New disruptors are bringing rapid change to the traditional insurance industry
For every industry there comes a time when new competitors enter the fray, offering glitz and glamour as the new kid on the block. The insurance industry is experiencing this disruption now – and they are doing more than taking away potential revenue from traditional insurers – they are forcing them to change in order to survive.
Insurtech businesses are re-defining the approach
It’s easy to believe these neo-insurers are creating headaches for the traditional insurers simply because they are shiny and new and aren’t held back by the baggage of legacy technology. In reality, these disruptors approach business challenges from an entirely different angle. They place the customer at the center of their business model. They are then able to retain their focus on resources that provide better products, services, and distribution to customers. And customers can tell the difference. A recent study shows that customers are willing to pay up to 13% more for services if it delivers a quality customer experience.
The insurtech industry – now a decade old and growing - is using this approach to go beyond customer retention to create brand ambassadors. Those users and customers who utilize their own methods of outreach like social media to expound on the positive experiences they’re having with a given brand or company. In fact, Nielsen reports that 92% of consumers trust referrals from people they know and are 4 times more likely to buy when referred by a friend.
Why the disruptors are winning
Disruptors are digital-first technology organizations that offer a single or a limited number of insurance products to their customers. Their teams are nimbler, quickly addressing any questions customers might have about their products, because, as they offer few products, it’s expected that everyone in the organization understands them very well and can provide knowledgeable answers and support quickly.
They are also technology driven. Insurtech companies are often built from the ground up using technology to create the product. Whereas traditional insurers create the product and then find ways to use technology to distribute and service customers. This is where the term insurtech derives from since most of these disruptors are technology companies that sell an insurance product.
They are customer centric – their business processes, operations, products, services and distribution are built around customer needs and preferences, the business follows their customers’ as their needs change, and they are able to adapt quickly.
How traditional insurers win
Savvy insurers have created think tanks, innovation labs, and other internal “startups” within their companies to foster a culture of innovation in ways similar to their disruptors. Instead of focusing on the most profitable product, and then trying to maneuver their massive business around to begin earning from it, these agile teams peer into the gaps in the industry and invest in solutions and products for those gaps. Further, they have the autonomy to and are comfortable with losing a dollar today, if it means making two, three or even four dollars in the long term, so to speak. The goal isn’t a quick win, it’s setting up the foundation for longer term success.
When those internal “startups” aren’t possible, insurers look for best-in-breed technology partners to help accelerate how they innovate – whether its servicing, distribution, their products or any combination of all three.
Traditional insurers are also evolving their business, breaking down functional, technical and even knowledge silos to modernize and deliver a single customer experience regardless of product or channel, and further reduce costs by centralizing and sharing information.
The power of the customer experience
Insurers large and small recognize the journey from being a product-focused, process-oriented business to a customer-centric, technology-enabled organization takes time and many planned and purposeful steps forward. These changes allow insurers to move at the speed of consumer demand. Creating an individualized customer journey experience is paramount, especially in light of a recent study that shows in 2020 the customer experience will overtake price and product as the key brand differentiator.
Insurance customers don’t see and can’t be bothered by line of business or technology siloes. In fact, 55% of customers say a frustrating website or mobile experience makes them less likely to engage with a company. Expectations are high; now more than ever customers want choice: to reach a live person on the phone, to have access to the information they need online, to be able to submit questions and get real time responses on their mobile phone, and for their home or auto devices to help alert the insurer should a leak or accident occur. Insurers are no longer claims processors, but commercial business partners, life and financial wellness protectors, providing peace of mind to individuals, families and business owners.
If the insurance business is built on trust and relationships, then focus on communicating clearly, quickly and relevant information to customers is at the core of the insurance business. And loyalty is fickle without trust built over time. 1 in 3 customers said they will leave a brand they love after just one bad experience.
Great experiences are difficult to replicate but are 100% engineered. Don’t give your customers a reason to look elsewhere for insurance - Quadient’s industry leading customer experience and communications solutions transform how insurers reach their customers today, and as new channels emerge tomorrow.
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