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Insurtechs Are Specializing

Money has been pouring into insurtechs, reaching a record of almost $2 billion in Q4 2019. Since 2018, investors have put more than $1 billion per quarter into companies seeking to shake up the industry. Not a single market segment has been untouched.

In 2020, the focus will be on innovating with insurtechs that enable incumbents. One report found that 96% of insurers said that they wanted to collaborate with insurtech firms in some way. Those surveyed favored partnerships and the software as a service (SaaS) approach to developing new solutions. There’s a rapidly growing list of insurer and insurtech partnerships.

See also: An Insurtech Reality Check  

Insurtechs are developing to solve niche problems, and most aren’t aiming to tackle every vertical or every phase of the process. We all know the saying, jack of all trades, master of none. Insurtechs are focused on being the master at very specific parts of the value chain. Allianz has partnered with Flock, an insurtech startup offering pay-per-flight drone insurance; Aviva partnered with Digital Risks in the U.K. to develop insurance for startups and small and medium-sized enterprises (SMEs); and State Farm partnered with Cambridge Mobile Telematics to deliver usage-based insurance to drivers in the U.S.

One big driver of these partnerships is the inability of one company to do everything at once. Synergies can be realized when combining complementary skills. In Germany, Generali formed a partnership with Nest to offer homeowners insurance that leverages Nest’s smart home technology. Nest’s technology detects smoke and carbon monoxide and sends alerts to customer’s phones, reducing the risk for the insurer. Nationwide’s partnership with sure.com allows it to sell renters insurance through an app; Nationwide is still handing the underwriting and policy management separately. 

More and more, incumbents are working with several insurtechs that integrate to bring change to every aspect of the industry. 

Insurtechs bring the speed, agility and technological skills that incumbents need.

As Deloitte’s 2020 Insurance Outlook pointed out, “Despite some attempts to upgrade legacy marketing and distribution systems… carriers continue to struggle to drive more effective connections with consumers accustomed to online shopping and self-service.” Trying to bring legacy systems into the current age of digitization simply isn’t working, and, if incumbents try to build in-house, they face a longer time to market and higher costs.

Partnering with an insurtech company allows incumbents to quickly bridge the innovation gap, where technology changes faster than their ability to keep up. The estimated timeframe to develop solutions in-house is around 18 months, whereas you can be up and running in as little as three months if you partner with an insurtech. Moreover, incumbents that partner can respond more quickly to changing customer demands and lessen their risk of losing market share to a competitor. 

See also: How Tech Makes Sector Safer, Smarter  

For their part, insurtechs have realized that seeking to disrupt and replace incumbents can be too costly. To run a successful insurance company, you need significant capital, which is difficult for startups to raise. The insurance industry is also regulation-heavy, making it difficult for newcomers to find a place. Startups struggle to access the complex networks that support insurers. The industry presents too many barriers to independent disruption, but partnership benefits everyone involved.

Insurers are ready to innovate and have the data and distribution networks to support large-scale rollouts. Insurtechs have the technology and the agility to come into a large organization in the midst of change, work with its legacy systems, partner with insurtechs solving other problems in the supply chain and provide immediate value in moving them into the digital world. Both sides of the equation are ready and willing to realize the benefits of working together.

A Shift to Service, Away From Price?

According to the U.S. Small Commercial Insurance Study, after three years of declining rates, insurance providers are no longer able to compete primarily on price and are now focusing their efforts on ways to please their customers.

The payoff is a significant increase in satisfaction among their small business commercial customers, with a 30-point improvement in overall satisfaction in 2016, to 823 on a 1,000-point scale, up from 793 in 2015.

The study, now in its fourth year, examines overall customer satisfaction and insurance shopping and purchasing behavior among small business commercial insurance customers with 50 or fewer employees. Overall satisfaction is composed of five factors (in order of importance): interaction; policy offerings; price; billing and payment; and claims. This marks the third consecutive year when satisfaction has improved.

The study finds that interaction improved the most among all study factors, increasing 32 index points from 2015. Within that factor, website performance showed the largest jump year over year (up 36 points), followed by agent/broker (up 34) and call center (up 28). Interaction is driving the overall increase in satisfaction.

This is the only J.D. Power insurance study in which Gen Y is the most satisfied generation. As expected, Gen Y businesses have been operating for a much shorter time, but they typically have higher revenues than the businesses of their baby boomer counterparts (51% of Gen Y business customers report annual revenue of more than $500,000, compared with 42% of baby boomers).

The study found that American Family, Allied and Nationwide hold the top three positions in terms of satisfaction.

Find more on the study here.

4 Ways Insurance Is Disrupting Itself

Coming from the Insurance Executive Conference earlier this month in New York, I am extremely excited by what I heard regarding where the industry is heading.

I attended both the life insurance and P&C tracks, picking up the following insights about how the industry is disrupting itself before others can:

  1. Insurance carriers are embracing change.
    Anwar Haneef, partner at IBM Watson, said, “We have not seen much disruption in the insurance industry in the last 100 to 200 years” and acknowledged that new technologies have the potential of changing that. Jeffrey Killian, vice president of in-force service and operations at New York Life, stated, “We could become Blockbuster (Video) if we don’t go through the change.”
  1. Insurance carriers are focusing on their customers in a new way. For example, Gerald Patterson, senior vice president of retirement and investor services at Principal Financial group, spoke of Principal’s move away from thinking about customer service to focus instead on the customer experience. Principal tries to provide value to the customer and understand that young consumers expect the same technology from insurance carriers that they experience with other service providers. He also stressed the importance of embedding experimentation in your customer experience on a regular basis.
  1. Insurance carriers are embracing technology and planning for a different future.
    At the highest level, for example, Jane Chwick, former partner in charge of global technology at Goldman Sachs, provides technology expertise as a board member of the relatively young company Voya Financial. Patterson mentioned that he has recently spent time visiting Silicon Valley and attending Fintech conferences.

Killian acknowledged that realizing a company’s vision of customer experience requires investment and pointed out that Principal is committed to making the right investments to accomplish this. He remarked “We have invested a lot in Lean Six Sigma. It’s amazing how much energy you can unlock through these processes.”

Joe Beneducci, chairman, president and CEO of Prosight Specialty Insurance, said, “Technology is a catalyst that affords us options.” Life insurance executives discussed their expectation that the analytics movement will affect carriers’ entire value chain. They also saw predictive analytics enable insurance carriers to be learning organizations.

West Hunt, vice president and chief data officer at Nationwide, discussed the capability of scaling human expertise through cognitive computing. At the same time, the rise of robo-advisers and their potential threat to the business was mentioned. Finally, the recent trend toward digital and what it means to the industry was raised. Technology was discussed all over the conference.

  1. Further opportunities to leverage technology were identified. Colleen Risk, senior analyst at Celent, mentioned the opportunity insurance carriers have of enhancing their websites to provide transaction capabilities for consumers, such as changing beneficiaries. Recent research by Celent showed that less than 25% of life insurance carriers are doing e-delivery of contracts. Other opportunities include: making data available throughout the company, producing strategies to sustain customer loyalty, developing a compelling message for life insurance and educating Millennial consumers.

I was happy to participate in the conference and felt energized by the discussion of new topics that position the industry to continue to thrive into the future.

What do you think? Post your comments below!

Don’t Be Dissuaded by Medicaid Myths

Brokers hesitate to offer Medicaid enrollment services to their clients because of the perceived stigma surrounding them.

But the reality is that those stigmas are all talk and no bite – most Americans don’t have a problem with public benefits like Medicaid. In fact, those who qualify for it generally prefer it because it offers lower costs and better coverage than many private plans do. Brokers who offer this government-subsidized coverage give themselves an advantage over those who don’t while better meeting workers’ healthcare needs.

Busting the Medicaid Myths

The common notion that Medicaid provides inferior coverage when compared with private plans is patently false. Study after study has shown that Medicaid recipients are actually happier with their coverage than enrollees in individually purchased plans or employer-sponsored private plans. In three southern states, low-income residents said they preferred Medicaid’s quality of care to that of private plans. Nationwide, 87% of Medicaid enrollees feel positive about their health insurance, compared with 73% of those with private plans.

Medicaid’s doubters note that only 66% of those eligible for Medicaid are enrolled and say the figures demonstrates inadequacies in the program. Under-enrollment has many causes, but pride is not among them. Many people don’t know they’re eligible for Medicaid, and the application process is complex. In addition, the application process is largely online, and a significant number of low-income individuals lack computer skills or access to the Internet.

The Truth About Medicaid

The reality is that Medicaid provides affordable, high-quality care to working people. It also presents brokers and business leaders an opportunity to lower costs while increasing the number of employees who have health coverage.

Contrary to the misconception that Medicaid offers little coverage, the program provides more comprehensive coverage than most private plans. Medicaid includes vision and dental benefits for children throughout the country and for adults in most states. It also includes benefits like non-emergency transportation and substance abuse treatment.

What’s more, care under Medicaid is just as accessible as care under private plans. Only 2.8% of Medicaid enrollees can’t access nearby care – while that number isn’t zero, it does suggest that the vast majority of enrollees can find primary and secondary care.

Not only does Medicaid cover a wide range of services, but it’s also quite affordable. The vast majority of Medicaid enrollees pay no premiums, and employers pay no additional cash for their employees enrolled in Medicaid. Even in the handful of states that do have premiums, enrollees typically can’t lose coverage for failing to pay. Medicaid has no deductibles and minimal co-pays, often charging just a few dollars for prescriptions and doctor visits. Medicaid covers the whole family; unlike many private plans, there are no drastic rate spikes for dependent coverage. For many families, Medicaid is the only path toward insuring the whole family.

In addition to saving money on premiums, people who have Medicaid are significantly less likely to incur significant medical debt than eligible people who do not sign up for Medicaid. Medical debt remains the most common cause of bankruptcies in the U.S., and Medicaid reduces the risk that a devastating medical complication will also bankrupt an individual.

When brokers help companies provide Medicaid enrollment services in the workplace, most employees are grateful to get help with this process in a comfortable and familiar venue without having to make appointments during their limited hours outside work.

How Brokers Can Benefit

It’s clear that Medicaid benefits enrollees, but what about the brokers who provide the benefits? Medicaid helps them, too.

Offering Medicaid enrollment support sets brokers apart in a crowded field. By bringing a new solution to the table – particularly one that many people are unaware of – brokers distinguish themselves.

Medicaid options also represent cost savings for employers, so brokers can find footing among business clients if they choose to offer Medicaid. In an increasingly commodified health insurance market, the ability to provide an option that requires minimal or no payroll deductions while offering access to high-quality care gives brokers an edge over the competition.

If attracting business clients wasn’t incentive enough, brokers can also earn sizable commissions through third-party enrollers on all workers they enroll in Medicaid, including those who were previously uninsured and thus generating no commission at all. At the end of the day, these additional commissions can actually generate more revenue for brokers than they would receive without offering Medicaid enrollment services.

Employers associate high costs with high quality, but that’s not always the case in the world of healthcare. Brokers who help employees find the right coverage for the right price help everyone save money while providing high-quality care to those who need it.

With Medicaid myths busted, it’s up to brokers to help individuals access care when they need it – and for a reasonable price. As the American population becomes increasingly insured, Medicaid enrollment continues to climb. Brokers who don’t offer Medicaid enrollment support might find themselves on the outside looking in if they fail to provide their clients with the cost savings, coverage and care that Medicaid brings to the table.

#InsuranceMarketing: How to Use Hashtags

The hashtag phenomenon dates back to 2007, when Twitter launched a tool that allowed users to search and share topics by using the # symbol. Since then, the symbol has gone mainstream, and you will commonly find it in other social media sites, such as Instagram and Vine.

Insurance companies caught on to the trend and incorporated hashtags into their digital strategies, adding humor, wordplay and aspirational connotations.

Insurance Entertainment benchmarked seven hashtags used by insurance companies to provide some insight into how hashtags can be best used:

#DreamFearlessly by American Family

#ThinkSafe by Travelers

#SummerIsMayhem by Allstate

#MakeSafeHappen by Nationwide

#BeTheJake by State Farm

#InFlovation by Progressive

#GeckoPhilosophy by Geico

The hashtags fall into two categories: 1) branded hashtags, which refer to the brand directly or indirectly (e.g. #InFlovation), and 2) interest-based hashtags, which speak to shared topics (e.g. #ThinkSafe). Some companies use Twitter to position themselves as aspirational brands by building communities around shared values.

Here’s the bird’s-eye-view of who’s doing what and why:

ima

Geico and Progressive, for example, opt for “branded hashtags,” while American Family and Nationwide promote “interest-based hashtags” in an attempt to target like-minded individuals.

7. Geico – #GeckoPhilosophy

Twitter: @GEICO, @TheGEICOGecko, Hashtag: #GeckoPhilosophy

#InspirationalQuotes are abundant, shareable and, generally speaking, positive. Geico took notice and added the Gecko flavor to its version of inspirational quotes, forming what is known as the #GeckoPhilosophy. Geico gets an A for creativity but a C for execution, as the tweets are often dull on screen. The idea has merit and is an example of a branded hashtag, tailored to the audience on social media, which in the long run may see more pickup by users.

gecko

6. Progressive – #InFlovation

Twitter: @Progressive, @ItsFlo, Hashtag: #InFlovation

#InFlovation is Progressive’s playful take on innovation and Flo.

Similar to Geico’s #GeckoPhilosophy, it’s a branded hashtag targeting those who enjoy interaction with Flo. By the way, at this time, Flo does not make public appearances. Someone asked. Progressive answered.

flo

5. State Farm – #BeTheJake

Twitter: @StateFarm, @JakeStateFarm, Hashtag: #BeTheJake

Another branded hashtag around the real Jake from State Farm.

state

4. Nationwide – #MakeSafeHappen

Twitter: @Nationwide, Hashtag: #MakeSafeHappen, Powered by MakeSafeHappen

Nationwide’s marketing team drew some heat for its Super Bowl ad featuring a “dead boy” with the tagline #MakeSafeHappen. But let’s face it, the #1 cause of childhood deaths is preventable accidents, and you know that thanks to Nationwide. So, aside from completely reshuffling its marketing team, the company “stands behind the commercial and the message.”

Since then, #MakeSafeHappen has taken a less controversial route, but not without consequences: MakeSafeHappen.com desktop traffic tumbled to an all-time low of approximately 1,000 monthly visits compared with 85,000 when the ad premiered. Better safe than sorry?

wilb

3. Allstate – #SummerIsMayhem

Twitter:@Allstate, @Mayhem, Hashtag: #SummerIsMayhem

Mayhem is the third most-recognized insurance advertising character, behind the Geico gecko and Flo. With more than 79,000 Twitter followers for @Mayhem compared with about 61,000 for @Allstate, it is obvious why Mayhem’s dark humor is an integral part of Allstate’s digital strategy.

mayhem

2. Travelers – #ThinkSafe

Twitter: @Travelers, Hashtag: #ThinkSafe

Surprise. An insurance company posting safety tips.

There is actually more to this strategy than meets the eye. Aside from its relevant and practical content, albeit dry at times, Travelers is also looking out for its independent agents by producing content they can easily share. Travelers gets an A for thoughtfulness, an F for entertainment.

traveler

1. American Family – #DreamFearlessly

Twitter: @amfam, Hashtag: #DreamFearlessly powered by DreamFearlessly

American Family has one of the best brand extensions an insurance company can hope for. In the land of cost savings by Geico, price comparison by Progressive and 3:00am customer service by State Farm, nothing says different like American Family. A slogan turned interest-based hashtag, #DreamFearlessly is a branding initiative that allows American Family to move away from functional attributes and create an aspirational brand.

There is one caveat, though – which is true of all interest-based hashtags. They are not exclusive. While they do generate more reach, sometimes the tweets have very little to do with the insurance brand seeking to be associated with that message. So while #InFlovation offers a direct association to Progressive, interest-based hashtags such as #ThinkSafe, #MakeSafeHappen and #DreamFearlessly require a bigger marketing push. The outcome, once successful, is worth it.

american


As the graph below shows, in the last 30 days #DreamFearlessly enjoyed more than 10X the reach of #GeckoPhilosophy. Clearly, Americans love to dream.

chart 1

In sum, hashtags are only as great as one’s offline strategy (American Family, Travelers); there is no harm in plain fun (Progressive, Geico, State Farm); and never underestimate the size of the fight in the dog (Nationwide). After all, there are no low talkers on social media.

Bottom Line: In a zero-sum game, the score is American Family (1), Geico (-1).