A few years ago, insurance experts began foreshadowing the impending digital disruption that would leave a wake of innovation in its path.
With the rise of InsurTech and non-traditional players entering the space, it’s clear that “disruption” is here.
However, if traditional players learn from their new counterparts, and continue to foster a culture of innovation across their business, “disruption” does not have to be disrupting.
For new entrants and traditional carriers alike, here are five trends to watch over the coming year:
1. Ensuring innovation with InsurTech
More than just a buzzword, InsurTech, the application of technology to traditional insurance practices, is impacting stakeholders across the industry.
Safe, low-mileage drivers are seeing lower premiums thanks to growing telematics programs. Claims frequency has been impacted by sensors and “dashcams,” and companies such as Allstate and State Farm are partnering with drone start-ups to assess roof damage — circumventing the dangers of climbing ladders to get the job done.
Agents are also riding the InsurTech innovation wave. Many can now submit applications via web portals, which not only facilitates the underwriting process, but also increases agent productivity. Others are testing “chatbots” to streamline the lead generation process and free up time for tasks that require more personal attention.
While these innovations have the industry abuzz, there are still many uncertainties associated with new technologies. As such, intuition and anecdotes can only get decision-makers so far in deciding which (if any) of these ideas are right for their business.
In order to proactively manage the uncertainty that comes with introducing a new technology, insurers should first pilot these services with a small group of policyholders or in select markets, to gauge whether they generate enough incremental benefit to justify the substantial upfront costs. These pilot programs can also help insurers identify unforeseeable issues with implementation and address them before broader rollout.
Carriers are increasingly investing in connected car technology. (Photo: iStock)
2. Give the people what they want: Refining product portfolios
While at the core, the idea of insurance is simple, insurance policies themselves often prove perplexing to policyholders. Individuals may not understand all the fees, premiums, coverage and allowed amounts available; the terminology alone can often prove intimidating.
As new entrants, such as Metromile and Lemonade, gain a following with their simpler offerings, we expect more traditional players to explore ways to refine their product offering, fee structures, and marketing to compete. For example, USAA recently invested $24 million in Automatic Labs, a telematics platform that claims it will “connect your car to your life” and provides a full suite of integrated apps. Others are exploring new products in response to collaborative consumption services, like Uber, Airbnb and TaskRabbit.
Introducing these offerings inevitably requires navigating the complex web of disparate state regulations and directives. Yet, many leading insurers have found the silver lining in these situations — framing the initial introduction in select markets as an opportunity to gauge interest and financial impact. By accurately and rigorously analyzing these introductions, insurers can gain insight into how the new line impacts existing lines, which individuals it attracts, and in which other markets the product may be profitable.
Peer pressure and competition can be powerful motivators for insurance sales teams. (Photo: Shutterstock)
3. Game on: Increasing gamification
Stemming from an interest in behavioral science and social networking, gamification in insurance seeks to introduce elements of competition and teamwork to encourage desired agent behavior. This has taken many forms, including introducing “point” systems to incent agents to sell new products, and transforming product education materials into interactive digital games to improve agent engagement.
In order to make the right investments, future-focused leaders should first try these initiatives with select agents, and compare their performance to a similar group of agents who did not participate in the program. In doing so, decision-makers can ascertain which types of agents knock it out of the park, and which strike out.
Both encouraging receptive agents, and identifying alternatives that incent favorable behavior in their less responsive peers, can unlock significant profit opportunities for insurers.
Insurers must examine data to determine how agencies benefit from carreir interaction. (Photo: Thinkstock)
4. Supporting a winning team in the field
Newcomers and traditional insurers alike are focused on how to optimize the activities and priorities of their field force.
This can be a complex task, as agencies’ varied backgrounds, relationship management styles, and incentive preferences mean a one-size-fits-all approach won’t cut it.
Some agents, for example, may benefit most from increased in-person interaction with underwriters who can explain the complex risks and benefits associated with specialty products. Other agencies may benefit more from a motivational visit from a territory manager or corporate office leader. Further, while some agencies may benefit from multiple visits every year, other agencies may require only one visit.
To determine the right cadence and types of visits, insurers can begin by looking at historic data to understand the impact of such visits on different agency types in the past. Through this analysis, insurers can glean the insights necessary to allocate resources in a way that sets each agency up for success going forward, without incurring unnecessary costs.
Carriers should determine which innovations truly improve the customer experience. (Photo: Thinkstock)
5. Driving impact through each policyholder interaction
As nimble tech start-ups vie for policyholder attention, ensuring each policyholder interaction is a positive one is more important than ever. Some carriers are relying on in-person events and call center outreach to build trusted relationships, while others look to direct mail and digital campaigns to unlock upsell and cross-sell opportunities.
So how are leading insurers determining which ideas truly have an impact on customer satisfaction and retention, and which only look great on paper?
The answer lies in building out an “innovation funnel”— a process for collecting ideas, putting them to the test in-market and rolling out the winners. Ensuring the company’s funnel is always full — and not just limited to a few potentially “big-bang” ideas — gets insurers one step closer to the insights they need to successfully target the right customers with the right content at the right time.
There are big changes ahead for many insurers. With more agile competitors and new technologies shaping the industry, executives will need to carefully consider the opportunities before them to ensure that they are driving, not chasing, these exciting developments.
John Howard, senior vice president at Applied Predictive Technologies (APT), has more than 15 years of experience helping large-scale organizations achieve data-driven insights that drive enhanced decision-making. He currently leads APT’s insurance practice.