Is the future of insurance in the past?

Is the future of insurance in the past?

The earliest known instance of insurance dates back to ca. 2250 BC, when the Babylonians developed a type of loan insurance for maritime businesses. On receipt of a loan to fund his shipment, a merchant would typically pay a lender an additional premium in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen or lost at sea. In effect, the lender assumed the perils of the goods in transit at a premium rate of interest. The inception of insurance relied on an ecosystem of partners and was based on trust within a community.

Today, an acceleration in digital trends, the shift in consumer behaviors, as well as a demand for digital products and service offerings have forced many companies including insurers to rethink their approach to meet the constantly evolving expectations of their customers.

As we begin to move into a post-pandemic world, customers are only going to demand more from the companies they work with. They have seen what’s possible in the way that businesses responded to the pandemic. For example, given the realization that people would be driving less, several insurers proactively reached out to their customers in the early days of the pandemic to reduce their automotive insurance premiums. This move showed real empathy to the sudden shift in the circumstances of their customers—and was well received as reported in a customer sentiment analysis study based on twitter data [1].

Looking forward, having this kind of empathetic mindset and the ability to proactively respond to unique situations will be critical for insurers to gain trust and remain relevant in the eyes of their consumers. Insurers need to embrace the concept of insurance as an ecosystem that brings together partners, products, and solutions to provide unique value and an exceptional customer experience.

Building a digital ecosystem in insurance

Meeting or exceeding the ever-evolving demands and expectations of customers will require an integration of operational activities, new services and solutions that many insurers simply don’t have today. It will require insurers to understand their customers at a deeper level from their generational characteristics and motivations to their life stages and family situations—and then provide insurance offerings that align with those needs as they evolve.

The boom of insurtechs and new value-added services in the industry has created a new insurance value proposition. While often tied to a specific insurance product (e.g. renter’s insurance, pet insurance, cover for cyclists [e.g. Laka 2], or simplified term life), the customer experience exceeds expectations and instills trust in the relationship between customer and provider.

How do insurers ensure a consistent experience across all insurance products within an ecosystem of partners?

Building the right digital ecosystem will prompt insurers to rethink their predominantly siloed organizational structures, find ways to harness data housed within disparate legacy systems spread across their organizations, and work collaboratively with insurtechs and other partners to leverage or create solutions and products able to quickly turn insights into customer value.

While this might sound like a daunting proposition, here are four activities insurers can undertake to begin developing a customer-centric ecosystem of insurance:

1. Build commitment across the organization

An ecosystem approach will only work if everyone across an organization is committed to working together to create customer value. Insurance companies should work upfront to get all business leaders to buy into the approach and the organizational changes required to align the ecosystem of insurance solutions and products around the customer.

Insurers need to make sure they have the right foundation to provide a seamless and unified customer experience. This means restructuring their organization and processes to be customer-centric rather than line-of-business focused, so that everyone within the company is focused on the same goals: creating customer value and providing an exceptional customer experience. For example, having one individual responsible for a customer across all lines of service, rather than having separate individuals responsible for different insurance products. Such an approach can help insurers build trust by making every interaction about the customer and their unique journey. 

By restructuring their organization to be customer-centric, insurers will be able to create a customer-focused business strategy that crosses the entire organization and, therefore, provide a more robust digital customer experience. Such changes will also put insurers in an optimal position to fully leverage ecosystem partners and solutions.

2. Work to understand the customer journey

Insurers need to develop a fulsome understanding of their customers and their customers’ expectations and needs across the entire customer journey (e.g. onboarding, billing and payments, renewal, claims, customer retention). This means leveraging data more effectively, both from organizational and public sources (e.g. customer sentiment analysis) as well as implementing the right technologies (e.g. machine learning).

Insurers also need to identify ways to gather and leverage unique and value-added data from communities of their customers beyond their traditional sources. For example, HealthIQ gathers health and wellness data from consumers and uses that information to provide targeted insurance quotes and offers incentives such as smart watches, juicers and vitamins to customers who maintain healthy lifestyle [3],Customers provide unique health information in exchange for incentives and with the understanding that the data will be used for their benefit and the benefit of others in their community.

Building a deep understanding of customers and their communities can be an incredibly complex task, particularly when information is spread across legacy systems and other sources. But this work can be invaluable for insurers and is essential for turning data into real customer insights that can be used to move forward.

3. Forge ecosystem relationships that contribute to customer value

When looking at potential technology or insurtech partners, insurers should maintain a laser focus on their customer experience, as well as manage the dependencies between them. It can be easy to embrace transformative technologies for the sake of innovation, but too often, such solutions fail to achieve the outcomes companies want. By looking at every opportunity individually and asking, ‘How will this create unique value for my customers or enhance the customer experience?’, insurers can prioritize partnerships and build an ecosystem that directly aligns with their objectives and that will allow them to become a trusted insurance provider throughout the life journey of their customers.

4. Identify an authentic purpose that resonates

In today’s world, purpose matters. It drives how people, particularly those in the millennial generation and those following in their footsteps, make decisions—including choices around the companies they trust and want to do business with.

A number of insurtechs have been successful because they have shown a strong sense of social consciousness and a purpose beyond revenue that resonates with their target market. For example, Lemonade, which gives unclaimed money to charities chosen by policy holders [4], and Loop [5], which offers more inclusive and community-first insurance offerings that are not based on traditional pricing models like credit score, income, or living location.

And what about sustainability? Soon Google Maps will suggest the route with the lowest carbon footprint when it has approximately the same ETA as the fastest route [6] Is there an opportunity here for insurance companies to reward the right behaviour by tracking this in a ‘pay as you drive’ offer? It sure sounds like a better metric than fast acceleration or hard breaking!

Historically, most insurance companies were founded on a sense of social purpose, although that purpose might have been diluted over time. By redefining their purpose in a way that demonstrates an awareness of what matters to their customers and communities, insurers can foster more trusted relationships based on shared principles and ideals.

The key, however, is that insurers need to align their renewed purpose to the ecosystem they are building if they want to be seen as authentic.

Becoming the trusted insurance provider customers want

Customers today are highly skeptical of companies; it is difficult for them to believe that businesses including insurers actually have their best interests in mind. If insurers want to build trusted customer relationships, they need to demonstrate they understand their customers at a deeper level than ever before and that everything they do is meant to create real customer value.

This is particularly true when it comes to data usage and the sharing of data across partners and communities. If insurers want to obtain or retain access to the quality data they need to provide responsive and unique customer experiences, they need to show they can be trusted with that data.

While insurance is a highly regulated market, insurance companies are responsible for creating a digital ecosystem that is ethical and secure.  

Inspired by the past, insurers can lay the foundation for establishing long-term trust with their customers by developing an ecosystem of partnerships, products, and solutions that are customer-centric and purpose driven—one that can create value for both them and their customers long into the future.

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Please get in touch to discuss how CGI’s Insurance team can help you navigate this evolving ecosystem.