What have we seen?

The insurance industry is undergoing a customer-led transformation and with the COVID-19 pandemic further heightening expectations, customers are demanding more. The insurance sector is notably trailing behind while other industries seem to be making quantum leaps by offering personalized, always-on user experiences tailored to their customers’ every need. Recognizing this opportunity, both incumbents like Allstate and disruptors like Lemonade are beginning to reshape the insurance value chain – molding their products, services and experiences – around the needs of the customer.

What actions should insurance carriers take?

Looking across both challengers and incumbents, we see five key capabilities insurance companies need to invest in to capitalize on this shift. These are:

  1. Customer Data Value Exchange
  2. Human-Centric Experience and Innovation
  3. Digital Direct Marketing
  4. Holistic Distribution
  5. Services Beyond the Core

Capability 1: Customer Data Value Exchange

Designing programs in a way that provides mutual benefits for insurance carriers and customers alike by systematically collecting and using data more effectively sets challengers like Lapetus Solutions apart. By integrating machine learning, Lapetus effectively develops platforms that enable financial services companies to more accurately and cost-effectively update assessments.

For instance, global reinsurer Gen Re used Lapetus facial analytics technology in its newest mobile application to quickly estimate factors like the user’s age, gender and BMI based on an uploaded image of their face. In exchange for providing this data, the app greatly streamlines the customer’s onboarding process and allows policies to be issued to applicants in minutes.

Action: What can insurers do now?

Short-term: Run targeted pilots to collect opted-in customer data in exchange for improving the experience at specific use cases (e.g. faster claims, problem resolution).

Medium-term: Build out a 360-degree view of the customer and use the marketing tech stack to provide increasingly real time, 1:1 experiences.

Capability 2: Human-Centric Experience and Innovation

Lemonade is driving higher relevance, retention, satisfaction and advocacy with customers by putting them at the center of product, service and experience development. Insurance companies have traditionally struggled with pricing transparency  but Lemonade  shows customers every consideration that factors into their quoted price. (On top of this, after taking its own fee, Lemonade gives a portion of the remaining funds to charities designated by the customer).

Incumbents like State Farm also recognize the importance of investing in disruptive technologies. In 2018, it announced a new $100M venture capital initiative investing in startups to provide new and innovative products and solutions to customers. So far, through partnerships with ADT and Canary home devices, State Farm is offering integrated packages that leverage IoT technology to enable customers to monitor their homes when away.

Action: What can insurers do now?

Short term: Leverage existing customer knowledge to interact with customers in simple, transparent, jargon-free terms.

Medium term: Take insights-based holistic views of customers to develop new products, services and experiences that more closely fit their needs.

Capability 3: Digital Direct Marketing

Data-driven digital marketing enables insurers to move beyond ‘selling’ to customers, helping them connect and engage with consumers on a deeper level.

For example, MassMutual’s in-house start-up Haven Life started experimenting with short, personalized videos that include basic data about the individual such as their name and occupation to help re-engage prospects.

As another example, Metromile offers a new type of insurance that charges customers based on just the miles they drive. Metromile creates a direct relationship with customers and provides value above and beyond the product, using its smart driving app to help drivers avoid parking tickets by informing them of street sweeping schedules.

Action: What can insurers do now?

Short term: Communicate with customers on their terms, sharing content that meets a need and is credible coming from your company.

Medium term: Unite sales and marketing teams to create holistic relationships with customers and prospects through providing useful information, content and interactions, rather than pushing messages or products.

Capability 4: Holistic Distribution

Progressive recently collaborated with Bold Penguin to launch a quoting platform for small businesses, known as BusinessQuoteExplorer (BQX). The new portal synthesizes and standardizes time-consuming forms, enabling Progressive agents to focus on serving their customers, and making it faster and easier for small business owners to select coverage and get an accurate quote.

Disruptors like Blend are also changing distribution norms. Blend, an online lending platform, partners with banks, credit unions and insurers to make lending simpler, safer and faster. Using a conversational interface with embedded AI and automation services that leverage consumer data enables loan teams to seamlessly collaborate with consumers on loan applications and manage tasks.

Action: What can insurers do now?

Short term: Pilot direct-to-consumer models for lower-complexity products (e.g. auto, term life).

Medium term: Create a portfolio of distribution approaches, united with common interaction guidelines and customer data, promoting a relationship-driven approach.

Capability 5: Services Beyond the Core

Insurers are increasing engagement with their customers by launching new value-adding services above and beyond policies.

In 2018, Argo Group launched a pilot program for its restaurant, supermarket and retail clients with Kinetic, an insurtech startup that makes wearable devices aimed at preventing back injuries and reducing subsequent injury claims. The wearable technology vibrates to alert employees when they are lifting heavy objects incorrectly. The data from each wearable aggregates to an analytical dashboard so that managers can assess the risk profiles of their workforce, helping reduce workforce injuries by up to 84 percent. This partnership advances Argo’s tech strategy and use of IoT technology as a means to reduce workers’ comp and general liability claims, while creating a safer work environment that benefits business managers and employees alike.

Action: What can insurers do now?

Short term: Offer additional monetized services as add-ons to core products to drive greater customer penetration.

Medium term: Create combinations of new services and products that may or may not involve legacy insurance products, designed to meet customer needs holistically.

While consumers’ expectations are rapidly changing, and disruptors are increasing competitive pressure, these examples show how incumbent carriers can successfully adapt.

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