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June 2, 2017

To Predict the Future, Try Creating It

Summary:

Life insurers can offer modular products--that can be built up or down and switched on and off to reflect much better how life’s risks ebb and flow.

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Backed with new capital, powered by digital technology and using decentralized administration, a new model for transparent, simple and customer-focused life insurance couldn’t be easier to visualize. And competition from newcomers means existing providers must innovate. But what can traditional insurers do specifically to — to paraphrase management theorist Peter Drucker — predict the future by creating it?

Today’s insurance market is a customer-centric, buyer’s arena that reflects a palpable shift in power from the producer to the consumer. Insurers’ service offerings need enhancement. If it is felt little value is added to consumers’ daily lives, customers often fail to see the relevance of the importance of cover. Technology can help insurers to innovate and address this gap and deliver enhanced services.

By striving for simplicity, insurers can also increase transparency. That said, no matter how simple the front end is made for the customer, acquiring cover remains an intricate process. Advice, compliance and regulation can clog the process but offer important protection to consumers. There is a delicate balance to achieve.

See also: 7 Steps for Inventing the Future  

Letting people engage in the ways they want is crucial. Trust and advice seem somehow less important to people than before. Today, people make emotional decisions with far fewer facts, and for many a community-based recommendation will do. This combination suggests that social brokering will only grow in importance and that demand for automation with robo-advice will increase.

Consider the disintermediation — the reduction in intermediaries – that transformed High Street banking. An appointment with the manager is no longer needed to set straight one’s personal financial affairs. We fend for ourselves by banking online and using mobile-first apps to view statements, to set up transactions and to move money about. Customers now have similar expectations of life insurance.

To provide more flexibility, insurers can offer products that work in a completely modular way — products that can be built up or down and switched on and off to reflect much better how life’s risks ebb and flow. It’s likely the silo-based approach to the design and sale of line-of-business products is not sustainable. Product fragmentation with more diverse offerings will offer tailored products that fit with the way people live their lives.

Personalization gives insurers the opportunity to transform the services they offer and take a real stake in the future health of their policyholders. One way is to shift from risk identification to risk prevention that is based on knowledge of behavioral change. While using data from wearables is a start, more support can be provided — not just to the fittest customers — by developing apps and technology that engage their unique health needs.

Data from health apps, for example, is just one source that will give insurers access to a real-time view from which to assess risk, instead of relying on past data. However, continual engagement requires transformational change in the industry. To achieve this, insurers can — and are — engaging with experts and companies outside the sector. As the boundaries between insurance and adjacent businesses fade, roles and skill sets within insurance will also change, resulting in a need for more diverse recruitment.

See also: How to Build ‘Cities of the Future’  

Much is being said about big data, in particular how better use of the insights can make insurers’ operations leaner. But analysis of large datasets gives established corporates and newcomers to the industry identical insight. While agility of execution may favor startups, it’s industry knowledge that puts insurers in a strong position to turn data into actionable insights.

For more perspective on how technology is changing life insurance, click here.

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About the Author

Ross Campbell is chief underwriter, research and development, based in Gen Re’s London office.

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