The US life insurance industry is undergoing similarly profound changes that the UK experienced over the last 15 years. These changes will greatly impact insurance distribution and create significant growth opportunities for insurance providers that plan now.
The US life insurance industry is undergoing similarly profound changes that the UK experienced over the last 15 years. This will lead to dramatic change in retail insurance distribution and customer engagement, and there are important lessons to be learned based on historic precedent. The US market can expect a seismic shift to web-based self-service, the emergence of market aggregators, and more direct to consumer distribution models. There will be more consumer transparency, lower policy costs and commissions, new Exchange Marketplaces and comparison sites, and increased consumer self- service, particularly using mobile and tablets.
Consumer data will be at the core of the distribution revolution and Insurance carriers without a single unified view of the customer and a customer-focused approach will loose market share. Customer data, analytics and insights are a pre-requisite to compete in the digital age.
We can also expect hybrid distribution models where small groups of like minded insurance providers work together with select brokers to leverage marketing budgets by combining and packaging non-competing products and services. Reduced margins and increased costs will lead to the wide-scale destruction of smaller brokers and a major re-think about distribution The way in which carriers engage with prospects and customers, provide advice, sell products and support policyholders will look very different in 5 years than it does today.
Intensifying competition in insurance markets combined with demographic changes are leading to the emergence of multiple low-cost distribution channels and the rapid growth of mobile and tablet as the preferred method of obtaining comparative information and buying on line.
Technological innovations have allowed customers and advisors to get faster and more personalized information about product benefits, price comparisons, helping them choose which products best match their profile, with little effort. With the increasing use of the Internet and smartphones, customers increasingly prefer to gather information on products and services offered by multiple insurers and to compare before making a final decision.
New technology can serve multiple customers across multiple channels, optimizing the experience for each one, based on a unified view of the customer. We will see the increasing deployment of technology that collects and analyzes data in real time, and uses this information and the insights to personalize and optimize the customer experience, and to drive sales.
Western Europe, particularly the UK, has seen the fastest adoption of these new marketing and enrollment channels, though Latin America is catching up. The new channels have provided insurers with opportunities to increase sales while keeping costs low, whilst the customers have the convenience when buying insurance products. Although direct to consumer sales using new on line channels is relatively higher in Europe, agents still dominate the US life insurance market, so insurance companies need to be careful to reduce channel conflicts when looking at direct to consumer marketing.
The impact of demographic shifts, given that the under 35s have a clear preference to buy life insurance on line, often using mobile or tablet devices is hard to overestimate. The proportion of the US population aged 55 and over is set to grow 25-30% by 2020, according to US Census data. By that same year, the number of citizens between the ages of 35 and 55 will shrink by 3%. Meanwhile, the number of citizens under the age of 35 will increase by nearly 10% by 2020.
These demographic changes will have significant implications for insurers because of the different ways they want to be engaged. Younger people prefer to go on line to gather information and purchase products, including insurance and financial transactions. They also have much higher expectations of the consumer experience, which needs to be personal, relevant, and engaging. This increases the viability of digital self?service channels, including Market Exchanges, where products can be compared and purchased.
The US life insurance market has been slow to embrace the digital age and look at how new and more effective ways of distribution and customer engagement. One only needs to look at other market sectors and to understand that smart digital marketing and customer engagement has transformed most other market places, from travel, to banking, stockbrokers, gaming and retail. It would be very naive to believe that insurance will not follow the same path, when firmly held views and skeptical opinions have been proven wrong time and again.
The Internet has empowered today’s consumers to buy almost anything online and there’s no reason to think that life insurance will be an exception. Just think of the booksellers, travel agents and stock brokers who believed consumers could not conceivably forego their expert advice and buy directly online. Or the established publishers and music companies never expected competition from new digital formats or new distribution model. Decision makers in the life insurance market would be foolish to ignore these changes, in the belief that business will continue as normal. Instead, they must recognize that digital disruption will change their business just as profoundly as these other sectors.
The importance of customer data means that field agents will play new roles, like assisted selfservice, where they a follow a scripted sales processes, that changes dynamically on their Ipad as information about individual customers is captured. This would lead to the capture of rich behavioral and unstructured data as well as valuable customer insights. By providing an agency force with ìlisteningî and ìlearningî capabilities they can not only follow best sales practice, but issues over compliance and training are resolved, making them a strategic asset for increasing sales, gaining customer insights, and for new product development.
