Competition in insurance is changing across three dimensions—the X axis (how we sell), Y axis (what we sell) and Z axis (who is selling). In the previous post we looked at how we sell insurance, noting the move toward new channels that require new skills in the face of new competition. In this second post of a three-part series, we will look at the Y Axis: What we sell.
Traditionally, insurance has been a risk response product. Specific risks such as a fire or accident are covered for defined amounts and if the risk occurs the insurance carrier responds to help the insured. Carriers have had complex policies that determined when and how they responded and they used those variations to explain why their coverage was better than a competitor’s.
As speed, price pressure and channel drive commoditization, product variations are no longer as valued in the marketplace as they once were. A stripped-down product compared to a more full-service one is understood, but the value of smaller variations has eroded.
Competition in the industry has therefore moved from what we sell to the services we provide to distribution partners, companies or end customers. And it is with these services that carriers create distinctive value that can command a premium and be a source of competitive advantage.
The range of options here are tremendous. At the low end are specialized products or forms for particular industries, but these too are becoming commoditized. Product advantage is coming from risk prevention and value-added services for the insured, which are being provided by the carrier, or often times by vendor agreements or alliances working with carriers.
A question insurers must ask themselves: How good is my organization at defining not the products of the future, but the risk solutions (products/services) our customers want, need and are going to demand?
In my third and final post in this series, we’ll look at the Z axis: Who is selling.