Insurance companies face an Amazonian threat – but does it demand a herculean reaction?
These are potentially trying times for the insurance industry. Commoditisation has caused a race to the bottom for some, with price comparison sites increasing the incentive to compete by offering customers the lowest possible price – even if this results in a worse customer experience overall, especially in the event they have to claim.
At the same time, newcomers are always entering the fray: with the most recent competitors being data-rich tech companies such as Google (albeit briefly) and Amazon. Some are likening this to when retail giants such as Tesco in the UK began offering insurance and other financial services, but if anything the threat to traditional insurers may be even greater.
Businesses such as Amazon have already built themselves around using customer data. In an increasingly tech-led industry such as insurance, their experience – plus the wealth of information they already have from customers thanks to their other channels such as retail, books, online video and digital assistants – means they have the potential to offer increasingly personalised, and accurate, services and premiums to customers.
Many insurers are increasingly becoming technology companies themselves in order to compete with these new market entrants. Insurers should also remember their core expertise: years or even centuries of experience and knowledge of what is the best service for customers, and the ability to advise and interact with them. Consumers certainly value a personalised experience, but that means more than simply targeted offerings: it means an insurer that offers a two-way conversation with them, instead of simply one-way information. By giving advice and insight insurers can open up this conversation, give their customers a new experience, and secure their ongoing place in the market.
Technology has a clear role in this. For instance, many insurers already use apps to communicate with customers, but the conversation can go beyond this. For instance, using Augmented Reality with home insurance customers to show them precisely what items in their home are worth; and what steps they could take to reduce their premium or better protect themselves. Similarly, virtual reality could give motor insurance customers safer driving tips – and even support an online course that results in reduced premiums. By focusing on the customer conversation, and exploring new technologies, insurers can protect themselves from the Amazonian invasion.