GlobalData’s recent "Big Data & Personalization in Insurance" report was revealing. It highlighted how advancements in technology and changing consumer preferences are leading to a greater focus on personalizing policies. According to the report, personalization has the potential to transform the relationship between sector and customer, something that’s desperately needed when you consider waning trust scores globally.
Personalizing policies is what insurers try to do, and in many ways often achieve. I’m a good example. I have two car policies with the same insurer, both at the same core level of insurance. Each vehicle serves a different purpose and has distinct usage, requiring tailored insurance., like adding a courtesy car option for one but not the other. This is a good example of adapting a policy product to meet my specific needs.
But here's the thing. Personalization requires vast amounts of technical complexity, stitching and integrating into systems through mainframes and so on. The legacy problem is well documented. Monolithic, unscalable, and constraining technologies and architectures make change in insurance an almost impossible task.
The result is that truly valuable policy adaptation and personalization is where constraints really start to bite.
The tapestry of technology and connections makes changes to policies and experiences much more complex, especially mid-term or in renewal. Simple things like windscreen repairs become disjointed experiences when you move into the claims process. As a customer, you realize that personalization was just an illusion of digital.
Despite vast amounts of potential, we still just fill in online forms that were once offline forms. Try to move into the call center experience to clarify any questions you might have on the quote, and you’ll likely have to start the process from scratch.
No, adding our names on top of cross-sell emails or sending me birthday wishes does not count.
The problem is that insurers are set up as value chains focused on policy production and sales, not as customer-centric systems capable of adapting to people's lives.
See also: How to Customize Insurance for Gen Z
Insurer or E-Commerce Business Selling Insurance?
During a recent conversation with an insurer client, I was struck that they now sit firmly in the middle of a scale where the operational design of an insurer is at one end and an e-commerce business model is at the other. My client displays both characteristics.
Sure, they "manufacture" insurance and have all the core skills - underwriting, pricing, product, and so on - but, they are built around customers, data fluidity, and turning insights into actions through a different working model.
They demonstrate an enterprise design change. The operational capability and the working model are both transformed to be highly collaborative, multifunctional, data-led, customer-first, and technology-capable, Their teams move from idea to outcome seamlessly in comparison with their peers. They create value fast and with far lower barriers to change. The difference is profound.
Like an e-commerce business, they:
- Are built around the customer and not just capable of thinking of the customer first.
- Treat data as a perishable asset, constantly mining it for insights and acting on those insights holistically (no sticky plasters).
- Collaborate through a working model akin to that of a software developer business, which means managed innovation or continuous change.
- Reduce the time span for change, for things like genuinely new products, from months to weeks. They do this based on key performance indicators (KPIs) that are constantly improving, shifting from lagging indicators to leading indicators. Everyone starts to look forward at what's possible rather than backward at what's wrong.
These four characteristics are defining for competitive success in insurance. They underpin what it means to be more adaptive.
This is the essential element: Adaptation will become increasingly fundamental to insurers, which need to face changing environments, customers, businesses, and regulation at ever-increasing rates.
Orchestrating Value Into Customer Relationships
Personalization becomes built in, not something we try to build on top. It’s hard-coded into the system and business. The customer has the flexibility to operate self-sufficiently or engage in human-to-human support systems.
This all begins to make them feel very different about insurance.
Relationship orchestration is about moving beyond policy selling, annual retention, occasional cross-sell, or, God forbid, a claim, to cultivating a deep connection with the customer. That connection is achieved by becoming active in their lives, capable of providing a holistic view of their insurance needs, and exploring the creation of completely new propositions. These new propositions are then delivered at low cost, in a short time, through high-learning-based cycles.
Products that operate in real time (e.g., usage-based), are seamlessly embedded in experiences or can be easily activated or deactivated as life changes. Products can be combined to add further value.
This is the essence of relationship orchestration. It’s where the potential lies for insurers to form trusted, more meaningful relationships with customers.
The trust issues in insurance today are largely overcome when customers feel supported, in control, and able to choose their experiences rather than endure them.
See also: How AI Can Lead to Personalized Medicine
Let's Get Personal
According to McKinsey, 76% of consumers expect personalized experiences and 71% get frustrated if they don’t get them. Bridging the gap in insurance between technological possibility and customer expectations isn’t an option, it’s an imperative.
The benefits for insurers are often more profound than in other sectors. Retention, as an example, has a far greater overall impact on the way insurers can price and operate their businesses than is true of other industries. Acquisition is hard, and often has pricing implications across the board.
Increased engagement can lead to risk mitigation and higher revenue. Equally, moving from one-off policies to multiple holdings massively reduces the cost of a customer in relation to their overall value. Yet cross-sell rates and value-added, multi-product offerings are in woefully short supply.
This all means that personalization isn’t optional or desirable. It is mandatory, and key to insurers' corporate strategic goals. With the right foundations, it's also entirely possible.
