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Image TLDR Don’t look now but the self-declared insurance disruptive force called InsurTech is maturing. There, I’ve said it. And cyber crime issues need to become mainstream discussions. There, I’ve said that, too. Here are some compelling InsurTech maturity indicators seen in the media this week: Publication of articles discussing more mainstream concerns for […]
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image TLDR Are the InsurTech advocates/enthusiasts ‘preaching to the choir’ and considering that to be conversion of the masses? Within the orb of InsurTech press, social media, and conferences one would think innovation and migration to adoption of the most clever of tech and innovative practices is de rigueur within insurance- if one […]
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You don’t have to look very far to find an active insurance ecosystem- just visit the neighborhood insurance agent or contact a commercial broker. They have been fostering the ecosystem method of serving customers since before the term was moved into the front row at the innovation and InsurTech get-together.
TLDR. Read any of the volume of current discussion regarding insurance ecosystems and you’ll find references to smart device apps, on-demand, shopping or ride sharing companies that are adding insurance options (Paytm and LIC, Amazon and Acko, Flipkart and Digit) but these are not surprisingly in insurance markets that are developing through a ‘digital native’ business culture. Ecosystems per se have been a difficult ground up start in more developed insurance markets, e.g., U.S., Canada, and Europe. But what of the US and Europe- forget being part of an ecosystem?
A quick look at defining an insurance ecosystem finds:
Ecosystem- “An ecosystem is a new business paradigm in which firms use digital tools to leap over traditional industry boundaries or forge partnerships.” (WHY ECOSYSTEMS ARE THE FUTURE OF INSURANCE, Accenture).
Huh. Leap over traditional industry boundaries or forge partnerships.
Or this-
“we suggest that middle-market insurers may want to consider expanding their horizon well beyond the standard product and service options they typically offer policyholders (see figure 2). This would involve creating or joining a much broader ecosystem offering a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers.” (Building new ecosystems in middle-market insurance, Deloitte)
Hmmm. Offering a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers.
I suggest if we look past the urge to see ecosystems as a new paradigm in developed insurance markets you will find- the agency model. Not just the independent or captive agents who are churn and burn lead chasers, but the agents who have a holistic approach to building relationships (old school suggestion of recognizing inter-connectivity of business- nascent ecosystems.)
Digital ecosystems such as are noted above typically didn’t begin as systems; they were applications. WeChat was launched in 2011 as a mobile chat app by China digital giant, Tencent. Within four years it had developed by the popular demand of users and affiliate companies into being a 200 million users per month- wait for it- ecosystem of users and providers. The application was adding value to what was originally a form of communication. It was accessible, easy to use, had features that were meaningful in daily life. It’s said that WeChat was the impetus behind the explosive growth in use of QR codes in China.
How does that tie into insurance, or insurance ecosystems?
There are tens of thousands of insurance agents in the U.S. alone, each of whom is working to build business, retain customers, increase the actual or perceived value customers find in the agent’s service, in other words- working to sell a reason for the customers to interact with the agency more often than once per year.
Smart agents have figured ways to do this for years before digitization- sponsor little league, be active in the chamber of commerce, bring a dish to pass at the service organization luncheon, donate bicycles to good readers at school (Chris Paradiso !), names on bowling shirts, filling sandbags, holding a customer’s hand when a claim occurs, referring the accountant next door, keeping a bank account in the local 1st National, keeping abreast of business and tech changes, and so on. Building the value he/she could bring to customers, being a resource.
How is it that agents can be the insurance ecosystems of today? If in China- have your QR code on WeChat, of course. Piggyback on the platform Tencent has constructed. But in mature markets where the insurance industry has tenure, the model has it’s own reference- ‘legacy’- and the availability of carriers is a fractured confusion to customers?
Active agents have the basis- relationships with collaborative businesses/organizations, and a pool of mostly content customers. How might the agent leverage these resources?
There are agents who are working to perfect targeted ecosystem plays, e.g., cyber insurance (Brett Fulmer, Joe Hollier, Ben Guttman in the US), or in unique SME plans (Michael Porpora ), or in facilitating service tools for high net worth customers (Kurt Thoennessen). A very good example of building an ecosystem/resource platform is Pat West whose firm, Hedgequote’s primary function is to be a resource for those needing information on insurance and potential firms from which to purchase.
I regret I do not know many agents working outside of the US, but some good examples who are building services beyond the basic sales model include Muhammad Ayodeji working in Lagos, Nigeria, (who in addition to representing insurance well posts traffic and accident updates through Twitter), or Mark Callanan in Sydney, Aus, who investigates crop and parametric options for the farmers and farm landowners in the country. And one never knows- the transition that German insurer DFV-AG has forged from being a more traditional carrier to digital expert may lead the firm into digital ecosystem land.
