In my last post, I looked at how mobile apps provide new opportunities for P&C insurers to build better customer relationships. Now, I’d like to focus on the other trend that is rapidly changing consumers’ expectations of the customer experience they get from their insurance providers—the inexorable rise of social media.

Social media has shifted the balance of power from service providers to consumers. It provides customers with a new way of interacting with P&C insurers that demands more immediacy and transparency in the relationship between carrier and consumer. And social media gives insurers an opportunity to listen to their customers and learn more about their needs, beliefs and behaviours.

But in addition to providing consumers with a new channel to voice gripes and ask questions—an area with which most insurers are still coming to grips—social media also creates new communities by allowing customers to collaborate with each other. Herein lies an exciting new opportunity that few, if any insurers, have explored.

If consumers are connecting with others in communities of shared interest, perhaps there is an opportunity for insurers to tap into these communities. For example, if you’re already tracking social media activity in your customer base, why not serve ads to people within the friends’ networks whom you consider to be good risks and good customers?

Then, perhaps in the not-too-distant future, we could even start looking at ways to pool and underwrite risk more efficiently. We’ve already seen initiatives such as the online portal Bought by Many bring together customers with similar insurance needs to purchase insurance that is both cheaper and better tailored to their needs.

Why not take this to the next logical level by using social media to shape consumers’ behaviour? Imagine if a social network made up of friends and family represented a single basket of risk and bought the same insurance product from the same provider. Insurers could extend this by partnering with other providers, who offer related services, to build an ecosystem that helps these virtual communities to lead the lifestyles to which they aspire.

The insurer could perhaps offer them incentives and bonuses for driving safely—if they all agree to install telematics devices in their cars—and extra no-claims bonuses each month or year that no one in the insured pool claims against the cover. Thus, peer pressure becomes a way to motivate less risky consumer behaviour. And social media helps to give customers more reason to stay loyal to the provider.

Against the backdrop of regulations that make it easier for customers to switch—not to mention the prohibition on using gender as a risk rating factor in life and P&C cover in most of the EU—it’s important that insurers start to think about this sort of digital innovation as a means of managing risk in new ways as well as reducing customer churn.

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