Tag Archives: demographics

What Millennials Demand as Customers

Those of us born in prior generations are used to certain innate complexities about insurance. We are almost immune to the thick stack of documents that accompany a policy. We’re not particularly upset about having to jump in a car to visit our insurance agent’s office to ask a question or pay a bill. We somehow are even understanding about delays associated with getting a claim adjustment or an appraisal completed.

But, in June, Millennial demographics crossed the chasm. Millennials exceeded a quarter of the population, passing the number of baby boomers. The question for business is, Are we ready? Do we truly know our new consumer; do we understand what they want, what they need, and what they like?

It seems obvious that generations get older and that things change, but did we miss the Millennial switch? Are we still stuck thinking about the customer of yesterday and today, or did we start to shift to meet the demands of the customer of tomorrow?

The Millennial consumer does not have our patience and understanding. This consumer has seen great companies like Google, Amazon, Apple and others consistently deliver on their promise by providing excellent service. Millennials demand the same in insurance – the speed and quality, simplicity and transparency, fairness and flexibility.

Millennial consumers do not understand why insurance has to be so complicated that it almost requires a degree in insurance to truly grasp it or why the policy cannot be acquired, managed and paid for easily online or over mobile. This consumer doesn’t understand when 24/7 service is not available and definitely does not understand when certain insurance activities take weeks to finalize. A Millennial knows that he can acquire money from any of his friends worldwide in a matter of minutes and does not understand when payments from a worldwide enterprise take weeks. Likewise, a Millennial doesn’t understand when claim information captured immediately during the incident cannot be delivered and reviewed in real-time and why almost every claim no matter how small must go through a process that could come out of a CSI episode.

As an industry, we are already too late. The industry finds itself experiencing a true generational gap between the insurance organization and the Millennial consumer.

What the new insurance customer demands requires more than just fine tuning of existing methods, technologies and business processes. There is a need to re-invent insurance as a whole, and innovative technology and products are the key.

Hide and Seek With Healthcare Profits

Little did I know that the children’s game of Hide and Seek would provide valuable lessons for a life in business. But success requires trying new strategies, moving in different directions and venturing away from the illusion of comfort that home base appears to provide.

To win at Hide and Seek, you had to be flexible in your thinking to find great hiding spots, had to make a decision while the countdown was ticking and had to move fast if you wanted to win. Managing healthcare profits in a post-ACA world works the same way.

Hide and Seek is a business strategy used in healthcare like no other industry. The key players resist transformational change and use the power of political lobbying, fear, confusion and an almost unbelievable – you can’t make this stuff up – kind of limited transparency.

By lack of transparency, I mean like playing Hide and Seek with no moon in the sky and wearing all black. There’s no way you were going to find my hiding place!

Fully insured health insurance companies and HMOs are exceptional at playing Hide and Seek, with profit margins hidden in the premiums.

Besides the Affordable Care Act and its new extra charges and taxes, you have to look really hard to find out where the contingency margins are hiding in the premium calculations – especially when you consider that there is very limited transparency in the actual healthcare renewal calculations. Ask yourself – did your employees’ good health and low healthcare utilization inure to your corporate bottom line or to the insurance companies?

So, where are the good profit margin hiding places in the fully insured premiums? Let’s take a peek at the ones hiding inside the employer-paid healthcare premiums? For starters, try looking at the pooling charges, medical claims trend factors, demographic load factors, pharmacy claims trend factors or the capitation trend factors.

Of course, there are more profit margin hiding places in the retention factors, IBNR reserve, claim stabilization reserve, pending claim reserve and the earned interest rate assumptions built into reserves.

Don’t limit yourself playing Hide and Seek with your local fully insured health insurance company or HMO, because the game is rigged against you as long as there’s no financial transparency, profits can be hidden, your company’s good claims subsidize bad risks and you have no way of being rewarded for good claims.

The situation reminds me of the poor kid who always lost at “Bubble gum bubble gum in a dish” or “Engine, engine #9 going down Chicago line” to pick who was going to be “it” first. He didn’t know he was playing a rigged numbers game.

The answer was hiding in plain sight… and no one told him.

And, now you know!

Insurance and the Connected Car

I grew up watching Knight Rider and seeing KITT, where Michael would continuously talk into his watch, and KITT would drive to his rescue (through a garage door or two) or safely transport him through the night while Michael had a catch-up on his sleep — only to be woken up by the local police freaked out at the thought of him asleep at the wheel, only to be foiled by his pretending to have a “crook neck”!

Move forward 15-plus years, and we now talk to our watches, and cars are driving themselves. This futuristic TV show and its “connected car” is today’s reality and only becoming more and more real. We are allowed driverless cars from January 2015.

