A more consumer-centric attitude is sweeping across major corporations, including insurance. Last time, we discussed the need for insurance and financial services to begin thinking like an aggregator. Taking a cue from the likes of Uber and Amazon, we too need to adopt the new marketplace mindset of transparent comparison and seamless user experience, possibly at the expense of feeling that we, as companies, need to create all the products we offer.
While our current reality in financial services is far different from this model, I’d like to posit that comparison sites are returning a great deal of value to the customer. And the more customers feel they’re getting value from this kind of system, the more they will engage with it — leading to many customers paying a little bit, as opposed to relying on fewer high-end customers to fill our coffers. The question we have to continually and iteratively ask is, how do we get there? And once “there,” where do we go next?
The old model in insurance holds that the premiums of the many pay the claims of the few. The “user experience” (to apply a fintech term to an old model) in purchasing an insurance policy consists of filling out a long questionnaire, and in return receiving a multi-page policy statement that most likely will remain unread. The bulk of the conversation happens in the customer-acquisition process. The next substantive engagement over the policy? Usually when the policy holder is dead. What about the intervening, say, 20 to 25 years?
In short, we don't communicate with our customers regularly. Correspondence is fairly minimal. And this been the unspoken agreement that has characterized the insurer-customer relationship for nearly a century. The same applies to property and casualty, whether it’s damage to a house or a car accident — we only restart the conversation if a claim is filed.
In the emerging mindset, however, people want to see and feel that they’re getting value frequently. Otherwise, the slavish $75 premium coming out of their account as a direct debit once a month—knowing that the only time they’ll use it is if they die or get a critical illness — isn’t very rewarding. Here lies the opportunity. Consumers want to feel they know what they’re paying for as well as whom they’re paying for it. To this end, it behooves us to engage in conversation with them. And this is where digital excels, though we’re still quite a distance from this taking place. To begin moving the dial, we’ll need to start a discussion — we’ll have to bring up different topics, other experiences with which to engage people in financial services.
First, we have to redress the basics of our customers’ user experience. Have you ever had the experience of your bank or insurance company sending official correspondence like statements to an address you may have lived in years ago? This is an example of an organization that hasn’t spent the necessary time controlling their master data system. Data needs to be consolidated and unified such that, through a one-box model, only one version of the data on each customer is recognized. While it may seem simple or obvious, this is a critical digital factor that companies can start working on right now.
When we built a new policy system for customers to log onto, we didn't get every single problem fixed right out of the starting gate. But somewhere in the middle of our process, we added a change-of-address function. To our surprise, that’s the thing that people consistently use the most. Our hope is that if they log in five years from now, they’ll be able to see that they’re in under the wrong address and can make that change simply and electronically.
I feel this is one basic way we can start a conversation — by listening to and interacting with the customer on the most fundamental levels. By offering an up-to-date digital experience, we can give the customer the message that we appreciate their visiting our environment regularly, if only to check in on the status of their 401K in the market. And taking that conversation another step further, we might be able to ask them if they’re interested in travel insurance… and what they’re currently paying for it.
This brings us back, full circle, to the aggregator-comparison proposition. It’s a step toward creating a marketplace-type environment. And the most progressive organizations have shed their defensive veil and freely offer the competitive price tag of their product against that of the market.
As an industry, we’re a long way away from this reality. We can't decide whether this new model of online marketplaces is a force for good or evil. And to be fair, there are some fundamental differences between this retail comparison model and what we have to work with in the financial services industry. Next time we’ll get into how the aggregator mentality is leading to fragmentation and change in our field. But it’s change for the better, as it’s returning value to the consumer.
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