December 14, 2017
‘It’s Life, Jim, but Not as We Know It’
The line from Star Trek (sort of) leads to a key question: Can life insurance become as hot and sexy as sci-fi, or at least an iPhone?
The article below has been based on a keynote presentation delivered at the Euro Events Life Insurance & Pensions Conference in Amsterdam on Nov. 16, 2017.
The title for this article has been chosen for a number of reasons. It’s meant to be a mildly funny reference to the original Star Trek TV series, about boldly going where no man had gone before. This article is doing something similar, but specifically in insurance. We are going to discover new, unfamiliar ways to manage customer risks.
There is another reason for the tiel. There is a case of misattribution to be found here. Many of us may remember the phrase, “It’s life, Jim, but not as we know it” from the original Star Trek TV series. However, this specific sentence was actually never a part of the series. Instead, it was introduced in a parody single – Star Trekkin’ – released in 1987 by British group The Firm.
There seems to a bit of a similar misattribution when it comes to insurance in general, and life and pensions insurance, in particular. On the one hand, we all have clear customer needs: We are looking for a safety net for ourselves or for our loved ones. Or, we want comfortable living after retirement, being able to buy a holiday home or provide education for our kids. Or, we want to make sure we have sufficient income even in case of illness or unemployment. Insurance marketing has been playing on these needs for decades, strengthening the notion that, to manage our lives, risks and ambitions, we need to buy an insurance policy.
We are all policy holders ourselves, so we know this is how we are being seduced. While our need as customers is this safety net for ourselves or for our loved ones, reality unfortunately is a little bit different, and we have to settle for an insurance policy that provides only a partial solution for these needs. The limitations are often legally required; still, we always wind up meeting a crude approximation of our actual needs.
See also: Thought Experiment on Life Insurance
I suspect that if you’re really honest, nobody ever really wanted to buy an insurance policy. Either you have to or there is no better alternative available. So we end up buying a product that doesn’t really cover our needs in the first place, and, on top of this, processes and interactions around it are not really helping us to become engaged, happy customers.
Now, insurers are increasingly aware of this gap between the products offered and customer expectations, fueled by the digital revolution. We see how other sectors have been disrupted by concepts powered by the latest tech, allowing us to manage our lives increasingly through easy, friendly, highly integrated apps and digital infrastructures. People are actually waiting in long lines to buy the latest Apple product!
So, here are a couple of challenging questions: Can insurance become as hot and sexy as an iPhone? Can it become something that customers actively engage in? That seduces people to actively manage future risks? That becomes urgent, relevant, an integral part of your life, even fun?
As an optimist, I would like to say: Yes, you can. But it’s going to take some changes from current insurance practices. Let’s address two approaches to make this happen.
Redefine your value proposition
The first approach is to redefine your product and shift to a value proposition that takes a broader view on your customer risks and builds new solutions. Now, of course, insurers have an excellent position to support customers with managing their risks, through a contract, by transferring this risk to a large group of individuals or businesses and investing in future income. We already know the limitations of this approach. But what if you use all available expertise to design other solutions to manage or reduce risks? All you need to do is realize that there are other options besides an insurance policy. Once you take on that view, a wide range of opportunities arise, offering new way to interact with customers.
As an insurer, you can build your expertise on risks, impact, behavior and probabilities and support your customers with individual risk assessments. New technologies allow you to make this assessment much more granular, incorporating individual behavior and internal and external data. Using these advanced data analytics, you can use these insights to build awareness among stakeholders and create new value propositions. You can offer customers a choice between different mitigation strategies – assuming, reducing or transferring risks.
Now, some of these activities may already be in place for specific business lines or customer segments. But this is different – we’re not assessing risks to set the right premium or clauses on a policy. We are investigating risks to reduce them.
Take the Discovery Vitality solution, rewarding clients for healthy living. With this health and wellness program, participants can save on their premiums and earn valuable rewards and discounts by simply living a healthy life. The more active your lifestyle, the more you’ll save and the greater your rewards. You can earn a $300 Apple Watch for $25 by exercising regularly.
This may imply that insurers need to redefine their role as part of an extended eco-system as they are broadening their insurance offering to increase customer relevance. Examples include integration with health, safety, housing, mobility and personal financial planning. Life insurance may become a part of the client’s broader financial plan, including healthcare requirements or housing arrangements after retirement.
But there are approaches to increase customer relevance. While we may have life or funeral insurance, there are still a lot of difficult, complex financial and legal items to manage. Especially at a time where you really don’t want to handle that. So how can you help your customers? By offering them a solution to prepare.
The startup Tomorrow. from Seattle, recently received $2.6 milliion of funding from VCs, angel investors and Allianz Life. The company’s solution provides an easy way for families to prepare themselves for the future, both financially and legally, making arrangements for when a relative passes away. The app helps to set up roles like guardian, executor or trustee, to create a will or a trust — and to buy life insurance.
Another example is Afternote, providing a digital platform where you store your life story, leave messages and make last wishes known for your funeral and legacy. The purpose is to help customers to reduce the complexity and fuss when preparing for a funeral, managing digital legacies and honoring last wishes.
Both Tomorrow and Afternote provide a broader service than a life or funeral insurance. We expect these kinds of solutions over time to become more and more integrated with service partners and other functions or platforms (e.g. healthcare, support groups, notaries, public records) creating integrated work flows reducing complexities and inefficiencies we have around these events today, that make a difficult time just a bit easier in a difficult time. That’s where the added value is going to be.
See also: This Is Not Your Father’s Life Insurance
Of course, you can apply these concepts to pension insurance, as well. If you understand all the complexities of pension insurance, the real challenge can be to translate this into clear communications and interactions with your customers, not only digitizing channels but creating attractive, interactive environments where customers can increase their awareness and involvement. Digital solutions offer the opportunity for real-time notifications or attractive simulations for advisers, employers or private customers. This way, you can offer new services and new ways to strengthen the relationship.
The second approach to change insurance into a product that customers actually want to buy will be covered in Part 2.