REIMAGINE EXPERIENCE

The insurance experience reimagined

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Creating new insurance customer experiences

In the face of declining customer relevance, the insurance industry is poised to reinvent its fundamental value proposition.

The basic foundations of insurance have remained relatively unchanged since the first risk pools were formed hundreds of years ago. Yet a host of new forces are now challenging the relevance of traditional insurance offerings in the minds of many customers.

Momentum for change has been building for some time, and with the proliferation of Internet of Things (IoT) technologies, maturing attitudes toward risk and heightened customer expectations, conditions are ripe for an ambitious and fundamental rewriting of old rules.

This is the time for the industry to step up and reinvent its products, services and experiences from the ground up.

Success requires the insurance industry to assess the future, iteratively transform and adjust its role to meet new customer intents. We have identified six key areas critical to any insurer looking to rethink their value proposition, business model and customer experience.

We're reimagining experiences in additional industries besides insurance.

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1. THE CHALLENGE OF TRUST AND RELEVANCE

From premium for indemnity to holistic protection, risk mitigation, and restoration, the insurance industry continues to evolve, shaped by shifting customer needs. There is tension between customers who seek trusted advisors and insurers who have been slow to react to customers’ holistic needs. Insurers that reinvent their offerings to meet evolving needs will be best positioned for long-term success.

2. REFRAMING INSURANCE: THE SPHERE OF TRUST

Lines between traditional industries are blurring. To be at the forefront, managing and mitigating customer risk, insurers must not think of a person’s life as disconnected fragments of events. Instead, they should think of risk holistically as spanning the physical, emotional and financial well-being of the customer—what we call the sphere of trust.

3. REBUILDING TRUST AND GOING BEYOND RESTORATION

Developing a sphere of trust begins with insurers considering an expanded value proposition. This does not just mitigate and restore—it must also prevent and reward customers for the right behaviors. All of this must be considered holistically and supported with personalization of the offering.

4. Outpacing disruption through new growth strategies

Reinvention of the offering creates the opportunity to target new customers, expand offerings and cultivate deeper relationships. This presents a new economic model for insurers with new sources of revenue. Subscription-based income, advisory fees, partnership fees and data monetization enable insurers to grow beyond traditional premium-for-indemnity and investment income.

5. JOINTLY MANAGING RISKS IN THE FUTURE

Insurers’ roles will transform, requiring them to think, say and do differently. They will have the opportunity to capitalize on increased engagement with customers and become trusted advisors. Together, insurer and customer must manage risks and provide ongoing support.

6. How to transform into the carrier of the future

Insurers need to equip their organizations with the right mindset, tools, assets and resources to welcome change with confidence. The path is neither linear nor sequential, but iterative. Partnering with industry experts to co-create—from strategic visioning to execution—can help insurers accelerate the reinvention of their offering.

What do insurance customers expect? Now is the time for insurers to work on building customer confidence and reimagine the experiences they offer.

WHY THE FAULT LINES ARE BEGINNING TO SHOW

Historically, the insurance industry has proven to be incredibly resilient. The basic proposition of insurance has maintained its relevance with customers as other industries have risen and then fallen.

However, while insurance has been resilient, in recent years it has also been relatively stagnant. Growth is flat. Profitability is constrained, and cost performance is worse when compared to other sectors. And what we are seeing now is a looming crisis of relevance for insurance.

To maintain customer relevance, insurance will need to look different in the coming years. Driving this change are a few underlying trends that continue to pick up momentum:

The nature of risk is evolving. The rise of digital, decreasing rates of ownership, and other factors are driving significant changes in the types of assets and interests that customers are seeking to protect.
Customer expectations are being set by innovators in other sectors, and customers bring these expectations with them as they consider insurance offerings. But in insurance, customers primarily see value only when a claim is filed, and even then “fine print” exclusions often leave them wondering what they paid for.
Start-ups are creating solutions to both help customers address gaps in coverage and to simplify the customer experience. Ladder¹ has simplified the process of purchasing life insurance while providing tailored support to customers along the journey, for example. One of its key features assists customers with the difficult task of understanding the amount of life insurance needed for financial security.
While technology is driving ever-increasing personalization and convenience in other sectors, risk and pricing models in insurance are still largely based on aggregate data. Insurers are starting to leverage new sources of data. Betterview², for example, is a platform that provides property insurance underwriting insights based on drone-captured images of roofs.

