Last week, I looked at some of the new dynamics that are impelling a change in the relationship between insurers and their customers. I also indicated (and this is a theme running through these blogs) that insurers are finding it hard to adjust to this new world—something that was evident when I had the privilege of meeting recently with the next generation of digital leaders amongst Accenture’s insurance clients.

Another factor that must be considered is that insurance is not primarily a B2C relationship. Very often, insurers operate through intermediaries who in fact “own” the customer relationship. Here one is primarily talking about the agent channel and brokers, but also other financial institutions and even partners like car or cell phone manufacturers who may be offering insurance bundled with their products. So there are also B2B and B2B2C relationships involved, and other businesses are also customers.

Indeed, it is starting to seem as though the insurance value chain is best conceived as an ecosystem, with multiple organizations each playing its part.

When it comes to meeting the expectations of end-customers, it’s clear that insurers have to become digital insurers—and in pretty smart order.

And about time—after it’s the financial services industry, not financial products industry!

Microinsurance again offers us some guidelines for how this can be done. Bima creates insurance products that help mobile operators influence their key performance indicators by providing insurance products that can be delivered via mobile phones. Crucially, its whole approach is premised on adopting a customer-led approach to product and process design.

Another good example is MicroEnsure which creates insurance to help create products for the poor on behalf of partners such as Grameen Bank on a turnkey basis. Products include weather risk management for smallholder farmers, hospital insurance for mainly rural households in India as well as suites of products for poor households covering life, disability, political violence, property and other insurance. In my view, this ability to listen to what customers want and then design appropriate services actually positions these organizations to play in the mature markets as well.

In fact, many insurers in mature markets might decide to adopt a similar approach by becoming utilities that provide white-label policy management, claims and payment services to distribution channels. However, some hard thinking needs to be done when making this decision. This approach still requires a close understanding of what makes the insurer’s customer’s customers tick—while delivering at high volume and low cost.

Other industries teach us that the utility model only works for a few companies, and more often represents an intermediate step on the way to completely changing the business model or just going out of business.

Cars are something of a passion for me, and I find what happened to the auto producers instructive. When they industrialized, they became mere producers in a brutal cost and volume industry. Some of the established marques are now fighting to get the customer relationship back (for example, BMW with its new iModels), and new entrants like Tesla Motors are consciously making consumer behavior and needs the fulcrum of their design and marketing strategies.

The truth of it is that most large insurers will probably adopt a pragmatic mix of business models across their various lines and in the countries they operate. But the need to understand what the consumer wants will also remain.

Next time, I want to look a little harder at the kind of insurance company that will prosper in the customer-dominated world I have sketched.

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