The connected car is a super exciting area that many folks already talk about in great detail. In fact, Capgemini’s Car’s Online study  presents a compelling case. Here is a quick summary from me of benefits:

  • Safety — by default, car capability increases beyond recognition. Humans no longer control of the car (especially as the car will react quicker than we ever would). In 2015, all cars in Europe must be equipped with eCall, a system that automatically contacts emergency services and directs them to the vehicle location in the event of a serious crash.
  • Fleet knowledge and efficiency — knowing when to roll vans/cars/trucks across what roads.
  • Intelligent GPS — bye bye theft, traffic jams and other inconveniences.
  • Location-based services — working out the best things for you along the way, including charging points for you and your car!
  • Infotainment and more — never be out of touch; everything is connected to your biometric-enabled smart phone. Your fingerprint not only unlocks the phone but tells the car who is driving and sets your profile and other preferences.

Of course, there is far more to it than this. The key here for me — it’s an unprecedented volume of data for us to derive insights from. There is a good summary from Direct Line in the UK here. A 12-month pilot, for example, gathered more than 11 million miles of data.

It’s nothing new!

One of my frustrations is that everyone talks about telematics as a new shiny thing. Like GPS, telematics has been around for more years than I care to recall — however, it has only just found its feet in mainstream marketing and the minds of consumers, primarily because of plummeting technology costs for the telematics “black box,” smartphones that can do the same (or similar) things and, most importantly, a problem to solve: the increasingly high cost of insurance. I use the word “mainstream” carefully; telematics is talked about a lot, with adoption in some key demographics (young drivers). While it has applicability across a great many other demographics, the number of actual policies is still relatively low compared with the total number of policies in force for any one insurer. I do, however, believe this will change, not because of the desire to reduce the cost but more because of the way we move to buy everything as a true utility or service.

This was debated at a recent roundtable discussion by Post magazine, which I participated in. However, to drive significant adoption, it may need a more fundamental change. Perhaps a change in law from opt-in to opt-out? It would certainly give governments the opportunity to truly consider road charging properly!

Let’s be blunt!

The connected car brings so much more and is yet another blunt instrument providing oodles of data back to organizations that allow you to use it. As in most of these cases, there is always a pioneer, and in the world of motoring it’s usually Formula 1, followed quickly by Mercedes in the consumer markets, before it filters down to other manufacturers. As an aside, there are some great videos here on data in F1 here and here – the difference being, soon this will be available to all of us, on our phones. F1 is a world where hundreds or thousands of changes are made to the car during a race to increase performance and the team’s chances of winning. It’s all data-driven. Imagine now if that same logic could apply to your everyday commute. Extend the life of your car, avoid accidents and congested roads and get cheaper gasoline. The list goes on — these, in fairness, are all here today and almost all through your smartphone. It’s simply quicker and easier to update than the cars’ in-built systems. Just look at the long list of features on the Ford Fiesta driving experience page.

Today’s reasonably priced car is a hive of sensors, features and functions. Advertising of them has moved from mpg, performance and power steering, to how it connects to the rest of your digital life, from Foursquare check-ins with Mini, to connecting to your phone in every car. (A change in law helped that specifically here in the UK, to ban the use of phones while driving.) In fact, infotainment is now seen as more important in most cases than the actual driving experience itself.

From an insurance perspective, the connected car offers a great insight into not just where and when you drive, but how you drive, too — therefore what risk you present to insure. We already have the ability to do some great things way beyond UBI (usage-based insurance); organizations like MyDrive compare your driving style to that of advanced motorists — the key here being you can drive fast (among others) safely. In fact, go a step further: Allianz has found in the Australian market that if you are a meat eater you are a better driver than your vegetarian counterpart. Data is starting to tell us much more than ever before.

What does the future hold?

Jump forward five, 10, 15 years. We will live in world of autonomous vehicles. Car safety will have excelled beyond recognition. Motor accidents will be a thing of the past. It is a familiar story now. What or who do we insure then? The personal market with have dissolved. The fleet and commercial market will have evolved.

From a personal perspective, I still question even the basics of car ownership. Going back to where I started this post, I remember growing up as a kid, and my first ambition at 17 was to get driving lessons, pass my test and buy a car. Ask a 17-year-old today in the UK where car ownership is on his list of priorities, and I would be surprised to see it in the top 10. This in itself brings a new challenge. We will no longer insure the driver and vehicle; you will simply rent your journey with a Zip Car or similar, which will include a near-new car, Sat Nav, insurance, gasoline and much more. These new schemes, or fractional ownership, could destroy the need (in urban areas, at least) or the desire to own a car and its associated financial burden.

For insurance companies, we need to decide on what or where the market will be – who we establish new partnerships with outside the vehicles – to drive new revenue streams and make the most of the vast volumes of data available about each and every journey. Of course, with this brings more questions, the most important being: If all this data is so valuable, who owns it?

Home, James!

Personally, while I love driving, 99 times out of 100, we could probably be doing something else far more valuable when the one thing we haven’t solved yet is creating more time. I wait for my autonomous car to chauffeur me around in the future!