If insurers fail to keep pace with these trends, they will continue to decline in relevance. Combine this decline with increasing commoditization and price pressures, and the industry is ripe for “compressive disruption,” as start-ups and players from other sectors step into the void to claim higher, service-based returns, leaving traditional insurance players with declining revenues and profitability.

THE POSSIBILITIES OF AN EXPANDED INSURANCE VALUE PROPOSITION

To reverse this trend of declining relevance, insurers need to reassess their fundamental value propositions.

This will require more than just an optimization of the core business. It will mean reinventing insurance to expand beyond indemnifying a customer against loss to a future where insurers partner with customers to actively manage risk and protect their interests.

The shift insurers will need to make is from being in the recovery business to being in the confidence business.

from INDEMNITY >> to RISK MANAGEMENT
In today’s world, the customer and the insurer both effectively wager on the likelihood that the customer will experience a loss. The dynamic is a bit like a player (the customer) sitting at a blackjack table trying to beat the house (the insurer). The proposition is unique when compared to other sectors in that the customer only recognizes value (wins) in the event that they actually do experience a loss.

But what if we flipped this arrangement on its head? What if a novice player (the customer) could team up with a card shark (the insurer) to play together against the house (risk)? In the future, we imagine insurance solutions that focus on helping people proactively identify and mitigate risks in addition to helping them recover should they experience a loss.
from CONTRACTS >> to CONFIDENCE
Today’s insurance policies are written for specific assets and contain myriad caveats and exclusions that narrow their usefulness to a particular set of circumstances. While this protects the customer against loss, they must separately pursue arrangements like warranties and maintenance agreements to ensure that the asset is truly delivering its intended value.

In the future, we imagine a blurring of the lines between insurance and other kinds of protection arrangements to protect the true cost of ownership that is associated with a customer’s assets. By removing many of the asterisks from the arrangement, the customer is given a greater sense of confidence that the insurer is “all in” with them.

from ASSETS >> to INTERESTS
Roughly half of all insurance policies written today are property and casualty premiums³. Yet the rise of digital is leading to a rapid proliferation of intangible assets, and the rise of the sharing and streaming economies is changing attitudes toward ownership. Combine this with the fact that technological advances like robotics and artificial intelligence are changing the nature of liability, and what results is a significant disruption to the fundamentals of property and casualty insurance.

In the future, we imagine insurance solutions that go beyond protecting assets to protecting a customer’s interests—such as health, wealth, mobility and income. To achieve this, tighter integration between different types of (traditional) products will be required in order to manage the intertwined risks and to reposition insurance companies’ value propositions to be truly focused on customer interests. The resulting solutions will form a sphere of trust that wraps around the customer and helps manage risk across multiple dimensions.
from ASSUMPTIONS >> to EVIDENCE
The rise of IoT has been used to create hyper-personalized solutions in other sectors. Yet most insurance products today are priced at the point of sale based on aggregate historical trend data and customer segmentation. This actuarial approach is, at best, mystifying to most customers and, at worst, leads many customers to the perception that they are being treated unfairly.

We imagine a future in which insurers move to use real-word behavioral data to create highly individualized pricing, and we expect that pricing to become more dynamic—evolving with the customer’s behaviors that increase or decrease the risk profile over time.

Organizations that embrace these foundational changes will be best positioned to reinvent their offering—retaining their relevance while driving growth in new areas.

It’s critical that we set a high ambition level for the change that we’re involved in and driving. We must join forces to set new standards around the insurance experience. The effective future experience will have a few landmarks:

A tailored offering that considers the whole person, with respect for risk appetite, behaviors and interests in need of protection, is replacing an impersonal and standardized experience.
A simple, accessible and continuous journey that helps the insurance company and the customer manage risk together is replacing a fragmented, complex, opaque and transactional experience.
Proactive experiences that offer predictive advice and real-time risk management that help drive transparency and ongoing relevancy are replacing a reactive model that’s using historical data focused on evaluating risk.
Products and services built by focusing on people’s modern lives and their needs—mobility, learning, investing and so on—and enabled through cross-industry ecosystem partnerships are replacing a disconnected, siloed set of products.

Organizations that set a high ambition level for human experience and embrace this kind of meaningful innovation will grow, sustain their mission and lead a positive shift in the insurance domain.

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