Preparedness counts in the property and casualty insurance industry, and if anything is certain, it’s that insurers need to spend more time looking ahead. To prove the point, take a look at the push for customer-centricity across the industry. While insurers are doggedly driving initiatives to become customer centric, Forrester is predicting that the entry of new market startups and evolving initiatives of other industries will compel insurers past the demand for customer-centricity to a new “customer-obsessed” culture built on extreme digital superiority.i It’s an environment that InsurTech startups, with their digital savvy and customer know-how, already navigate with ease.
While many current InsurTech contenders have positioned themselves as industry disruptors intent on seizing market share from established players, there is a set of InsurTech Innovators who recognize the native advantages of existing insurers. Building on insurers’ inherent strengths, innovators are committed to providing the digital capabilities and product choice that incumbents require to grow and flourish. According to PwC, traditional insurers can evolve more quickly and position themselves for future disruption by partnering with this brand of InsurTech entity,ii particularly in areas of distribution where the lack of digital capabilities and product options are holding insurers back.
Customer-centric Trends Driving Disruption
When it comes to InsurTech Disruptors, a survey conducted by PwC revealed that margin pressures, loss of market share and increasing customer churn are the challenges that keep insurance CEOs up at night. What goes unsaid, is that InsurTech Disruptors are only disruptive because their operational models or products position them to address three critical factors:
• Product Customization: Emerging trends are reshaping the future of insurance products as consumers look for greater personalization of insurance offerings. Fresh entrants like Trov and Metromile present customization options, allowing consumers to turn coverage off and on as needed or pay according to usage.
A study conducted by LexisNexis indicates that awareness of usage-based insurance (UBI) has grown 10% year-over-year, with a 50% adoption rate by consumers who are offered the product.iii UBI presents a snapshot of the growing trend toward more customized coverage options, and underscores the need for established insurers to gain access to innovative offerings if they’re going to compete with disruptors.
• Channel Choice: Millennials are now the largest age group in the U.S., and those with more than $100,000 in assets spend $2 trillion annually.iv This is where the future of insurance buying is headed, but millennials see the world very differently than the generations that precede them. For one thing, millennials avoid traditional engagement channels and saving money is of the highest priority when making purchasing decisions.v
Current insurance business models don’t easily support their engagement, price or product preferences, but some startups like Lemonade are hearing millennial voices and offering a completely digital offering at bargain basement rates. Established insurers need the same digital savvy and product options even when targeting previous generations where the vast majority of customers also prefer to interact through digital channels and often select coverage based on price.
• Meeting the Pace of Change: It seems that before insurers could fully adapt to the digital revolution, an onslaught of InsurTech Disruptors have entered the scene. Digitally adept and naturally in touch with the consumer-centric movement, they have no need to rehaul aging systems or adapt internal cultures to meet new trends. As they enter the market imbued with the digital capabilities and the product innovation consumers expect, the pace of change accelerates, challenging traditional insurers with the need to keep up.
As the pace continues to accelerate, traditional insurers will need to embrace emerging insurance technologies to build future-ready enterprises. The simplest solution? Partner with an InsurTech Innovator.
Incumbents Armed by InsurTech Innovators
What seems to be missing in all of the talk about InsurTech is the advantages that traditional insurers hold in the industry. While startups offer something unique to the market, their customer-centric products and delivery models are nothing that can’t be met by established insurers with the right digital tools and product choice. Industry incumbents already have the customer base and brand recognition, and by partnering with leading InsurTech Innovators, can quickly scale to achieve the customer-centric focus established by other industries and disruptors.
Just as insurance executives worry about the challenges presented by InsurTech Disruptors, they see tremendous value in partnering with InsurTech Innovators committed to advancing their cause. Nearly 80% of insurance executives expect to realize cost reductions, and 60% anticipate improved retention rates and revenues.vi The problem is, the number of companies partnering with insurance technology innovators lags well behind other industries such as banking (23% versus 42%)vii and too many insurers are missing out on the opportunity to quickly ramp up to current customer engagement standards and to position themselves to meet the future product needs of consumers. This leaves them at odds with the disruptors and behind the 23% of insurers that are ramping up to customer standards through InsurTech partnerships.
Digital Distribution Innovator – a Partnership Example
Determined to elevate traditional insurers to modern standards, the digital distribution platform of one major InsurTech Innovator focuses on rapidly bringing insurers up to today’s customer-obsessed standards by expanding product selection and digital channels of engagement. By white-labelling the platform behind their existing website, insurers are positioned to bundle multiple products from the market network and their portfolio in a single transaction. They gain the ability to digitally quote, bind and issue customers’ coverage without the need to develop all of the products in house, gain additional carrier appointments or commit to an annual amount of premiums sold.
Since the platform easily scales to meet current and future needs, regardless of the insurers current business model or digital standing, insurers are positioned to exceed strategic growth objectives by creating the “customer-obsessed” environment of tomorrow, today. Leading capabilities include:
• Rapid quoting and purchasing: Consumers purchase products directly from the insurer, taking advantage of autofill capabilities to rapidly quote and purchase policies, but it doesn’t leave agents out of the equation, giving them the same power of automation to efficiently quote, bind and issue coverage.
• Cross-channel capabilities: A single console unites customer data from multiple channels and simultaneously populates all necessary back-office systems. Customers can start and stop transactions at will, picking them up in other channels as necessary. Agents receive complete visibility, allowing them to step in when required to either help the process along or advise on coverage options the customer may be missing.
• One-stop shopping: Part of delivering a customer-centric environment is becoming the one-stop shop for insurance needs. Because customer data is automatically entered into back-office systems, multiple products can be obtained in a single transaction without the need to rekey data or be redirected to a separate website. It’s Amazon for insurance, as customers customize coverage solutions to meet their needs and price points, and insurers watch retention rates and premiums climb by 12% and 14% respectively. Market share also improves by 5% as insurers bundle products from the market network with their own.
When partnering with an InsurTech Innovator, insurers can overcome the challenges of legacy systems and internal cultural roadblocks to meet current customer expectations, while achieving the agility to meet future developments in the rapidly evolving market. A partnership with the right InsurTech Innovator puts traditional carriers on an equal plane with InsurTech Disruptors, giving them the digital superiority and vast product selection that they need to establish a “customer-obsessed” culture today.
Stay with us as next month we explore the advantages of partnering with InsurTech Innovators and discuss how insurers can select a partner that will take them on their customer-centric journey.
i John Matley, Malika Gandi, Emily Yoo, Bill Jarmuz, and Stefan Peterson. “Insuring the Future of Mobility.” DU Press Deloitte. Deloitte University Press, 13 May 2016. Web.
ii “Opportunities Await: How InsurTech is reshaping insurance”. PwC. PwC, June 2016. Web.
iii “2016 Usage-based Insurance (UBI) Research Results for the U.S. Consumer Market”. LexisNexis. LexisNexis, August 2016. Web.
iv “Millennials and Insurance: Understanding Tomorrow’s Mass Affluent Today”. Novarica, Novarica, Sept. 2016. Web. 5
vi “Opportunities Await: How InsurTech is reshaping insurance”. PwC. PwC, June 2016. Web.
vii “Opportunities Await: How InsurTech is reshaping insurance”. PwC. PwC, June 2016. Web.