How to “Lean In” to the Future of Insurance

future of insurance

Ready to evolve your business from survive to thrive in a disrupted insurance marketplace?

Before we get there, we must discuss the problem threatening to destroy the independent insurance channel.

According to a study by Accenture, less than 1/3 (29%) of insurance consumers are satisfied with current insurance provider.

It doesn’t stop there. The same study found that only 1 in 6 (16%) insurance consumers would definitely buy more products from their current insurance provider.

So, what’s our problem?

Insurance consumers believe insurance is a commodity.

How bad is our “commodity” problem?

The commodification of the insurance industry has created $470 billion opportunity in life insurance and property & casualty insurance premiums globally (same Accenture study as above).

These premiums are up for grabs and disruptive insurtech startups, playing to declining customer loyalty and the perceived commoditization of insurance products, view as low hanging fruit.

What should independent agents do?

matt nickersonIn an interview I did back in February discussing the fall of Google Compare, Matt Nickerson, President of Safeco Insurance, delivering the defining quote for our industry in 2016″

“It’s time for independent agents to lean in.”

The insurance marketplace is changing.

We can no longer afford to”wait and see” if certain technology becomes standard practice.

Disruption is coming whether we like it or not.

In a disrupted marketplace, it’s the laggards who get mowed down.

I’m not simply talking about innovation. Innovation is defined as new methods, ideas, or products which improve upon an existing process or product.

This might include updating website to be mobile responsive, moving to a cloud-based agency management system or VOIP phone system.

Disruption is a completely different monster.

Disruption is that which causes you to make a fundamental change in business strategy, creates new markets and value networks, and ultimately displaces market leaders who hesitate to adapt.

Disruptive forces threaten the incumbent value chain.

As other industries, from retail to banking to education, profit from deeper customer relationships and enhanced customer experience, the insurance industry is continually marginalized by:

  • An ever widening set of choices in insurance provider,
  • Advertising messaging which promotes price and commoditization, and
  • Laggard technology adoption.

Who let these disruptors in?

Short answer. We did.

Looking out over the incumbent marketplace, opportunities for disruption seem so obvious.

It’s only been a few years since carrier still demanded faxed in submissions and only allowed access to their web portals through Internet Explorer.

Even today, in 2016, we lack widespread adoption of digital sales and marketing strategies inside independent agencies (Unless you’re a member of Agency Nation University).

Not to mention the strong distrust of comparative rating which reverberates through our industry, despite an obvious interest from insurance buyers.

In hindsight, it’s easy to wonder why we didn’t see disruption coming.

But then the old way always seems silly after disruption has happened.

Take the smartphone.

Ten years ago we needed to own many different devices, including:

  • Digital cameras,
  • Calculators,
  • Organizers,
  • Alarm clocks,
  • Email readers,
  • Fax machines,
  • GPS devices,
  • Handheld gaming devices,
  • Electronic book readers,
  • Video cameras,
  • Laptop computers,
  • Cell phone, and
  • Landline.

The smartphone has replaced all these devices and fits in your pocket.

We take disruption for granted after the fact.

Disruption changes the paradigm.

The insurance paradigm is changing.

My concern, is that as industry, we don’t fully understand why.

It would be easy to blame technology.

  • Chatbots
  • The Internet of Things
  • Mobile
  • Blockchain
  • Autonomous Cars

Technology is NOT disrupting the insurance industry.

In today’s fully connected, always-on world, consumers gravitate towards products which fit the way they live and work.

The True Disruption

The true insurance industry disruption was born out of new expectations and higher demands on the insurance customer experience.

disrupting the insurance industryUnfortunately, we can’t hide from this disruption.

Word of superior customer experiences now travels the globe in a flash, through text chains, Snapchat and the latest YouTube sensation.

Technology is NOT disrupting the insurance industry. Humans are.

Answering the phone in a friendly and polite manner is simply good customer service.

Good customer service is not enough.

Good customer service is the bar, it’s the barrier to entry. We MUST have good service or we don’t get to play the game.

Delivering a quality customer experience moves beyond providing a good product, with good service, at a good price.

The customer experience is those things, plus everything else the customer wants.

Prioritize customer service over customer experience and you’re already a commodity.

The Human-Centric Model

Disruptive companies are moving away from product-centric models, towards a human-centric model.

Upstarts like Lemonade, Trov and MetroMile, will NOT disrupt because of technology, but rather their ability to harness technology to provide unique human-centric customer experiences.

  • Lemonade – At it’s core, the peer-to-peer insurance model is simply a mutual insurance company with a fancy deductible methodology. The marketing resonates with consumers due to a lack of trust in large corporate institutions. Consumers feel a sense of empowerment in choosing their own risk pool.
  • Trov – The on-demand, micro insurance model fits perfectly into the lifestyle and mindset of Millennial consumers. From Trov’s website, “Protect just the things you want – exactly when you want – entirely from your phone.”
  • Metromile – There will come a day when the “Pay-per-mile” auto insurance model will seem like a no-brainer. Why should a consumer who drives half as much as another (all other things being equal) pay a similar auto insurance premium. Many consumers don’t believe they should.

insurance customer experience technologyThese insurtech startups are filling gaps in the insurance customer experience with technology (and not the other way around).

