The Future is a Custom Fit
Agile insurers can get ahead by keeping customers at the heart of their operations
A Segment of One
If you achieve it, you can build a fascinating strategic picture and see how customers react to particular products. The first thing you’ll see is that, in today’s markets, standardized offerings are not enough. In almost all industries people seek customized offerings that are relevant to their particular situation. The challenge is how to achieve a segment of one – a micro-segment that targets each customer directly.
In an ideal world, the obvious answer would be to have agile product definitions that the customer could tweak to suit themselves, but – especially for insurers with legacy systems – making changes is sometimes even harder than coming up with a whole new product altogether. We need to give insurers the capability to make those adaptations quickly – but also to make it easy to add additional services that will help them stand out from their competition.
One simple example could be a fire insurance product that also provides fire safety checks and replaces your fire extinguishers every six months – a win-win situation for both client and insurer. The only problem is that delivering it effectively to millions of customers requires serious logistics and service expertise.
Rethinking Insurance in Emerging Markets
Some insurers I have met in emerging markets are rethinking the insurance model altogether. I have seen them create fascinating new products that don’t quite fit the classic Life or P&C (Property and Casualty) definitions. They instead think in terms of ‘Life Events’, so a package is produced around a major life event (such as buying a first house) that then builds in other life changes that tend to go hand-in-hand with it (new child, job, marital status, commuting situation and so on).
Know Thy Customer, Keep Thy Customer
The thinking here is that this prospective customer will probably have many needs in their financial service and risk management – so why keep them all separate? It makes more sense to simplify and streamline their experience, bundling homeowner’s policy, mortgage, revised life insurance policy, credit insurance and more into a customized package. The insurer who knows their customer, keeps their customer. It’s all about meeting their needs.
I heard an interesting story from one of our customers recently. A policy holder had called up his agent to say that he’d been looking at the fine print on his policy, and found that his homeowner’s insurance covered him against avalanche damage. The customer said that since there were no mountains near his home, it was irrelevant cover and he should be charged less. The agent chuckled and told him not to worry about it. The customer cancelled his policy and went somewhere else. There is a generation of hyper-informed people emerging who will decide what they want to buy, not what we want to sell them. In most industries, the trend toward mass customization has been underway for the last 10 years.
Will it come in insurance?
What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAPforInsurance.