Tag Archives: next-gen insurer

Voice of the Customer: They’re Not Happy

Early in November 2014, immediately following the release of the SMA research report Crowdsourcing and Open Innovation: Powering the Sharing Economy, which explored the shared economy and its implications for insurance, I received an interesting email from the CEO of a shared shipping start-up. The CEO stated, “I just wanted to let you know that I have found the hardest problem to solve as the CEO is that, after talking with 12 different insurance companies, I am still stuck on finding someone to write a policy for me! I am not sure you can overstate the tsunami of change that insurers are trying to avoid. It is frustrating to me as a CEO trying to get my company going.”

My instant reaction was … what a powerful voice, and what a compelling, if troubling, customer statement! I immediately reached out to him to discuss his predicament.

In our SMA research, we have written about how the shared economy is empowering individuals and businesses to access specialized skills, resources, goods or services from anyone, anywhere, at any time based on an instantaneous need. The change is spawning new business models and leveraging the combination of crowdsourcing, open innovation and technology. These new business models are challenging decades of business assumptions, models, pricing and growth that were based on the principle of ownership, rather than access or subscription. As a result, the fundamentals of insurance, from risk models to pricing, products and services, are feeling shockwaves. My discussion with the CEO about his business provides a great but jolting example of the need for these new business models, new risk models and (especially) new insurance products. He agreed to do a webinar to describe his needs and his frustrating experiences for our SMA Innovation Communities.

During the webinar, the CEO shared his experience and powerful insights for insurers:

It was easier to obtain $2 million for investment funding than to find insurance. The funding would likely be completed within 30 days. Contrast that with finding insurance coverage: After talking to more than 20 insurers, brokers or agents, over nearly 12 months, there is still no coverage. He found two companies, one of which works with Peers (the non-profit company backed by shared economy companies), that are bringing insurance to this market segment. But he is still awaiting confirmation.

Outdated insurance business models don’t fit today’s market needs. The old models are based on historical actuarial models, rather than real, point-in-time data (i.e. coverage when driving and shipping something). The lack of visibility into capabilities of insurers and independent agents and the language barrier (the coverage needed is inland marine, which implies the use of a boat rather than land surface shipping) make it especially difficult to find exactly the right coverage.

Finding the right independent agent is “tricky” because of referral chains, lack of skill sets, unclear representations, and agent incentives. In seeking coverage, he was told by many in the industry that, “Insurance has not updated the business model since the 1800s, so you won’t find anything.”

What does this mean for the insurance industry? Mildly put, listening to the voice of the customer should be a wake-up call. The lack of understanding and inability to respond rapidly to new market needs opens the door to new competitors and the potential loss of customers.

Just like many other industries that are being disrupted and transformed, insurance must reimagine its business models – from the mission to the customer to the product, pricing, operational and revenue models. Historically, insurance has been about the transfer of the risk of a loss from one entity to another in exchange for payment. In today’s fast-paced, changing world of emerging technologies, new business models and shifting industry boundaries, is that focus limiting our opportunities? This experience by a “could-be” customer clearly suggests we are at least limiting our future, if not risking it altogether.

Other industries (and companies) are noticeably redefining their visions and focus to compete in this new world. At the 2015 Consumer Electronics Show, the media noted that Ford CEO Mark Fields sees Ford as rethinking itself as a mobility company rather than being defined by its legacy as an automotive company, and Ford is delivering a wide array of new services and experiences via the auto. Even Google’s CEO, Larry Page, has acknowledged that its vision statement – “To organize the world’s information and make it universally accessible and useful” – is too narrow, as reported in a Nov. 13, 2014, Fortune magazine article, “Google’s Larry Page: The most ambitious CEO in the universe.” Page is creating a future by leveraging emerging technologies to reshape the business beyond the legacy as a search engine.

