Insurance implications of the retail comparison model
In my previous article, I discussed how engaging consumers in an easier, more constant and streamlined financial services experience might begin to build a broader base for returning value to them, and to the industry. To briefly recap, we discussed how the legacy model of minimal interaction with customers — the extreme example being only interacting with life insurance policyholders at the time of their death — has become outmoded in light of current consumer demands for convenience, transparency and interaction. In this article, we’ll look at the realities inherent in challenging the existing model in financial services.
The basic premise is that our industry needs to start thinking like an aggregator — in essence, behaving as if it were its own competition. The ecosystem model of comparison sites and, indeed, retail marketplaces, comes to mind as a springing-off point for insurance and financial services companies to examine as it tries to improve its relations with the consumer and stay relevant in changing times. And while it’s all well and good to consider shaking things up in an Uber-like fashion — in fact, there are already disruptive startups in our industry, trying to completely break the status quo — there are key differences between insurance and, say, retail, that need to be accounted for.
To begin with, retail doesn’t have to deal with regulatory product service. Because of this, they’re able to keep the user experience very simple, and keep the customer at the heart of that experience. They clearly have outstanding data management systems, because they can recommend the next logical (or illogical) thing for you at the bottom of the page, based on aggregated feedback from a similar demographic buying pool. From a data-management perspective, they are geared to be a sales machine focused on the individual. The profile they have on each customer keeps getting fatter and fatter as they add additional layers. They are thinking like a challenger, asking not only, what do I need to know, but what would I like to know? And where can I go next with this consumer?
In financial services, a challenger taking on this mindset upends our marketing-driven revenue system. Financial services has a lot to lose — no one in the industry wants to destroy the financial services market as it currently works, because if they did, that would be the end of their income stream. So once again we are left with challengers who have nothing to lose, and mega-aggregators like Amazon and Uber.
And what are these challengers after? By putting the user experience first, versus the actual product itself, they are taking nibbles out of our lunch. Consider that there are innovators in our industry who say that just because the minimum period for a household insurance policy is one year, that’s not what we, or our customers, believe in. So a consumer comes along who wants insurance for a month, and these disruptors can slice up their policy, and it ends after a month. Following the same logic, what is stopping a consumer — or a disruptive challenger — from saying, why do I need a life policy for 25 years? These kinds of customer expectations are already beginning to disrupt our long-standing, traditional markets. Customers no longer have to sign a long-term contract for phone or utility bills; why should they have to for insurance?
In the UK, we do have the beginnings of a comparison market for insurance. However, as it’s in its infancy, the process for the customer onboarding experience is the same as it’s historically been—rather cumbersome. There’s still an application process, a quote-and-apply journey. But if consumers continue to call the shots, this will have to change. One direction that would benefit large companies is to prove to their customer that getting their information about insurance from a TV ad is no longer necessary, by showing them the whole market. Even this relatively new area of technology has changed tremendously since its inception a decade or two ago.
So, here’s what’s changed: aggregation capabilities used to be problem-led, but now they’re value-led. They’re absolutely transparent in the comparison of products, and there are ways, such as star-rating systems, to make it easy for the customer to see the transparency. Historically, comparison sites in financial services were for industry use only — they were clunky, and built on existing broker systems. Now they’re consumer-led and easy to navigate, simple to see on tablet devices and mobile phones, and totally clear and transparent in how they present the value of the product. The entire user experience is designed around saving the consumer money by putting all the products through a comparison test and working out which one should go in their basket and which ones shouldn’t.
By heading consumers off at the pass, and telling them that the financial services industry actually benchmark tests ourselves, we can prove to them that we are still best suited to meet their needs with the best value for them. And it starts with knowing them, because we converse with them. This would seem to be radical, but that’s where the industry is heading.
While insurance and financial services will never be able to offer the level of experience of some more innovative industries, my expectation is that the industry will be forced—by the consumer—to move more and more in the direction of aggregation and comparison.
So we can’t afford to rest on our laurels. The winners will be those that don't stick their heads in the sand and ignore it. They will think like competitors, asking themselves, we might have a lot to lose from this, so how can we start to create a conversation that feels a bit like that marketplace experience? The answer is, it’s a process of continuous creation: doors lead to other doors.