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The insurance industry has understood the need to reimagine insurance from the consumer’s perspective since at least the early 2000s, when the term “customer-orientation” made its debut. However, the journey continues, and many of the changes have been cosmetic or superficial. Reorienting insurance to the consumer’s perspective requires rethinking processes in light of their needs.
In the first two articles in this series, I will look at the industry from the consumer’s perspective, first with direct reference to individual consumers and then, in the second article business customers who purchase either commercial or group insurance products. This will include a look at how employees of businesses interact with the insurance industry whether as internal managers of the relationship or as end users of an insurance product they enjoy as a benefit. The analysis asks: What are their problems? What are their basic needs? And what are the key factors in order to satisfy those needs?
In a third article, I will synthesize the insights of the first two installments to show that customers and insurers have similar problems and needs, and that the same key factors to satisfy those needs apply to both through a single business model.
How do Individuals relate to the Insurance Industry?
Across all the different markets globally, consumers relate to the insurance industry in four basic ways:
- Through work
- Through Financial products
- Through the open market
- Through family and loved ones
Individuals can have these relationships either by law, as a provided benefit or through their own decisions. In some cases, a consumer can choose to buy direct, through a broker or agent or bank and from which carrier. In other cases, those decisions are made for them. Individuals can end up having more insurance products and relationships than they are even aware of.
There are characteristic problems or questions that relate to a consumer’s interaction with the insurance industry:
- What products do I have?
- Where do I have them?
- How do they work?
- How well will they work?
- Dependence on third parties.
It is also important to bear in mind that these relationships involve different actors or participants, such as brokers, agents, carriers, financial institutions, service providers (hospitals, auto repair shops, adjusters, funeral homes, etc.), HR departments—to name a few. On top of all of this, we are dealing with a very complex industry that operates on a mostly analog fashion.
Bearing this analysis in mind, if you asked an individual—just someone you might bump into—to list all the insurance products they have before and after you tell them how they relate to the insurance industry, what would this list look like? They probably will end up realizing they have more products and relationships than they were aware of.
What are the needs of individuals?
- And individual’s basic needs can be summarized as:
- Knowing what products I have
- Knowing where I have them
- Knowing how they work
- Knowing who can help me in case I need help
- Being able to share this information with my family or loved one’s in case something happens to me
- Being able to consult information and perform transactions (buy, pay, use, modify and renew), without having to do it through a third party.
What are some of the key factors in order to satisfy these needs?
There are two main factors in satisfying consumers’ needs, technology and the roles both brokers and carriers have to play.
The most important factor is for consumers to be able to interact digitally with their information—storing paper policies in a box is not the answer. If you can interact digitally with your information you can start getting answers and autonomy. Here is where web services/APIs and especially open web services come into play. Incumbents must be able to interact digitally with their clients. Also, we must keep in mind that it’s the consumer who decides to share his information—it’s not the brokers/agents or carrier’s information; it’s the consumer’s information.
The role of Brokers & Agents
Another key factor will be the role of brokers and agents. Keep in mind that they have two key roles, they can act as advisors/consultants and also as a distribution channel. These two roles give them a strategic advantage. Why do they have this strategic advantage, because what consumers are going to need the most is for someone to help them understand what they have in front of them and how to move forward in order to be more efficient in terms of coverage and costs. Brokers and agents will be able to act as advisors irrespective of where the consumer gets the product from, and in some cases they will also act as a distribution channel and sell a products to the consumer.
The Carrier’s Role
It’s also going to be key how carriers adapt their product and distribution strategies. We must keep in mind that if the consumer has a 360 view of all their products and the right advice from a broker/agent, they can realize they might have overlapping products or protection gaps. Building flexible products that can adapt to the different relationships a consumer has will be key.
Before concluding this article, I’ll share a relevant personal experience: My father was an insurance and reinsurance broker his whole working life. Two years before he died, he fell and broke his hip. He had medical insurance as a retiree of a leading U.S. reinsurance broker, but due to a large deductible, he ended up assuming the medical expenses, which, fortunately, he had the financial means to do. When he died, my mother, while organizing some papers my father had in a box, found a personal accident policy he had purchased through a bank that would have covered the medical expenses incurred when he broke his hip. This is not a unique occurrence.
In the next article in this series, I will look at the industry from the group insurance customer’s perspective, both company and employee.