In my last post I introduced the need for life insurers to change. The old model that served them well for decades, if not centuries, is no longer giving customers what they want. So what do they want?
The first thing is simplicity.
This doesn’t sit comfortably with most insurers, who have always surrounded themselves with complexity: complex offerings that are governed by complex contracts and require experts to sell them. But with more consumers researching and buying over the Internet, complex offerings are being left out in the cold. Those that are easy to understand, easy to evaluate and easy to buy are the ones that have the greatest appeal for the younger, digital-savvy consumers who are entering the market.
Simpler services also have much to offer insurers—they’re quicker, easier and cheaper to sell, and they allow the carrier to scale its distribution more effectively. More importantly, they’re what today’s consumers are demanding. For all these reasons, it’s at this end of the market that others are most likely to use their experience in manufacturing and selling simple products at scale to lure customers away from traditional insurance companies.
Innovation is the second thing insurers should target as they plan their transformation.
In a world where consumers are continually being seduced by new products, new ways of engaging with providers, and new ways of managing their lives, it’s hardly surprising that they’re unimpressed with the traditional products and channels that many insurers are still so reliant on.
It’s one thing when companies like Apple and Amazon raise the bar. However, a spate of innovative start-ups has entered the retirement market, and it’s challenging the old guard head-on. Some start-ups offer new products, others simply a new way of distributing conventional products. Most focus narrowly on consumers, helping them arrange their affairs more effectively or offering them all sorts of complementary services.
The more successful ones engage their customers on the customers’ terms, addressing their needs and intentions at a higher level than most conventional product-centric firms can.
Some offer new ways of doing what traditional financial services firms do, some inhabit the fringes of financial services, while others bypass the financial services industry altogether—perhaps recognizing that many consumers trust their communities and their peers far more than they do the big institutions.
Which of these newcomers will succeed and become the Google of the retirement services market? Who knows? Perhaps none. But what we do know is that they are testing all the things people are saying about consumers’ changing preferences. And as a group they are gaining market share at the expense of traditional life insurers. There’s no room for complacency.
In my next blog post I’ll discuss the crucial need to provide advice at scale. In the meantime, to read about some of the new trailblazers that are rocking the retirement services boat, click here. You can also find the earlier posts in this series here.