How digitalization creates a customer-focused business model and unlocks global scalability for insurers with the ability to form ‘borderless’ alliances.
The insurance industry is rapidly changing. This once product-driven industry is seeing an increasing need to become consumer-driven. Today’s average insurance customer has dozens of choices in providers. While customers understand that insurance is essential, they know they can make savings by shopping around. To compete in this diverse and growing market, insurers can create a customer-focused model that is inclusive of their customers’ needs—while also addressing loss prevention and better protection services.
To facilitate customer-centric business, insurers are moving towards digitalization and developing digital platforms and ecosystems to offer their services as well as other financial products. Indeed, by 2025 ecosystems will account for 30 per cent of global insurance revenue with insurance being one of the 12 distinct examples of digital ecosystems generating $60 trillion annually.
However, as digital platforms and ecosystems become increasingly advanced, insurance companies falling behind the pace of change could be faced with being disrupted themselves and eventually placed as minor components in the value chain. To avoid this and retain a competitive advantage, insurers need to focus on the customer first to become more customer-centric and explore offering a suite of financial services from a single ecosystem.
Insurers are well aware of the need to build better customer loyalty, especially when it is so easy and financially attractive for consumers to switch providers for a better deal, a more complete service, or a better customer experience. Focusing on customer interactions is the ideal starting point for building loyalty and creating an integrated and multichannel environment for improved customer engagement. This includes providing tailored product offerings based on customer needs. It also includes utilizing artificial intelligence to create chatbots to answer consumer questions seamlessly. Beyond addressing concerns and offering customer-focused products, insurers can foster customer loyalty by showing that they understand their customers’ needs and offer insurance policies to match.
The need to understand consumers has never been greater. This includes the issues consumers face as individuals, their nuanced experiences of the world, and their beliefs and values. This is particularly relevant for insurers as consumers trust their insurance providers with the protection of their most valuable assets: their health, physical possessions, and even their lives. Insurers need to understand customers' priorities and behavior to protect them as best as possible.
Digital transformation offers more opportunities to interact with customers. To create these touchpoints, insurers need to understand what drives people's behavior and decision-making processes. Insurers also need to overcome the interpersonal barriers created by digital interfaces and emotionally connect with their users. Digital interfaces and touchpoints have heralded a new age of customer understanding, and customer touchpoints can be placed into three factors: engagement, empowerment, and emotional connection.
Customer engagement. Insurers need to rapidly scale up their digital offerings to better engage with customers. Small changes can go a long way—for instance switching to paperless forms and using mobile alerts for loss notifications. However, building a good relationship requires more: namely trust and loyalty. This can be achieved through experience-led interactions that ensure customers are offered the right products based on their needs and circumstances at the right time.
Customer empowerment. Insurers need to give their customers access to the right information to empower them to make the right decisions. Insurance products are notoriously complicated, which is evident in the lower rate of digital purchases for especially complex products—like health insurance—compared to simpler products, like travel insurance. Therefore, trust and knowing your customer are so important in the relationship between the insurer and the consumer. Consumers need to feel that insurers have their best interests at heart and are offering them useful, tailored covers that are reasonably priced and do not have hidden exclusions. This means presenting policy information including exclusions in a simple and transparent way as part of customers’ digital experience, so they are engaged and feel empowered.
The emotional connection. Insurers need to incorporate behavioral queues into their processes to show more care and respect during digital customer journeys. Insurers need to collect sensitive information to accurately assess their customer’s needs. For instance, customers often have to share intimate medical details about their physical and mental wellbeing when applying for mental health cover. Currently, insurers are not perceived as treating this process in an empathetic and sensitive way. Insurers have a responsibility to treat their customers in an emotionally considerate way—for instance, by using data already available to answer questions or making sure empathic and behavioral cues are designed into their platform. These are good places for insurers to start building the emotional connection to be trusted as active stakeholders in customers staying well.
Data continues to hold the prime position for insurers looking to answer key questions about customer behavior and make improvements to their user experience. Data can be incorporated into an insurer’s business model to improve loyalty, offer new products, and improve customer journeys. For instance, large health insurance companies are utilizing data to enhance their existing business models to focus on cross-selling and reduce customer churn. They are also using data to build better relationships between brokers and carriers. In addition, they are using detailed customer behavior data to improve the relationship with their customers through customer journey mapping and real-time platform usage monitoring. For example, by tracking customer habits and behavior, it is possible to improve insurance reach and create customer-specific coverages.
Alongside data, three other key tech trends set to continue disrupting insurance and deliver enhanced customer experiences include:
Both fintech firms and insurers have successfully filled gaps in traditional services through digital platforms and ecosystems. Now, these same fintechs and insurers are realizing the opportunity to have a greater impact: forming strategic partnerships that provide value on all sides including cross-selling to new user bases and offering complete financial planning services to customers. Indeed, insurers can increase revenue and provide additional value to their customers by partnering with fintech providers. These partnerships can also provide a large and engaged user base into which insurers can sell.
Once partnered, fintech providers can help insurers expand their service offerings by providing them with innovative solutions and building more benefits into their programs—such as subscription management, insurance rate checks, and single billing for services. Adding extra services in this way can transform an insurer from being a “good” insurance provider to becoming a truly trusted source for a customer’s complete financial planning, giving them access to a suite of financial products (such as investments and pensions).
Becoming customer-focused is paving the way for the future of insurance. It is enabling insurers to offer a suite of insurance and financial products and become a complete ecosystem for their customers’ financial needs. By placing customers center stage, insurers can become trusted suppliers of financial and investment products. What is more, insurance providers who embrace a customer-centric model early on will be set to gain a significant competitive advantage and be well equipped to adapt to future trends.
Gambit’s innovative and personalized pension platform can help you open a digital distribution channel directly to your customers while reducing costs and increasing your bottom line. Our pension platform enables you to build a custom solution to offer advice to your clients as they plan for the long term and guide them towards financial autonomy.
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