Other parts of this series:
Traditional approaches to business can’t connect insurers to customers hungry for hyper-personalized digital services.
Infrequent contact with their customers, and the poor experiences that often occur when there is contact, have made insurers especially vulnerable to digital disruption. Unless they forge closer ties with their customers they’ll struggle to compete with rivals that offer more attractive personalized digital services. They’re at risk of being commoditized and becoming just providers of low-margin, risk-capital to more nimble distributors and customer-service providers.
By transforming themselves into Everyday Insurers, as I mentioned in my previous blog post, carriers can overcome their traditional shortcomings. They can emulate successful digital disruptors, such as Amazon, Netflix and Uber, and deliver “frictionless”, hyper-relevant connected services that delight their customers.
To become an Everyday Insurer, however, carriers must jettison some of their conventional business models. They need to adopt new approaches to generating value. Critical to the success of these new models will be their ability to connect insurers with consumers much earlier in the decision-making process. They must also improve the attractiveness of the relationships they offer customers. Stronger ties tend to lead to longer relationships. This gives insurers more opportunities to generate additional value.
We’ve identified three complementary business models that can help carriers become successful Everyday Insurers.
On-the-go: This completely digital approach uses a variety of distribution platforms, such as Amazon, Alibaba and Facebook as well as online aggregators, to deliver a range of “On-the-go” insurance products. Customers can quickly access these products from their mobile phones when they need cover for a specific event or item. This business model uses intelligent automated systems to provide customers with an enhanced user experience that could include personalized advice and help as well as easy claims-processing and usage-based payments. This approach was pioneered by specialized insurtech firms such as Lemonade and Metromile. Big insurers such as Liberty Mutual in the US and Europ Assistance in Europe are taking an “On-the-go” approach by introducing new customer channels that leverage artificial intelligence and voice recognition technologies to deliver innovative home assistance services.
Beyond insurance: Combining digital and physical contact points across a single ecosystem, this model positions the insurer as a trusted advisor. It provides customers with “end-to-end” assistance as they navigate big events in their lives; such as the birth of a child, buying a house or caring for an elderly family member. This approach requires the insurer to manage a network of third-party service providers that deliver complementary offerings such as healthcare, mortgage origination and smart home-monitoring services as well as a range of rewards for customers. A good example of such an approach is South African firm Discovery with its Vitality life and health coaching model that has been successfully adopted in major markets across the world.
All-in-one: Using this business model, the insurer offers a comprehensive range of insurance and risk-management services that spans a customer’s requirements and automatically adjusts to their changing circumstances. Advisors, supported by artificial intelligence systems, provide customers with highly-personalized services and develop a deep understanding of their needs. This provides the insurer with plenty of opportunities for further long-term sales. USAA, which provides financial services to members of the US military and their families, combines deep customer knowledge and intensive use of social networks to provide “All-in-one” services for auto insurance, household cover and financial planning.
Earlier in this blog series, I said that digital disruption could cause insurers to lose as much as 40 percent of their traditional risk-protection revenues. By becoming Everyday Insurers, and implementing one or more of these business models, carriers can protect themselves from such revenue erosion and grow their businesses (see illustration below).
In my next blog post, I’ll discuss some of the key areas of business that carriers need to change if they are to rise to the challenge of digital disruption and become Everyday Insurers. Until then, have a look at this link. I think you’ll find it worthwhile.
The Everyday Insurer: Playing a bigger, more valuable role in customers’ lives.
Seize the opportunities that new digital technologies offer to provide customers with personalized, on-demand living services in insurance. Read more.