Yet the view that insurance vision and business models are shackled in decades or even centuries of tradition is, unhappily, very real. This notion is reinforced in a Jan. 21, 2015, Forbes article titled “Insurance: $7 Trillion Goliath” that compares banking with insurance relative to change and innovation. The article notes that 15 years ago banking was a lumbering, vertically integrated giant that was largely untouched by the technology revolution. Today, however, there are a group of “Davids” like CoverHound, Lending Club and Square that are challenging traditional banking “Goliaths” with some digital “slingshots.” The article further observes that insurance has also remained largely untouched by the technology revolution, but that we are beginning to see the emergence of “Davids” who will challenge the traditional “Goliaths,” leveraging the technology revolution to disrupt the traditional business assumptions and models of insurance.

Insurers must redefine their vision and reinvent their business model, taking into consideration the new and emerging technologies, the growing amount of real-time data, new market trends and much, much more. If they do not, they risk facing a disruption that will be devastating, when it could have been transformational, creating new relevance in a rapidly changing world.

The reimagination of businesses in the context of today’s world and tomorrow’s potential are already defining and revealing future market leaders and winners. Will insurance remain focused on risk transfer products? Or will we look more broadly toward offering products and services that provide much more, enhance the lives or businesses of our customers and meet the needs of a reimagined business model, like the shared economy?

The possibilities are significant. Are you reimagining your business, considering the impossible as the new possible? Insurers need ingenuity and outside-in thinking to reimagine their business as a Next-Gen Insurer and ignite a vision of possibilities.

If not you, then someone else will. So dream the impossible and become a Next-Gen insurer

Made in China: Some Surprising Innovations

The dawn of a new industry and the Next-Gen Insurer is unfolding, influenced by levers of change from within and outside the industry, accelerated by an explosion of data and new technologies and fueled by innovation. Some insurers are embracing innovation to inspire a renaissance of competitiveness and customer value, reinvigorating what made them successful leaders in the first place or making them new market leaders of the future. There is an unparalleled opportunity to ignite a new future that is powered by the human imagination – and that is what China insurers are doing, as indicated in a recent article titled “Chinese Insurance Policies Cover Some Really Bizarre Things,” by Clare Baldwin and Diana Chan in Business Insider.

While the insurance policies being created may seem bizarre to some, they epitomize the spirit of product innovation, personalization and customer engagement that are identified as key trends in SMA’s research, The Next-Gen Insurer: Fueled by Innovation. Understanding rapidly changing customer demographics, needs and expectations is critical. The ability to reinvent the way to develop, package and deliver products and services is vital for insurers if they are to be relevant, let alone successful, in today’s new digital world.

So why are these innovative policies important for U.S. insurers to understand and consider?

First, the inspiration for innovation can come from other markets and geographies. The inspiration may stimulate the imagination, prompting new ideas and uncovering opportunities that can be built upon. In many cases, the thinking in markets, such as China, with less-strict regulations can help identify, incubate and market test new ideas. With more customers researching insurance on the Internet, they will see these innovative products and ask for them … and ask you why you don’t have them, or something similar.

Second, taking an innovative approach to meeting smaller, more defined needs provides a great entryway to other insurance products. What a great way to introduce your brand as innovative and personal.

In general, with trends like the connected car, driverless car, connected home, connected health, sharing economy and more affecting the future of traditional insurance products such as auto, home and health, to name a few, insurers must be as creative as possible in adapting to the shifting landscape.

Interestingly, niche-focused insurance products like those in China have been emerging in other areas in Asia Pacific, with “hole in one” insurance, and in Europe, with “wedding” insurance. Zurich’s wedding insurance, which covers all of Europe and which covers the costs of canceling or postponing a wedding, is an example of such a product and has been a big success in terms of sales, marketing and brand recognition. In the U.S., Warren Buffett’s Berkshire Hathaway insured the $1 billion prize to anyone who accurately picked the winner of every 2014 NCAA tournament game, a competition sponsored by Quicken Loans. And while no one picked the winners in the brackets, Buffett and Berkshire Hathaway got a lot of coverage.

Each of these examples engages customers in a fun way while also meeting a specific need. They have an element of “the cool factor” associated with them, something profoundly needed in an industry deemed stodgy.

So, while the article about quirky Chinese insurance policies seems to take an “aren’t they cute” approach, the examples are actually highly relevant for the customers they target, not to mention helping to educate a large population about the broader value of insurance. The massive interest in these untapped nooks and crannies exposes the fact that there are ready customers, regardless of geography.

The insurance industry has offered personalized, unique products in the past to selected individuals, but not on a mass basis. Remember when Tina Turner’s legs were insured, David Beckham’s legs were insured, Keith Richards’ hands or Bruce Springsteen’s voice … all for millions of dollars? The difference here is that these are high-value, highly customized situations that were all one-off products. In today’s digital world, with the customer demanding personalized offerings, mass product personalization will increasingly be a key driver in product innovation, shifting the industry away from the legacy of mass production of personal insurance products. Fueling this change will be customer demographics and preferences.

With product personalization, insurers need to develop products or product components that customers can shape to their unique needs – within days or weeks – according to new customer expectations. The mass personalized products will include new services that will strengthen customer loyalty and retention. These trends will help insurers differentiate themselves in the market and open market opportunities that can drive revenue and profitability.

So instead of the “naughty child insurance” offered in China, maybe it could be child care insurance that covers the costs of holding the child’s place while the child is out because of significant illness. Instead of buying insurance for smog’s ruining your holiday, you could buy insurance against weather such as hurricanes or snowstorms that could cause cancellation or limits to your vacation. And instead of covering pregnancy before the honeymoon, insurance could cover a health issue or death of a key wedding participant that could affect the wedding plans, and insurance could be the thing that could make a painful time a little less painful.

Major forces are converging that are fundamentally changing the entire paradigm of insurance, creating the Next-Gen Insurer in the process. Today’s insurers are faced with choices that are more intense, complex and transformational than ever before. An era of new leaders will be determined by their ability to respond to change and become innovators, embracing and capitalizing on each new wave of disruption.

Some of the waves with vast possibilities will be product innovation and mass personalization. Insurers in other geographies are catching the wave of customer needs and expectations. Are you prepared to ride the wave of mass personalization? If not, your competitors will!

The Need for Speed: It Just Keeps Intensifying

At the recent meeting of the Insurance Accounting & Systems Association, President Bill Clinton said in his keynote speech, “Share the future or fight over it.”

As an industry, we have a history of collaborating, which has benefited all of us, but we need to raise the bar to succeed in this fast-changing world. Other industries and businesses are changing all around us and seeking to encroach on and challenge insurance. So we must embrace open innovation, collaboration, crowdsourcing and ideation with new standards and at higher levels within companies, within the industry and even between industries.

The topics of innovation, change, and emerging technologies were the focus of this year’s IASA “Around the Horn” industry analyst panel. I had the pleasure of representing SMA, and as I prepared for the panel session I found myself taking a step back. I realized that when leveraging the vast base of SMA research and insights and blending that with the broader strategic business implications for the industry, a powerful story emerged. A wave of disruption and innovation has hit our industry with an intensity that we didn’t quite expect.

In the spirit of sharing, for those who did not attend, here is a summary of my rapid-fire responses to the panel questions to help inspire you, challenge you and get you to embrace collaboration as an industry to help you quickly define your future:

–Innovation is happening all around us. We are at the forefront of what is probably the greatest disruption in history: the digital revolution. And it is affecting every industry. This revolution is fueled by the breadth and depth of the new technologies that are changing customer engagement, transforming products and services, redefining business and revenue models, breaking down barriers to new entrants and more – look at the Apple iPhone, introduced 7 years ago, and the resulting destruction and construction of industries and businesses. Today, the bar is set at a new high. Operational excellence is an absolute. Innovation is necessary for future success. And the Next-Gen Insurer is being defined and shaped.

–Insurers must have a strong culture that combines the power of open innovation with an ecosystem that empowers collaboration. If we don’t define our own future as an industry, other industries may try to step in and define it for us.

–We must focus on the constantly connected customer. We all must recognize that, in this digital revolution, the customer is in control and is defining the channels that he or she wants to use – from purchasing through service. As insurers seek to become digital insurers, they must have unified digital strategies that create seamless, consistent and connected customer experiences in an omni-channel environment. Think like Google, Zappos, Apple, Nike, AT&T and others that are the new digital leaders.

–Product development and configuration are key differentiation levers. These capabilities are shaping today’s competitive landscape, with speed to market of paramount importance. The pressure to stay current, deliver new offerings and price accurately is driving many insurers to seek innovative solutions. The average new product implementation timeline is nearly 7.5 months. Less than 2% of insurers can implement in less than 30 days. But some innovative companies have found a way to implement in less than 5 days! Another emerging capability of even greater importance is the enabling of product co-creation – customers can help to configure their own products according to their wants and needs.

–Usage based insurance (UBI) is not just about product; it’s a whole new business model. UBI moves the focus from risk assessment to risk prevention. And its application is much larger than auto insurance. It is about the connected car, the connected home and the connected life. UBI is the precursor of a broader impact of sensors and the Internet of Things that will allow us to connect the dots between data for new customer products, services, outcomes and experiences – providing a real-time view of risk.

–Data is the new currency in the digital world. Data has always been seen as the lifeblood of the industry, but its strategic value is now at the forefront. And big data, business intelligence and analytics continue to take the insurance industry by storm. What is holding insurers back is the lack of a data management strategy and a deficient level of data mastery. Both strategy and mastery will be needed to unlock the full business value of data, whether transactional, unstructured, internal or external.

–Social media is a subset of digital data. Customers are sharing information about all aspects of their lives – social, pictures, online discussions, GPS, sensors, mobile technologies and more – and all this data is in the cloud. People are able to search their recorded memories and use new tools that can influence and shape their lives like never before. New companies are creating digital lockers for data that can be stored and managed by customers to be used in innovative ways. When new solutions like these form around customer logging activities, the question from customers will be: “Is the value of what I’m revealing worth the services I’m receiving in return?” The key issue will be the customers’ control of their data.

–Digitalization is happening and is dramatically destructive. A foundational change is taking place in the way all businesses are approaching value creation. In today’s hyper-connected world, companies are moving from managing value chains to managing ecosystems to power their businesses. The ubiquitous connectivity of people via the Internet and emerging technologies is disrupting traditional business assumptions about how to engage customers, the products and services offered and, ultimately, business and revenue models. Just look at these transformations: from the Yellow Pages to Yelp, hailing a cab to Uber or Lyft, booking a hotel to Airbnb and policemen managing traffic to managing traffic with crowdsourcing Waze. All of these represent the disruption happening all around insurance and point to the imminent disruption that will transpire within insurance.

–Mobile is much broader than the phone and tablet. It includes smartphones, MP3 players, e-readers, in-dash car electronics, cameras, portable consoles, home entertainment, appliances and any device or sensor that connects to the internet to share data. And there is now a continuing evolution of mobile apps from multi-purpose websites or portals to single-purpose apps. This will compel companies to design apps as a service layer within an enterprise technical architecture that will enable seamless integration and connectivity between apps – critically important with the Internet of Things.

–Cloud is increasingly mainstream because that is where the data is moving. Two years ago, it was an option in core system RFPs, whereas today it is increasingly a preferred choice. The future will be the Cloud of Things, a world of distributed data, devices, technology, intelligence, computing, etc. that is highly connected and will enable the creation of products and services.

–The issue is “customer empowerment,” not “customer-centricity.” Customer-centricity is a 1990s/early 2000s term and is only a subset of customer empowerment. We used to shape the customer experience; now it is shaped for us by the rest of the world. Customer empowerment defines new engagement models. As customers gain market power, they are increasingly comfortable with technology, have a stronger voice and use it to demand collaboration. Insurers must view all technology as touching customers, because it influences the customer experience, both directly and indirectly, ultimately shaping and defining the customer relationship.

–As an industry, we are seeing challenges to our long-held assumptions and business models coming at us every day. Technology is now super-connected, creating new experiences, new products and services, new outcomes and new business and revenue models that were not possible a few years ago. Just as the iPhone provided a platform of possibilities, core systems – integrated with an array of new technologies like mobile, social, Internet of Things, cloud, big data, analytics, driverless vehicles, biotechnology and much more – have the potential to transform our industry … and to do it on our own terms.

So be inspired. Be creative. Be collaborative. Be bold. Let’s create and share the future together!

Reimagining Insurance: More on AXA-Facebook

The reactions to the Strategy Meets Action blog “The Shot Heard Around the Industry: AXA and Facebook” have been enlightening. The blog has drawn polarized reactions … from some who envision the potential, and from others who only see today’s view of Facebook and insurance. The responses of this latter group explain a lot. They see the industry as risk-averse, steeped in tradition, lacking in creativity and slow to change, labels that inhibit an insurer’s ability to be imaginative. This time-worn outlook will need to change if insurers are to survive and thrive in this fast-changing environment.

Like it or not, the increasingly rapid pace of change is because of modern and major influencers: the customers' being in control; the new business models used by other industries and companies like Facebook, Google and Amazon; and next-gen and emerging technologies that are converging and challenging decades of business traditions and assumptions.

A new perspective is required that can inspire new directions for insurance.

Industries — including retail, books, travel, entertainment and pharmaceuticals — have found the very foundations of their long-held business and operational models challenged, necessitating innovation. Those that have not innovated … well, they are no longer the market leaders in their space, or maybe even no longer in existence. Just consider the iconic brands of Kodak, Blockbuster, Circuit City, Time magazine, Borders, the Boston Globe, CNN or JC Penney. Their inability or unwillingness to see and act has cost them greatly. Even companies that were recently considered innovative are challenged. Look at Yahoo, Blackberry and Nook.

Yet other companies are embracing innovation, new technologies and outside-in approaches. As noted by one response to our blog, automotive companies like Ford, BMW and GM focused on the “connected car.” Companies offering “shared car services” like Uber, Zipcar and Lyft are recognizing the importance of being customer-driven. And Facebook and Google keep expanding the realm of possibilities to grow and strengthen the customer relationships and experiences through acquisitions such as Facebook’s Instagram, Face and Oculus, or Google’s Nest, Titan Aerospace and Zagat, to name a few.

What separates those who innovate from those who don't? It’s the vision of leadership. Leaders who can innovate can define a future vision, create a culture of innovation, identify and understand the influencers of change and embrace an outside-in approach.

The insurance industry must learn and respond fast, because it is facing the same types of challenges that have reshaped other industries. The strategic partnership of AXA with Facebook is a game-changer, distinguishing their leadership and their willingness to take an outside-in approach. We are not likely to see the inner workings for competitive reasons, but AXA has taken a bold step toward becoming a next-gen insurer. By leveraging a company like Facebook with massive expertise in understanding the digital experience and the changing expectations of customers, AXA is being transformed to a digital insurer in terms of brand presence, customer experience and customer loyalty.

Being a digital insurer is so much more than just having a website, more than using channels like social media to sell or advertise and more than having a mobile app to report claims. A digital insurer is a powerful integration — of the website, mobile platforms, social media, mobile messaging, location services, crowdsourcing, business and customer applications, online video, content management, customer communications, sales enablement, branding and marketing – that creates a seamless, engaging customer experience. And the digital insurer is underpinned with sophisticated data and analytics that know, influence, anticipate and engage the customer in a way that creates a next-gen customer experience.

After all, in today’s world it really is all about customer experience and customer loyalty. AXA’s bold move in taking an outside-in approach — by partnering with a company that has been a leader in redefining the customer experience, redefining the digital experience, embracing new technologies, and using data and analytics — has created an opportunity for AXA to do different things that will position it as a leader in this new digital world.

The coming years hold the promise of unparalleled opportunity for insurers to increase their value to their customers. Those that remain tied to tradition and the past, choose to ignore the key influencers or wait too long to react will risk losing relevance. Those that are willing to take the bold steps forward will stand to gain the greatest rewards.

