Real-world examples of digitalized insurance product development
To insurers, these can seem like the best of times and the worst of times. While there are enormous opportunities to transform their businesses to create a dynamic customer experience, getting there is not an easy task. Entertainment, media and e-commerce companies have raised the bar in terms of customer expectations for products and services that are convenient, fast, and personalized. Customers increasingly expect no less from their insurance carrier.
The good news is that the insurance industry in general, and those targeting the small commercial segment in particular, seem to be coming to terms with this new reality. Many insurers are reconsidering outdated product-driven business models and turning their focus to improving the customer experience. Indeed, in recent interviews with small commercial insurance and insurtech product development leaders in the United States and Canada, we heard a keen awareness of these challenges. Insurers recognize they need to evolve toward creating a more seamless, dynamic customer experience for products and services that incorporates tailored options and services.
Actual transformation remains slow, however. With few exceptions, the general consensus among those interviewed is that it usually takes 12 to 18 months to create and roll out a new product, and three to six months to modify existing coverage. In an age of instant gratification and fast-developing markets, these time frames are no longer viable.
Here are several tactics insurers may consider to reach their goals, including several already being implemented by pioneering organizations today.
Modernize technology capabilities. One common challenge among most of the insurers we interviewed involved having dated technology and platforms. These systems, often patched together with only minor upgrades over the years, continue to impede agility in product development and user experience for customers, intermediaries, and other ecosystem collaborators.
Depending on a carrier’s tactical plan and budget, minimizing such friction may be as broad as launching an entire technology system overhaul or as targeted as aligning with one or several third-party vendors to exploit innovative technology capabilities.
An example of such collaboration is The Hanover Insurance Group, which is using a digital platform to help its independent agents acquire new business customers in the gig economy, including freelancers, contractors and other self-employed professionals. The platform runs on technology from a third party digital agency, and the simplified sales process can be completed in less than 15 minutes.
Simplify product and process. Most insurance leaders interviewed agreed that stripping out complex language from policies to achieve greater transparency and comprehension would be the ideal scenario. But they were concerned that simplification might create coverage gaps for the consumer, while exposing their firms to risks they hadn’t necessarily intended to insure.
One option may be to simplify the buying and renewal process by tapping into alternative data sources. This would help insurers prefill, validate, or gather client information in an automated way and perhaps eliminate the current practice of quizzing small business owners with an endless stream of underwriting questions. These simplifications could potentially improve the customer’s buying experience and add further precision to underwriting and pricing of the risk.
For example, Berkshire Hathaway developed THREE, a three-page policy that uses simplified language to provide small businesses with comprehensive insurance coverage for workers’ compensation, multiple liability overages, property and commercial auto. This package policy minimizes time-consuming, multiple applications and coordination of multiple coverage needs.
Break down silos. Long-standing silos between lines of business, business and IT functions, and market channels are also pervasive throughout the insurance sector. Multiple rounds of handoffs and competing priorities between functional teams often hinder traditional product development processes.
For instance, as the sharing economy flourishes, and personal property is increasingly also used for commercial purposes, long-standing boundaries between the two lines of business may hinder development of essential hybrid coverages.
Insurers can reach across business lines and functions to build teams specifically focused on product innovation, using shared incentives. Insurers also may need to embed more diverse skill sets into these teams, recruiting innovative and creative thinkers who may not come from an insurance background.
Energize the culture. To attract the skill sets necessary for product development modernization, insurers should find ways to vastly elevate their appeal to make a career in insurance more relevant and attractive to innovative and tech-savvy individuals.
This could start with initiatives to modernize the company culture. Leaders can demonstrate a commitment to innovation, diversity, and social impact through related incentives and career development opportunities. If handled successfully and holistically across the organization, these efforts can help convince those with cutting-edge skill sets that a career in insurance can immerse them in an intriguing, exciting, diverse, and innovative world of risk solutions.
Increase customer touchpoints. Insurers can potentially use growth in digital connectivity as a gateway to becoming more relevant in the everyday lives of their policyholders. The Internet of Things (IoT) will potentially shift products from focusing on cleaning up after disruptions to forestalling those disruptions before they happen.
For example, USAA is piloting a program in which 6,000 policyholders test water-detecting sensors to help uncover potential water damage before it becomes widespread. Such smart home sensors could detect moisture in a wall from pipe leakage and alert the homeowner. This might save the insurer from a large claim and the homeowner from both considerable inconvenience and the loss of their valuables. The same can be said for placing IoT sensors in business properties and commercial machinery, militating against property damage and injuries to workers and customers, as well as business interruption losses.
Today, customers are no longer buying products and services; they are buying experiences that products and services provide. As insurers seek to create an optimal client experience, they can no longer remain locked into 20th century product development capabilities. To add value for customers and stakeholders and seize the vast opportunities unfolding in the 21st century, insurers must knock through long-standing challenges and transform in line with the constantly evolving marketplace.