Actors in the insurance industry put the whole sector under universal suspicion in the minds of customers.
Customers want to be able to identify with a company. This can only be achieved by successful branding campaigns that target establishing a relationship between the company and the consumer. If consumers agree with the values a company stands for, they are more inclined to trust the company. Young companies have the advantage of a fresh start; while traditional insurance carriers, as well as traditional insurance agents, are suffering a decline in reputation and need to win back trust, young companies can position themselves as an alternative to an unpopular industry and therefore benefit from unbiased consumers.
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In a way, InsurTech start-ups can provide a more personal service than traditional agents can, making use of marketing and branding advertising, as well as social media presence and availability. This becomes increasingly important as customers will use a vast variety of channels to interact with their insurance agent — brick-and-mortar agents will have a hard time keeping up.
Besides reputation, the use of technological advances will be an essential determinant for the success of insurance agents. As consumers use more and more online sources or digital agents to manage their insurance policies, local insurance agents will become less important. A report recently released by consulting firm McKinsey includes a chapter on “the end of an era for the local insurance agent.” This sums up the future of traditional, analogue agents, whose business model will no longer be able to withstand innovative alternatives. In addition to digital solutions and mobile-first applications, traditional agents will face competition from insurance carriers that will focus more on establishing a direct relationship with their customers and will gradually factor agents out of the equation.
Technology and simplification are changing nearly every aspect of our lives. Customers have become increasingly used to managing everything from shopping to paying bills with the help of apps. Our always-on culture is bringing more customized options into the very personal areas of finance through technology. Therefore, managing insurance policies offline is beginning to seem like an unnecessary and tedious task. Comparing insurance online has been popular ever since the first portals came up, but the gap in consulting was harder to close. Insurance brokers watched the onset of insurance portals with ease, knowing those portals were unable to provide advice for the mostly helpless customer when it came to insurance.
However, the development and distribution of insurance apps that offer an easy-to-understand overview of complicated insurance products, as well as independent advice, led to fierce competition on the insurance market. Consumers don’t want to store tons of paperwork in large folders and block out their spare time to meet their insurance agent for coffee. As a result, these agents are losing customers to the innovative alternative. New players provide comprehensive services, replacing traditional broker services and thereby replacing traditional agents who do not have the resources to develop the tools necessary for better customer service. The new market players figure out what kind of solution consumers want and need, and they adapt accordingly. This can only be forced by pushing into the market and spending money — investors’ money that established companies usually do not have.
Providers of mobile-first insurance solutions drive change in the insurance industry with a clear focus on advisory automation and mobile service experience. Apps like Knip do not just use technological advances as an addition to traditional services; they change the business model the insurance industry is based on, following a consumer-friendly approach and making products more transparent. That benefit will be hard for traditional brokers and insurers to copy. They can implement technological features and develop their own apps, but their business is based on sales rather than advisory, which will make them lose customers to more innovative companies.
Both traditional agents and insurance carriers are pondering this development. Their inflexible organizational structures will be hard to overcome to provide more technology- and customer-oriented services. Sure, traditional brokers and advisers will still be needed as technology advances. Some people prefer to welcome their insurance broker in their home and would not dream of a mobile customer-broker relationship. Yet, this group will continue to shrink and become more specialized with time, something everyone working in this sector should be aware of. Only the best of the best of the traditional brokers will survive, be it because of their special expertise, their marketing and brand advertising success or their operational efficiency. Consumers are so used to digital products they will not hesitate to punish any provider that cannot or does not offer them such.
There are still some challenges ahead for start-ups and innovative companies; patience and persistence are crucial. As they are innovating in a very traditional industry, not everyone is excited about digital solutions — mostly because they don’t know what to expect. Informing and educating are important to overcome this fear. It might take a while, but it is starting to work.
What everyone needs to be aware of is that ignoring the development will not end it. Those who turn a blind eye to it now will end up being left behind. Ten years ago, online banking was something extraordinary. Today, it is hard to imagine life without it, and very few people still fill out transfer forms at their local bank. This development will continue with more innovative ideas and more technological progress. Insurance is undergoing the same process, and, a few years from now, it will be perfectly normal to manage policies online and via mobile. The insurance industry realizes it needs to adjust to customers’ expectations if it does not want to be left behind.