The point is that ecosystems can be insurance businesses that truly offer a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers. Perhaps a clever player will build an ecosystem of business connections that is a digital repository of business links. Ecosystem is still be defined- agents can evolve beyond the world of sales quotas and discussions about premiums.
“Alexa, who does my insurance agent recommend for plumbing repairs?”
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
TLDR What to do, what to do, in the InsurTech, innovation insurance world? Insurance remains a ‘sold, not bought’, product. Virtual service is not only becoming a demand of customers, but carriers are embracing the concept based on expectations of efficiency and economy. Will there be a disconnect between service efforts and how customers perceive it? As customers change their habits, can insurance change theirs? What is the common thread?
How an insurance carrier performs is typically known only when an adverse situation occurs, i.e., a claim, and service is triggered for the customer, a customer who doesn’t really know what to expect during a claim experience. So of course the industry knows this and has devised many ways of gauging service performance: from internal surveys, JD Power ratings (Customer Service Index), and most recently, by asking claim customers how they would rate the service they received in terms of one question,
The answers to that clever question are the basis of the calculations for a ‘Net Promoter Score’ (NPS), a service (loyalty) measure devised by Fred Reichheld and other clever minds at Bain and Co. How does this tie in with InsurTech principles? Seemingly through another three-letter acronym, IoT (Internet of Things).
What are you talking about, you say- NPS is a survey administered measure made available to but a fraction of insurance customers, is but one question, and disregards the experience of the majority of the customers. IoT speaks to connected devices, ostensibly meant (to many in the insurance world) to detect adverse conditions, track adverse conditions, determine behaviors that might predict adverse circumstances, and by extension reduce carriers’ exposure to claims. One measures experience, and one works to predict experience.
Well, I’m here to say that the two concepts couldn’t be more intertwined, and as innovation within the insurance industry becomes more practical, and as IoT becomes more ubiquitous, the interplay of NPS and IoT will become clearer.
At its root NPS was developed as a means to measure what the folks at Bain found as the key driver of business growth and success- customer loyalty. Loyalty has been a proven factor in business growth and businesses who foster customer loyalty not only retain those customers’ business, but those same customers are motivated to bring other business along. Enhancing customer loyalty, adding value to the customers’ lives, and refuting the contention that “loyalty is dead” (see Mr. Reichheld discussing that here ) is the foundation of NPS. And everyone touts their NPS results, don’t they?
So along comes IoT principles as part of the InsurTech wave, and its primary advocate in the InsurTech world, Matteo Carbone. (In an odd coincidence as with Mr. Reichheld, Mr. Carbone is also a Bain alumnus.) Mr. Carbone has espoused the concept that “all insurers will be InsurTech”, but in addition to that his IoT Observatory has become a central authority regarding insurance effects of connected devices in autos, houses, and to some extent, wearables. And a main principle he covers within his recent article, “Smart Home Insurance Strategy 101”, is loyalty :
“This way of enhancing proximity and interaction frequency with policyholders (connected devices and value addition) – while creating new customer experience and expanding relationships – is one of the reasons for adopting IoT in home insurance. These interactions with customers are one proven way to earn higher loyalty and allow the differentiation from competitors.”
There’s that word- loyalty. In an insurance world where virtual service is becoming the holy grail for carriers, how will loyalty remain a factor that can be influenced by carrier service? Even the InsurTech poster child, Lemonade, has to have concerns that as long as NPS remains an important measure of customer service (Clearsurance may have ideas about that), interactions with insureds must remain focused on maintaining or building loyalty. Can a bot do that?
IoT programs have that opportunity to integrate technology, virtual service, and value addition that can build customer loyalty, for example, value-added services as noted by Mr. Carbone. “But the real opportunity is to solve customer problems by delivering enlarged value propositions for their homes. (Some) services enabled by home IoT are:
Seems any or all of those points would serve to build customer loyalty in the absence of direct service from claim staff. And what of agents? Insurance sales and servicing of policies remain a predominantly agency-driven proposition in the US and Europe- agents/brokers are beginning to recognize the need for provision of more to customers than just quotes. In markets where ecosystems and smart device access are the primary entry for customers to insurance, loyalty may be even more fragile as ecosystem change is simply an app away. In all matters the focus must remain on enriching customers’ lives, on #innovatingfromthecustomerbackwards.
NPS and IoT- the concepts can’t make insurance a more ‘bought, not sold’ proposition, but effectively focusing on IoT in an increasingly virtual insurance world can help maintain or build loyalty, and as the architects of NPS found, that is the foundation of an effective growth strategy. The two principles have previously marked different paths but are now on intersecting courses.
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).