May 30, 2018
What CVS/Aetna Can Teach Insurers
by Tom Anderson
Consumers no longer tolerate a supply chain that sees vital products and services changing too many hands with too little added value.
In early December 2017, CVS Health entered an agreement to buy Aetna for approximately $69 billion. Not only would this acquisition be the largest health insurance deal on record, but it is also likely to change the face of the health insurance industry.
So what can we learn from it? Quite a bit.
What can the insurance distribution business learn from CVS?
Lesson 1: Perhaps the biggest lesson is that, rather than wasting your energies resisting change, it is wiser to put change to work for you. The specter of disruption and the trends underlying disintermediation can be your business’ greatest assets if you’re willing to adapt, work within the laws of economic physics and embrace customer-centricity
Lesson 2: The consumer and his/her omnichannel convenience needs to drive future-facing strategy. With this in mind, companies will need to work to better understand their customers and to tell apart their different customer types.
Lesson 3: Once that’s done, companies can identify which customer type — which unique market segment — is most important to their business and how that relationship can be strengthened and sustained.
Lesson 4: You may need to tweak or even somewhat redesign your product/service offering to better accommodate those clients best-served by the unique combination of your available and potential resources, expertise, technology and employees.
Lesson 5: In some cases, you’ll discern gaps in your offering that require you to invest in new technology or to recruit and train new employees to specialize in specific markets. You might even look at merging with or acquiring another firm that will strengthen, complement or supplement your offering and help you to meet the demands of tomorrow’s more sophisticated and demanding customers.
If all that sounds like a tall order, it’s because it is. You’ll have to use some elbow grease and put in the leg work. But there are also ways to make the work a little less daunting and give yourself an edge. Leveraging digital platforms and big data innovations, smart businesses are enabling highly efficient transactions that are both customized and scalable.
See also: Global Trend Map No. 9: Distribution
Of course, there are also lessons aplenty to be taken not just for your business on a granular level but on a wider economic level. Consumers will no longer tolerate a supply chain that sees their vital products and services changing too many hands with too little added value. Today’s customers expect service providers to go out of their way to not just meet their demands but to anticipate their needs. This is especially true when it comes to services delivered by supply-side intermediaries.
This isn’t just the case for healthcare; it holds for all essential services. The insurance industry at large, and especially brokers and agents, besieged by the forces of disintermediation, can learn a lot from CVS.
When it comes to insurance intermediaries, that means keeping a finger on the pulse of the demand side of the industry, identifying transformational market forces and re-examining your business model to see how you can put those forces to work for you.
As demonstrated by CVS’s acquisition of Aetna, if you can streamline the delivery of your goods and services so that your presence is a benefit rather than a detriment to your customers, you’ll not just win the day but the morrow as well. The value proposition of an end-to-end, customized and data-driven experience is not unique to healthcare. In fact, that experience should be adopted as the guiding mantra and policy-shaping battle cry for insurance agencies and brokerages the world over.
CVS is a giant in its industry, and it still had the humility and foresight to understand its predicament and prepare accordingly. It would have been much easier for the company to rest on its laurels and for the C-Suite to take solace in its strong earnings reports. It would have been easier, and it would also have been a mistake. You cannot ensure future success on the basis of past actions alone. Whether you realize it or not, if you work as an insurance intermediary, disruption is coming for you.
As Eric Andersen, CEO of Aon Benfield, bluntly declared in 2015, “The traditional broker chain… could collapse… as reinsurers, carriers and their brokers all look to move more closely to the ultimate client.”
Whether through M&A, joint ventures, a niche strategy or a technology-driven continuance strategy (or something else altogether), now’s the time to explore every possible avenue to improve your business’ market resilience. The underlying forces of change are sweeping through the insurance industry and compelling forward-thinking operations to act.
2017 clocked in with more than $20 billion worth of M&A deals. What’s more, the second half saw a 50% increase from the first. That’s remarkable.
At the same time, technological innovation is pushing forward at an equally rapid pace. Accenture reports that “Some 83% of insurance executives expect platform-based business models to become part of their growth strategy over the next three years.”
Either way, one thing remains clear: Insurance distribution businesses will need to adapt to a fast-changing environment to ensure that their value propositions remain viable in the face of uncertainty.
To survive, your business will need to deliver a more customer-centric and more end-to-end experience.
At the company level, this means having more support staff and specialists to provide not only quick and comprehensive but also innovative and customized solutions for problems that your customers might not yet even realize they have.
It’s here that smart technology can be the game changer.
First, it provides better integration and visibility across the entire organizational structure. Data points are collected and centralized on the account level through a number of input sources — including email correspondences, the client portal, broker/agent-entered data, public records, social media, telemetry devices, BI insights and more. This ensures that all relevant information is at the fingertips of the interested party — anywhere at any time. Information will no longer be siloed between departments, and it will be shared automatically. After all, it’s often these extra customer insights that can make a difference.
For example, any number of data points can speak to a new policy need or an opportunity for upselling or cross-selling. If that information is kept with, say, the marketing department and not shared with agents, a huge potential opportunity could be missed.
Of course, this streamlined system also needs to be monitored and managed in an intelligent, timely, appropriately granular and end-to-end way. Not every approach or idea is going to work, so agents and brokers will need to understand where they are seeing a return on investment and what needs refinement. Risk taking will be a required part of the business moving forward, but that risk can be mitigated with smart tracking and analytics.
See also: Distribution: About To Get Personal
Today, consumer preferences are shifting, and this will only continue. Forward-minded insurance professionals know this and are working to build their businesses to dominate tomorrow’s industry landscape.
In fact, 84% of insurers report being increasingly pressed to reinvent themselves and evolve their businesses to survive and thrive in disruptive environments.
Companies need to be constantly thinking about how they can cater to a new generation of consumer, those who want one-stop shopping and value the ease of buying products and services above all else.
The agencies that are smartly leveraging technology to develop ways to make their customer experiences more personalized and convenient are going to succeed over the long run.
In other words, the CVS-Aetna deal is — at its core — about streamlining the supply and distribution of healthcare in a way that meets shifting consumer expectations and provides a more end-to-end, customized and data-driven service.
You can find the full paper here.