Yes, there are lots of details to be defined, piloted and implemented over the next few years in the AXA-Facebook partnership. And there will always be naysayers. But this bold move and others like it are ushering in the dawn of a new future that is full of possibilities. This is transformation and innovation. This is what will define winners and losers. And that is what is so exciting!

What the Next-Gen Insurer Will Look Like

Innovation is a crucial strategic mandate that is defining a new era of winners and losers. From retail to entertainment and everything in between, decades of business traditions and assumptions are toppling because of change – change that runs the gamut from customer behaviors and expectations to the use of new technologies. This level of change and disruption is unprecedented in the history of the insurance industry. And the pace just doesn't slow down: new technologies, the mash-up of technologies, new uses for these technologies, new competition, new customer behaviors, needs and expectations. These changes are demanding a new and responsive insurance industry.

At the same time, the impact of influencers is escalating — from both inside and outside the industry — and the explosion of data, the lifeblood of insurance, is creating new challenges as well as opportunities. This blitz is challenging and disrupting sacred business and operational models and assumptions, requiring new thinking, experimentation, the adoption of new technologies and yes … innovation. Many insurers, large and small, are grappling with getting their heads around how the business of insurance will change in the next three to five years.

While looking to the future has long been a part of our very culture, our ability to envision the future for insurance companies is often stymied by the priorities and challenges of today. However, if we want a future, we must rethink how we embrace innovation as the core of the Next-Gen Insurer.

A Next-Gen Insurer must reimagine the core components of insurance – the business models, products and services, infrastructures,and customers. All need to be underpinned by a culture that embraces collaboration, transformation and innovation. Forward-thinking insurers are defining what they will look like three, five and 10 years from now, planning how they will respond to influencers within and outside the industry, the path they will take to get there and the relationships that will fuel the journey.

Many insurers are on the journey, but they are going at different speeds and focusing on the different priorities that will uniquely differentiate and position them as market leaders. Some are reimagining the fundamentals of insurance, while others are retooling products, services, distribution and processes. Regardless of the approach, becoming a Next-Gen Insurer is a long-term, enterprisewide endeavor. It’s important to think big even though actions may start small.

So how to begin?

First, recognize that the innovation journey has started, with or without you. The longer you wait – the more difficult it becomes, and the more likely it is to be detrimental to your long-term business. Insurers must define their unique vision for how they will evolve into a Next-Gen Insurer by examining the fundamentals of the insurance business and determining how new levels of agility, flexibility, creativity and competitiveness can be created. There are four critical business components that insurers must reshape in their Next-Gen Insurer model: the customer, products and services, infrastructure and business model.

At the same time, companies must identify, track, assess and define how to respond to or leverage key influencers and trends. Prioritize them, developing scenarios and plans of action, experimenting and collaborating. This is paramount, not just for competitive advantage but for long-term survival. The coming years promise unparalleled opportunity for insurers to increase their value to their customers. Those that best capitalize on the key influencers will realize the most in rewards. In contrast, those that do not prepare for the future will find themselves falling behind, losing both competitive position and financial stability.

Equally critical is recognizing that no business, regardless of size, can go it alone and expect to lay hold of all the possibilities and reap all of the benefits. Most insurers lack the time, expertise and resources to track all of the influencers unless they engage outside industry resources. Insurers must identify partners who can mobilize an ecosystem of both internal and external relationships and resources to capture potential, change legacy cultures and enable the ideas and technologies that can be uniquely deployed within their companies to create their Next-Gen Insurer.

But most importantly, create and nurture a culture of innovation that starts at the top and is seen, heard and acted upon each and every day. Begin by identifying those within your organization who are the outside-the-box thinkers: those renegades and dreamers who can be advocates on the journey.

The innovation journey toward reinventing the business of insurance has started. Don’t delay, because what is innovative today will be expected tomorrow.

Begin your journey today — to ensure that you have a tomorrow.

For information about a detailed report on the Next-Gen Insurer, click here. To learn more about where the leaders in the industry are in their innovation journey, consider attending the 2014 SMA Summit in Boston Sept. 15, 2014.