It’s time for insurance industry to move to the same side of the table as our customers.

For too long we’ve operated in a product-centric, “Sold, not bought” ecosystem.

Enter the Millennials

By 2025 Millennials net income will exceed $8 Trillion

In 2003, 82 percent** of boomers were part of the labor force; a decade later, declined to 66 percent (source).

Millennials have grown up with choices. It’s called the “Back” button.

Millennials don’t prioritize price, product or relationship. They’re all pieces in the customer experience.

The way it’s always been done is no longer acceptable, because it no longer has to be. At least not for insurance consumers.

Millennial consumers demand a more sophisticated and personalized experience.

“Disruptors in the insurance space believe insurance is a bought product, and it is simply their job to cultivate more demand and create a superior customer experience.” ~ Maria Ferrante-Schepis

This is the reason 56% of insurtech startups focus on distribution and marketing (source)

This is why, according to CBInsights, VC’s are funding insurtech Startups at an insane rate, over $1B in first half of 2016.

Technology does not cause disruption.

How we use it does.

Embrace the New Normal

To move from survive to thrive in a disrupted marketplace, independent insurance agents must embrace a “Bought, not sold” ecosystem.

A life insurance study done in 2014 study by LIMRA and Maddock Douglas found there are almost 19 million “stuck shoppers,” (people who intend to buy life insurance but the current customer experience causes them to get stuck along the way).

It’s not a stretch to believe similar sentiment can be applied to the property & casualty industry as well.

Today, this statistic is a negative, but it ultimately maps out opportunity for those willing to adapt.

We are no longer the gatekeepers of insurance expertise.

Millennials, (and really anyone in the Connected Generation), are using their mobile phone to Google search online reviews at 10:00pm while waiting for the next episode of their favorite Netflix original series to load.

They want information now, in and easy to understand format, at the exact moment they want it.

And they’re not wrong for demanding such from their insurance providers.

Four Mindset Shifts of the New Normal

If we’re going to provide a better insurance customer experience, it’s important to understand the mindset shifts driving the “New Normal.”

Do-it-yourself, comparative shopping

First, pump your own gas; now check yourself out at the grocery. Most purchase decisions are well researched.

  • Transition from gatekeepers to tour guides (digital/automation).
  • Consider comparative rating.
  • Implement 24/7 strategy across business.

De facto product commoditization

social media introductionsAlthough experts know insurance isn’t a commodity, the public believes it is.

  • Focus on human-centric business model.
  • Become a “social” broker.
  • Prioritize access and availability.

Brian Fanzo, thought leader on the Millennial mindset, shares a defining quote on this idea:

“Social media will not replace a handshake. But social media done right will change the first meeting from a handshake to a hug.”

Distrust of institutions and marketing

Consumers value the experiences of peers and use recommendations in purchasing decisions.

  • Understand why P2P is gaining momentum.
  • Harness social proof.
  • Embrace authenticity.

Rise of the internet of things and mobile

We are online all the time, and expect to be able to get anything we want 24 hours a day.

  • Deliver mobile experience
  • Learn nuances of the sharing economy
  • Accept the Internet of Things underwriting

How to Monetize Disruption

In a Morgan Stanley study, they defined three distinct models pivotal to the future of insurance, many driven by new players:

“Segment of one” distribution

Defined as: Delivering personalized offers that are based on deep customer insight; these models will often be driven by retailers or start-ups. Essentially these specialized or niche models.

Figure out who you serve best and then provide them with a unique customer experience tailored to that market’s specific needs and desires.

One-stop shop distribution

Defined as: Orchestrating a broad array of services that fulfill an integrated set of customer needs—such as “everything I need to lead a healthy life.”

This is the horizontal services play. Figure out all the services are certain type of client could possibly need in your space, (i.e. real estate agent, payroll, legal, notary, etc) and be the solution for all. This could happen in-house or through partnerships.

Connected-object model

Defined as: Offering real-time monitoring of key risk objects, such as cars or homes.

Outlined in the chart below, technology adoption has accelerated to an almost ridiculous pace. The Internet of Things and pay-per insurance technology represent a truly disruption distribution model.

insurance technology evolution

The Rub

The question of when disruption will occur in the insurance industry has been answered.

It’s now.

Disruptors are at the gates.

Traditional methodology will adapt or be swept away inevitable change.

To thrive in the modern marketplace will require an evolved mindset.

Embrace the “Brackish Water,” that place where traditional values meet modern technology, for this is where the insurance customer experience thrives.

Where do we begin?

We must relinquish our focus on customer service or sales or technology.

Replace these with a single focus on customer experience.

All tactics, all strategies, are born from building an exceptional customer experience.

My argument:

Those agents and carriers who lean in to disruption. Those who have the foresight and fortitude to adopt a culture of customer experience will not just survive, but will thrive in the modern insurance marketplace.

Will you “lean in” to the future of insurance?

Thank you,

Ryan Hanley

P.S. This article was derived from a recent keynote presentation. If you’re interested having me deliver this presentation at your next event click here.

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