Empowered consumers, connected millennials, technological innovation, digital distribution and new competitors – taken together, these represent potentially explosive dislocations in the insurance industry. What do they mean for the future of insurance? Some say that new competitive business models are dooming the insurance industry to reduced premiums and agent and customer disintermediation. So, what does an insurer need to do to survive today? Here are three marketing-related steps for success:
1) Build the customer relationship first and sell insurance second.
How to get started? Be social! eMarketer reports that “nearly every millennial between the ages of 20 to 30 in Mexico said they used social networks (96 percent) and instant messaging services (95 percent) in 2015.” Insurer beware! According to lifehealthpro.com, not only will millennials make sure you have a Twitter account, they will check to see make sure you are answering questions on Twitter. Similarly, it’s not enough to launch a Facebook business page — are you replying quickly to questions posted there? Are you on LinkedIn? Do you have an easy-to-navigate website?
Then there are reviews. Millennials want to read them (think Yelp!). Encourage everyone who uses your products to share their opinions. Then, distribute this content (with permission). Post reviews on your website and Facebook page. Tweet them out! By doing so, you can sway millennials favorably in your direction at the exact moment they’re deciding what to buy.
The explosion of posts on services like Instagram further attests to the fact that most of us like hearing and seeing what others are up to. Build on customer stories by leveraging big data and analytics to develop customer profiles that resonate with your target prospects. This can help convey a comfort level to millennials and customers new to insurance products that you know what they need. It’s shocking how many of us make purchasing decisions based on what our peers are doing!
2) Experiment with distribution.
Gone are the days when local agents were the key to selling insurance. According to propertycasualty360.com, 67 percent of millennials are purchasing directly from insurance companies, leaving agents out of the picture. Here’s just one example. French insurer AXA has funded “PolicyGenius, an online-only insurer that sells life and disability insurance, along with policies that cover renters’ possessions and pets. Since its inception in July 2014, PolicyGenius has been visited by more than 300,000 users. According to Bloomberg, more than half of its customers are millennials.
Since local agents don’t appear to be a growth opportunity, consider using cognitive computing to provide self-service virtual customer service agents. These empowered advisors never sleep and can speak in a customer’s native language to answer questions and sell policies. Cognitive agents could also allow a rapid expansion of distribution outlets for insurance sales. For example, according to Accenture, there are now 3 million patients at 7,000 healthcare clinics in the United States. With cognitive agents in place, why couldn’t all of them become places that sell life insurance? Similarly, why couldn’t cognitive agents sell auto insurance in every car dealership?
3) Leverage new products and features.
Haven Life is addressing customers’ instant gratification desires by providing 90 days of temporary coverage until the required medical underwriting is completed. I don’t know how Haven is evaluating risk, but cognitive computing can be used to transform underwriting so that an insurer can identify risks much quicker and tailor an insurance product for a specific customer’s needs. In fact, Swiss Re is already using cognitive computing to improve its underwriting process.
Let’s go a step further. Why not use cognitive computing to help policyholders avoid the pain and suffering of damage? Let’s look at auto insurance. Say the Weather Company can predict where a hailstorm will hit your area. This data combined with a prediction of your likely driving route during the hailstorm can spur a message from your insurer, advising you of the hailstorm and directing you around the area (if you’re far enough away) or to the nearest public parking structure under which you can take cover. Drivers who avoid the storm or who take cover will reduce damage and fewer (or smaller) claims will result. Furthermore, drivers who show a willingness to change their driving behaviors based on weather input could receive a price discount!
Of course, the ultimate in risk protection will be insurance that molds itself around a person’s lifestyle – insurance as a service. Consider a world where your insurance rates fluctuate minute by minute depending on your unique risk context. According to TechCrunch, cognitive computing, accessing real-time data from IoT sensors and APIs, will allow insurance providers to tailor protection on an ongoing basis, taking into account a policyholder’s individual factors and circumstances – thus, providing a completely personalized microinsurance policy. Given these advantages, it’s no wonder that a recent IBM IBV study, “Innovating Insurance,” found that 95 percent of insurance executives intend to invest in cognitive capabilities.
Surviving and Thriving
The handwriting is on the wall. It’s a brave new world in insurance today. To succeed, insurers must understand their policyholders within their unique contexts and offer products and services that engage them via their preferred marketing and distribution touchpoints.
There’s no question in my mind that insurance business models will be transformed – perhaps disrupted. But even traditional insurers aren’t consigned to failure if they have the foresight and perseverance to evolve into providers that today’s customers seek.
For more information on IBM’s thought leadership on the insurance industry, check out IBM’s Institute for Business Value, including our most recent publication “Innovating Insurance.” To learn how to build a complete understanding of each customer’s unique, personal situation and proactively offer insurance solutions that help them cope, check out IBM’s Commerce solutions for Insurance.