(Image credit: Dollar Photo Club.)
While the Internet of Things and smart devices can be used to change some of the focus of the insurance business towards risk mitigation; and while expanded apps and services can help broaden the experience into a better one for policyholders, they can’t change the core insurance products themselves. But that, too, needs to be a focus on insurance companies.
For too long insurance products have been planned and sold as monolithic risk categories, targeted at as many people as possible. It’s been about what risk categories insurers want to sell as opposed to what customers want to buy. The segment of the industry where product design, target market, and distribution strategy all align is called “program business,” and it’s a niche part of the industry. In every other industry that’s the entire market.
All Insurance Business Should Be Program Business
Novarica has been saying for a long time that all insurance business needs to be program business, but that’s true now more than ever. Consumers have learned to expect that their precise needs will be met and serviced, and want a tailored product and experience. Why should someone have to answer questions that have nothing to do with them or their business in order to get a quote? Why should a consumer have to purchase several policies when they just want to cover their small business and get back to work?
In addition, the increased use of mobile devices means that less information can be displayed and less data gathered at point of sale. With an insurance product targeted to a very specific demographic, there will be fewer questions and a faster, easier enrollment. This will be a win for the customer and for the technology team tasked with building the app or mobile portal.
None of the changes in this three-part series will happen overnight, and 2016 will only see the beginning of these trends. But it is happening, both by startups and established companies, and by companies both in and outside of the insurance industry. Some companies will be using technology to help mitigate risk, and consumers will expect their insurance to reflect these changes. Some companies will be selling a broader set of services where insurance is only a part of the overall experience. And some companies will be rethinking their insurance products so that they are better tailored to exact customer needs in different demographics. Insurers who don’t follow this path will find themselves struggling to explain their value to customers and potentially losing control of the primary sales channel. Insurers who do embrace these changes, either through internal innovation or by partnering with third-party firms, will not only win the business, but they will find new customer segments and a stronger brand.
Editor’s note: This is the third article in a series of three. Click the links below for the other two parts.