Tomorrow’s top life insurers in both the older and younger market segments will need to excel in data driven customer understanding and insights.
With the rise and rise of enrollment platforms, Market Exchanges, and distribution channels used for policy sales the challenge faced by insurance companies (and brokers) is to provide a consistent customer experience. The paradox is that although many customers would prefer a ìself-serviceî approach, they are also demanding to be treated more personally, which requires a single unified view of the customer across all channels. Recent IBM research of more than 1,000 UK insurance consumers revealed that 91 percent felt insurance providers consistently failed to meet their needs when it came to customer engagement. Almost two thirds (61 percent) felt they were not marketed to as an individual, while more than half (56 percent) believed that, judging from their insurer’s communications with them, they did not have any idea of who they were. When asked if they felt their insurance company communicated with them on the provider’s terms, rather than the customer’s, the majority (59 percent) said it was on the provider’s terms.
The study identified that 66 percent of customers felt that their perception of their insurer would improve if it referenced matters relating to their account in its correspondence. Furthermore 36 percent say they would be more likely to recommend their insurance company if it engaged in a dialogue that made them feel they were being treated as an individual. 30 percent of insurance customers stated that they would be interested in receiving fewer communications by post.
The importance of personalization and customer centricity is supported by Afinium who have many years of data driven marketing for blue chip clients across multiple sectors from Insurance, Government, Retail, Travel and Gaming in Europe, Australia and the US. The results (measured by ROI) show that consumers across ALL industries consistently respond to highly personalized and relevant digital marketing and communication delivered across multiple channels, but in a consistent manner, driven by a single unified (digital) view of the customer.
Today and tomorrow’s distribution challenges require a wider technology solution: one that covers a single view of the customer, shared and coordinated enterprise content management across structured and unstructured information, the ability to process across all channels (including social media), a wide range of analytics and metrics, business rules, predictive modeling and external resources. The growth of business process management systems has been fragmented with many point solutions over the years and is now in need of coordination and integration with the other key technologies.
Increased competition in the market place requires accelerated deployment of products and services, which are possible through SaaS-based solutions. Insurance firms are therefore leveraging SaaS solutions to speed up insurance distribution processes across multiple channels. Another key driver for adoption of SaaS solutions is its use in developing pricing models that can be directly related to system usage.
For most insurers the foundation for this new ‘customer-centric’ approach will be installing serviceorientedarchitecture (SOA) and middleware to extend and enhance existing systems, rather than replacing the core system all at once, which entails significant one off investment and massive disruption. SOA defines how entities such as programs interact so one entity can perform work on behalf of the other. Middleware is software that lies between the operating system and applications, making it easier for software developers to overcome the rigidity of a legacy system. Further, data can be extracted from transaction systems and made available to anyone in the company. This same data can be used to deliver personalized and relevant content to the consumer and be used to optimize the client experience.
Licensing a SaaS based marketing and enrollment middleware (SOA) solution that interfaces and integrates with legacy systems and joins up existing and emerging distribution channels ensures that internal IT costs and resource requirements are minimized whilst allowing rapid deployment. The objective is not to seek to replace existing systems but rather to leverage existing systems, whilst maintaining a single view of the customer and data, thereby vastly enhancing the client user experience, and reducing processing costs.
SaaS based solutions offer further advantages in that they can also be offered to brokers and agents, allowing collaborative working, avoiding channel conflicts, and leveraging sales around a common integrated platform and view of the client. This collaborative working relationship, built around common interests, will lead to binding and lasting co-dependencies and competitive advantage.
Insurance carriers need to put customer priorities first and to put the customer at the center. This is a pre-requisite of digital marketing and distribution. At the core of this is the requirement to have a unified and single view of the customer that can be shared across agents and distribution channels, to provide a consistent and highly personal customer experience.
By centralizing customer data carriers can leverage marketing opportunities across all channels. Channel conflict can be minimized by providing technology and marketing services to agents and distributors, whilst ensuring that the marketing return is optimized based on data analytics and continuous ‘test and learn’ to drive ROI. The market is looking for an integrated solution built around the customer that can unify and leverage existing enrollment platform capabilities and relationships. SaaS middleware and SOA technology is much quicker to deploy and considerably less expensive than replacing existing systems, and allows the creation of a unified platform that joins up the dots, and creates real market efficiencies.
These changes are taking place now, which means that insurance providers and brokers who fail to embrace the changes will be left behind and either loose market share to the incumbents or face a steady decline.
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