulls the user’s insurance together in one convenient place, Facebook Messenger. It gives traditional policies a new lease of life by innovating engagement through simplification. Always accessible, it’s also extremely proactive: users are reminded when policies are close to lapsing and prompted to get the new cover they need. Teambrella, meanwhile, offers P2P coverage with teammates assessing their risk, voting on rules and claims, and payments made direct to each team member’s Ethereum wallet.
Certua is another new company making inroads into reinventing the life insurance market by applying innovative solutions to the five trends. A number of companies now offer quick and easy life insurance cover to the mass-market. Certua’s different. They’re using data to intelligently drive individual policy prices that automatically vary in line with your life. That means consistently fair pricing. The key? Engaging the customer in a personalised, easy-to-understand way, while providing all the information via on-demand digital access.
Cuvva and Trov are two exciting companies offering mirco-insurance and pay-as-you-go. Both have fine-tuned their offering to meet changing customer demands in an innovative way. For example, you can insure yourself during a taxi journey or insure your phone whilst in the gym. Cover can be switched on/off via the click of a button – it’s relevant protection exactly when the customer wants and is accessible from their smartphone. Expanding on this, a powerful enhancement for these companies could be to make this cover pro-active by integrating with taxi apps or utilising GPS data (post user granting permission) to recognise when the user is travelling or at the gym and automatically insuring them.
Several of these new brands use social to integrate with users’ lives. It’s a smart move and demonstrates how in tune they are with their target market. All of them are providing innovate customer-focused solutions, either direct to consumers or to a specific part of the value chain.
Considering an alternative perspective, our Accenture InsurTech programme gives us great insights into the direction of travel from now on. Last year, successful startups were involved predominantly in providing services within the value chain to support customer services (e.g. harnessing social data with Digital Fineprint, creating omnichannel engagement via SaleMove or automating a digital customer journey through chatbot Spixii). This year, they’re moving towards ‘under the hood’ capabilities like algorithms that support marketing, personalisation and cyber protection.
As you can see, the momentum of innovation is building fast across FS. Like I started this blog by saying, traditional LP&I players have to look at the wider marketplace to learn from their ‘juniors’ and start thinking and acting differently. How can they get started? It’s a challenge, of course, however, we’re helping firms take the plunge with a proven approach. That’s the subject of my next blog.
Thanks for reading.