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There’s a lot of risk and uncertainty in the world right now. Inflation. Trailing supply chain issues from the tail-end of the pandemic. Continued upward wage pressure. Simultaneous, large-scale global conflicts in the Middle East and Europe. The rapid acceleration of climate change, with 2023 the hottest year on record. And elections coming up for the U.S., U.K., India, and Russia in 2024.
All this volatility means that, among both individuals and corporations, the need for protection has increased. This benefits insurers because they can charge higher premiums for their products. Indeed, premiums for everything from home insurance to car insurance have skyrocketed.
Incumbent insurers cannot rest easy, though. Competition is growing as new entrants looking to take advantage of the increased revenue and profit opportunities are being stood up with speed and scale. And the hard market won’t last forever. When the soft market returns, premium rates will drop, and insurers will have to differentiate themselves in the fight for growth.
In 2024, insurers that focus on customer experience, enabled by advanced digital technologies, such as data and analytics and generative artificial intelligence (gen AI), will win. These same technologies will also enhance insurers’ ability to better understand, manage, and mitigate risks, improving both their predictions and business resilience.
Past investments in digital transformation will bear ripe fruit
Carriers that invested wisely in digital transformation two to three years ago have now fully embedded advanced digital technologies into their operating models. And they’ve already seen their efforts bear fruit.
In 2024, we’ll see a widening gap in their performance against peers across every relevant key performance indicator, including:
- Premium growth
- Targeted renewal protection
- Sustainable rate rises
- Targeted portfolio distribution
- Better deployment of capital
- Pricing adequacy
- Flat-lining or reduction in expense ratios
- Talent retention
But it’s not too late for more conservative carriers to ramp up their focus on digitization. This is especially true because the recent democratization of gen AI has changed the game.
Three ways to differentiate on customer experience in 2024
Carriers must make it easier for their customers to do business with them. That will happen through customer experience design, process optimization, and digitization. Here are three key ways insurers can differentiate themselves on customer experience:
- Keep it contextually relevant
Embedded insurance is one way that insurers can offer tailored insurance solutions that align with the needs and context of the customer’s interaction with another product or service.
For example, following its recent acquisition of the life insurance arm of Westpac Banking Corporation, Australia-based TAL is now developing an embedded insurance product. “When a customer takes out a home loan,” says Nial McConville, former general manager of retail distribution at TAL, “there will be home insurance embedded into it. And this will protect the homeowner in the event of damage or loss to their residence.”
Meanwhile, Tesla’s insurance arm is an example of a new market entrant taking business from traditional insuers by embedding Tesla insurance within the overall purchasing experience for Tesla vehicles. Tesla owners could potentially purchase insurance for their vehicles directly through the Tesla website or app, streamlining the process.
Advanced digital technologies play a crucial role in enabling embedded insurance by providing the infrastructure, connectivity, and data-driven capabilities necessary for seamless integration into various products and services. For example, artificial intelligence can automate the underwriting process, making it faster and more efficient. This is particularly important where quick decisions are needed during the purchase of a non-insurance product or service.
- Make it personal
An improved customer experience doesn’t only mean being more contextually relevant, though. It also means delivering more personalized solutions. Take health insurance, for example. Some providers of private health insurance, such as Vitality in the U.K., supply their customers with ‘wearables’ that track their activity, such as exercise and resting heart rate. They can offer their healthier customers more customized and competitive prices and keep their own costs down too by making more accurate predictions about all policy holders.
Meanwhile, Insurtech Hippo is modernizing home insurance using technology and data analytics. Hippo (Palo Alto, Calif.) uses data from various sources, including smart home devices designed to detect potential issues like leaks or fire. This not only empowers the company to assess, monitor, and mitigate risk more effectively, but also to offer policies tailored to the specific needs of individual homeowners. And Progressive Insurance offers a program called “Snapshot,” a usage-based insurance program that utilizes telematics technology to monitor and collect data on various aspects of driving behavior, such as speed and breaking patterns. Progressive uses this to customize auto insurance premiums based on individual driving habits.
In addition to custom pricing and policies, personalization is also about customer care. For example, most companies are now in open enrollment season. But surveys show that around one half of American workers don’t understand their selected benefits. So what’s missing? Personalized education and decision support.According to MetLife’s 2023 Employee Benefit Trends Study, 44 percent of workers didn’t consult anyone when they enrolled in benefits last year. And 50 percent say having a better understanding of their benefits—what’s offered and what’s covered—would make them more loyal.
In 2024, life and annuity carriers will launch personalized solutions in greater numbers than ever before. These solutions will consist of unique combinations of insurance products that help each individual customer achieve greater health and financial potential, thereby keeping their business and managing their own risk. For example, generative AI empowers consumers to enter certain criteria, such as age and income, and receive recommendations on which insurance products best match their unique health and financial goals. Gen AI can even generate comparisons for different employer-sponsored plans to help an employee determine whether their own company’s plan or their partner’s plan would better serve their family.
- Ensure speed and seamlessness
Since the turn of the century, process automation has been the insurance industry’s holy graill. Insurers will always pursue automation, and for good reason. Speed becomes ever more important especially as millennials want better service, faster. But there are some things that cannot be automated. Large language models work based on limited information to obtain data from multiple sources, cleanse it, validate it, and return it so the process can continue.
For example, Generative AI can quickly generate synthetic data to augment limited historical datasets. “Synthetic data is critical to innovation,” says Bipin Chadha, vice president of data science at CSAA Insurance Group (Walnut Creek, Calif.). More extensive and diverse data enhances the accuracy and speed of risk assessment, allowing insurers to make quicker and more informed decisions.
As premiums surge, incumbent insurers face intensified competition necessitating a focus on customer-centric digital transformation strategies for sustained growth. In this era of rapid change, the convergence of innovation and customer experience emerges as the winning formula for insurers in 2024.