In today’s world, we have some clear indicators that power has shifted from companies to consumers, and consumers’ expectations are increasing exponentially due to their experiences with other services, primarily services driven by technology. This is a world of immediate information and gratification. Select industries are raising the bar for companies that operate in more traditional business areas, such as insurance.
Products tend to be sexy in today’s world, yet insurance products seem to be the total opposite. How can that demand fit into the insurance world where product differentiation in regulated markets is still low and even in non-regulated markets, product differentiation is minimal and often reduced to pricing comparisons? On the other hand, the products really do make a difference in people’s lives, providing them financial security for life, their vehicles, homes and belongings.
Although service has come into focus for most insurers in the last few years, customer touch-points are too few and far apart to have a big impact on purchasing behavior. So how can an insurer develop products that inspire customer demand? Are incident-oriented insurance options a possible way out of this dilemma?
Some might think that being tech-savvy in general would help, especially with the use of telematics. But even in Europe, which has become one of the most important markets for telematics, investments are still needed to develop and implement the technology for some insurers.
Product differentiation for telematics might not prove the ultimate fix, as freedom of choice will be negatively affected leaving some potential consumers no longer able to afford insurance. The general use of Big Data also correlates with this change. A possible negative outcome of this could be even more regulation due to data protection hurdles. Such a scenario could happen in Life and Health Insurance.
There are other potential challenges within an insurer’s world when it comes to products. In contrast to General Insurance products, online sale doesn’t seem to be the right format for Life & Pension Insurance. How can companies effectively offer these products across different channels without raising complexity too much? Meanwhile IT has become more complex and expensive due to the channel expansion. The only way out might be a certain degree of automation.
But is anytime, anywhere, any-device access for consumers really imperative? Right now no one really knows if consumers expect a seamless transition between channels and devices without having to repeat their story for insurers.
To develop a true omni-channel experience for customers, agents, brokers and internal stakeholders, an insurer needs to embrace the concept of the service-enabled enterprise and the API economy. The concept also represents a move away from an in-house IT mentality to one that embraces external infrastructure, cloud computing, as-a-service options and mobility. (Read more in this CSC position paper.)
On the other hand, product simplification seems to be another way of dealing with this challenge. If products are going to be sold through a diverse range of channels, they need to be much simpler in design and options.
Another challenge is related to the rising list of Insurtechs. The general business model for these companies is of marketplace/aggregator or insurance management. Peer-to-peer models and direct insurers are another competing model, though not as common. Fortunately for traditional insurers, none of these business models is truly related to core competencies of insurance (Product Management, Risk Management, Claims Management and Asset Management). Their basic aim is to separate insurers from their clients instead.
History has shown that the role of being a first mover is not always the best for a generic business model. Perhaps the role of Insurtechs will be to provide good ideas that are easily adopted by insurers in a later stage.
One thing remains for sure – insurers need to get a clever grip on their future products. A single obsession with digitalization might lead away from other things insurers need to tackle. In general having a clear strategy in place seems to be a good option, e.g. putting all one’s eggs into the product leadership basket instead of putting it on operational excellence or customer intimacy. But when looking a little bit deeper into these options, it becomes clear that it isn’t an easy choice at all.
What could win at the end is an intelligent combination of many technical options that lead into a bright future for insurance products.
Norbert Gartzlaff is Product Marketing Manager for VP/MS, CSC’s product management software for the insurance industry. As a former product manager for General Insurance of a German insurer, he has been in the IT industry for more than 15 years. He has extensive experience in international product marketing, market research, insurance sales distribution,and is operating globally as a Knowledge broker for CSC’s VP/MS software product.