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Changing consumer demands are forcing entire business models to be rethought

Published: Dec 12, 2018
Author: Gabriel Schild

The face of insurance is changing—incumbents can’t afford to be risk averse or stick to their old methods. We spoke to leading insurance experts about the urgent need for change. Are you ready?

In the last decade, many industries have been fundamentally disrupted by digital technology—music, retail, transport, finance, communications. But throughout this turbulent era, insurance has remained relatively untouched. As a highly regulated and complex industry, it’s been hard for startups to break into—and large incumbents have closely guarded their share of the market. Now that’s starting to change. 

New tech is changing expectations

“[Customers’] core need, to be able to protect themselves and their possessions in case something goes wrong, has existed for 300 years … How we serve that need is changing dramatically.”
—Robin Peters, International Digital Development Director, Aviva 

The new generation of digital natives has little patience for slow or disjointed experiences. And the notion of paperwork is almost obsolete. If they can order almost any retail item with a few taps on their smartphone, why would they tolerate an insurance application that takes days—or even weeks—to process?

InsurTechs are stepping up to meet this demand. They’re using technologies like artificial intelligence (AI) and automation to drastically speed up approvals and claims processes. They’re also offering tailored packages through fast and user-friendly mobile applications. 

U.S.-based startup Lemonade claims that it can sign customers up for personalized coverage in 90 seconds, and pay out claims in as little as three minutes—all through an AI-driven mobile app. Another InsurTech is developing technology that analyzes uploaded images of consumers’ faces (or “selfies”) with the goal of offering more accurate life insurance premiums—and of course, ultimate convenience. 

The sharing economy is on the rise

“We’re going from a lifelong or a year-long insurance product—to days, and potentially even seconds.”
—Maarten Ectors, Chief Innovation Officer, Legal & General

Millennials and Generation Z don’t have the disposable funds of previous generations. Many are opting to rent things rather than buy them—and that’s dramatically changing their insurance needs. A growing number of people want to insure their car for a single ride, rather than a year. Or insure their home only when they rent it out to travelers. Airbnb, Uber and ZipCar are prime examples of companies taking advantage of this trend.

To compete in this sharing economy, insurers need to rethink their products and services. These new consumer needs should be at the heart of every strategy. Relying on established brand and reputation is no longer enough. Neither is locking customers into long-term annual contracts or competing purely on premiums. 

It’s moving beyond a “grudge purchase”

“If we can shift the dial around how people perceive insurance to be something that they trust—something that enables them to manage, mitigate and even prevent risk—I think that’s got to be a good thing for the industry.”
—Madeline Bailey, Head of Strategic Initiatives, MS Amlin.

Consumers are engaging with gamified apps on a regular basis. They’re becoming used to services that are engaging, exciting and fun—and soon these expectations could apply to insurance. Some insurers and InsurTechs are experimenting with gamified apps that incentivize safety and offer rewards for good behavior—like locking your windows or driving safely. This not only provides an enjoyable experience and potentially improves the customer’s wellbeing, it can also reduce the frequency and cost of claims.

Insurers need to move beyond the perception of insurance as a “grudge purchase”, finding new ways to make it appealing and engaging. It’s now important to build relationships with customers that are based on trust and enjoyment, rather than a fear of things going wrong. 

How can insurers stay relevant and thrive?

“It’s not just about improving incrementally—it’s about really challenging the status quo.”
—Susanne Chishti, CEO, FINTECH Circle and Co-Editor of the bestselling FINTECH Book Series

To address these challenges, insurers need to rethink their business models and drive an experimental, innovative culture from the top-down. What’s the best way of achieving this?

  • Know that the future is unpredictable. Consumer expectations are moving so fast it’s impossible to predict the next big thing. The key is staying agile—your organization must be ready to adapt to change.

  • Don’t fear risks, embrace them. Make sure your employees aren’t afraid of failure when trying new approaches or technologies. You should encourage and reward innovation, even when it isn’t successful. 

  • Trial, learn and move on. Aim to roll out new products and services every few weeks, rather than in months. Reduce the cost of experimentation by running small scale trials and actively seeking customer input.

  • Turn your competitors into allies. Instead of competing with FinTechs, work with them. They have agility and skills that traditional insurers can learn from. And you have years of insights and data on underwriting. 

  • Transition to a platform-based model. Opening your APIs can give you the scalability and flexibility you need to drive innovation, and make it easier to work with partners.

For more on the future of insurance, read our new report. Learn how to drive a culture of innovation and agility here.  

Gabriel Schild is the Executive Director of Digital Business Transformation at Verizon.