ITC was an action-packed week with over 8000 attendees and participants in all aspects of the industry! The energy was amazing and infectious! Majesco was once again active at ITC hosting a panel discussion with executives from MMG, Foresight and Combined with over 250 attendees and standing room and plenty of questions after the session for us all. Why such an interest?
Because the industry is moving forward quickly as change continues at a rapid pace all around us. Even with challenging macroeconomic conditions, there was excitement about the future. What also became clear is that companies that do not actively engage in optimizing their current operations and innovating for the future are at risk. Future industry leaders are doing both aggressively.
Our panel discussion provided insight into what is reshaping the insurance market and a new generation of leaders. We talked about five key trends that are fundamental to insurance leaders.
Welcome to the customer of the future. New expectations. Different lifestyles and behaviors. Robust digital competence. New risk needs. The demand for fantastic experiences at its core. An expectation of value.
Today̵7;s customers are increasingly disillusioned with the “traditional” method of insurance, create a loyalty fault line between the customers’ expectations and the insurance companies’ ability to deliver what they want and need. While risk and trust tend to be constant, customers increasingly have no guaranteed loyalty to old models, even for trusted brands.
Customers seek simple, holistic experiences across their lifecycle and demonstrated empathy. Customers are no longer just looking for a claim payout. They are looking for help with life and all of life. They broaden their view of financial well-being. Rather than looking at life, health, pension, auto or property risks separately, customers are increasingly looking for companies that help them manage insurance needs more holistically and broadly through the products, customer experiences and value-added services they provide.
Doing this requires a digital transformation strategy to create a business for a completely different future – the one customers expect.
Insurance can be difficult, complex and time consuming with products and services that don’t seem to deliver value. Today’s customers expect more. They want a risk product, value-added services and an experience that gives them what they need to manage their lives. This means that insurance products and services shift to preventing and reducing risks. And in the process, they humanize the entire customer lifecycle.
Part of the humanizing aspect is to offer niche, personalized products, services and experiences that fit their specific risk needs and use their personal data. From increased interest in life, critical illness and disability insurance to telematics and cyber insurance and more, customers want insurance products that assess their personal risk, lifestyle and behaviours.
Traditional product-oriented strategies, but handicap insurers. Instead, insurers must consider a product as containing the risk product, value-added services and the customer experience to meet customer expectations for delivering value. Part of that value is providing risk prevention and risk mitigation features and services that help customers avoid or mitigate losses, dramatically redefining the customer experience.
Our panel talked about the innovative approaches they are using to deliver value by offering more than just the risk product, such as a new critical illness product that provides DNA testing to support personalized cancer treatments, a new dental product that includes a smart toothbrush to monitor brushing for improved health and a worker comp product that supports safety and risk monitoring.
The bottom line… The potential is unlimited to deliver greater value to customers, we just need to think outside the box and keep the customer’s life cycle and needs in focus.
Market reach and channels
Complexity and out-of-date underwriting processes affect almost every product line. Many insurance companies’ innovations are refocusing to a “buy” rather than a “sell” strategy, through a multi-channel approach that meets customers wherever and whenever they want to buy. If the distribution channels are easy to use, with products that are easy to understand, then insurance has an opportunity to grow through frictionless multi-channel distribution.
While agents and brokers remain a dominant channel, new channels such as marketplaces and built-in insurance are gaining a lot of attention and traction. In fact, built-in insurance was the hottest topic of discussion at ITC and one that we have researched extensively.
Insurance companies that want to compete will find it difficult to do it alone. Create an ecosystem of interconnected channels, use a range of digital capabilities and connect with customers when and how the wants, requires cooperation.
In today’s interconnected world, insurance must play across a broad distribution spectrum of channel options, expanding channels and partners to reach customers when, where and with whom they want to buy insurance. These options form a distribution ecosystem that expands reach, but requires a partnership approach, especially for embedded channels. Built-in insurance changes this paradigm completely. With it, the insurance no longer exists soldbecause it is purchased as part of something else.
The new and growing range of channel options now available, particularly the exciting opportunities for built-in insurance, will provide innovative insurers and their partners with enormous opportunities for growth, with new markets, new offerings, satisfied and loyal customers…and growing business .
The technology provides a basis for adapting, innovating and delivering at a rapid pace to implement strategy and market changes. The increasing importance and adoption of platform technologies, APIs, microservices, digital capabilities, new/non-traditional data sources and advanced analytics capabilities are now critical to industry leadership.
From front-office to back-office, SaaS platforms reshape business focus from policy to customer, from process to experience, from static to dynamic pricing, from time guarantee to continuous underwriting, from historical view of data to predictive and prescriptive data, from traditional products to new, innovative products and so much more. Insurers’ ability to create and grow an ecosystem of partners to deliver increased value to the customer relationship will deepen and differentiate customer loyalty.
What distinguishes insurance managers? In our discussion and in many of the sessions at ITC, it was clear that leaders see the market and technology trends as a multifaceted opportunity for insurance. Leaders focus on initiatives critical to creating new business models, expanding distribution channels, entering new markets, adding value-added services and developing new products by leveraging technology as a foundation and catalyst for innovation. Leaders establish a strong operational and technical foundation that brings together SaaS next-generation core insurance systems, digital experience platforms, partnerships, ecosystems, and data and analytics. These are built on a modern architecture that uses integrated microservices or APIs that run in the cloud with a focus on speed and scale.
Leaders are also using technology to fundamentally change the business model and to innovate – two key aspects tracked by AM Best in their innovation ratings, which are reflected in our strategic priorities research and AM Best assessments.
There is growing evidence that those who focus on the next-generation core, incorporate new sources of data and analytics, expand channels to reach new market segments and customers, offer innovative new products and value-added services, leapfrog the competition in operational efficiency and growth. Along the way, these insurance companies are creating a new, sustainable business model. They extend their expertise in providing compelling customer experiences to capture new business and foster a greater sense of partnership, trust and loyalty.
Clearly, even with the macroeconomic headwinds and other market challenges, every aspect of insurance is being redefined in the future, and next-generation technology is the foundation of that future.
Talent constraints force companies to get creative. The large departure, including increased early retirements, affects the knowledge base. A shift to virtual or hybrid work models is changing the way companies transform themselves. The expanding Gig economy and contract workers give us a workplace in constant motion. Competition for talent and low unemployment rates have created their own source of inflation. These historical trends are fundamentally changing the nature of the workforce and impacting both the insurance culture and the balance sheet.
According to the US Bureau of Labor Statistics, the insurance industry is about halfway through a massive 15-year shift, with 50% of the workforce retiring by 2028. For some insurers, it’s even more dramatic with some projecting 40% or their workforce will in retirement. be eligible for a pension within the next 3-5 years. The loss of these employees will create a significant “brain drain” and loss of institutional and industry knowledge that insurance companies will be challenged to replace. Add to this is the lack of interest in insurance… as it is not necessarily seen as “cool or sexy” compared to other industries.
To respond to the key trends changing the insurance industry, retaining and accessing talent is critical. The panel discussed a range of areas they are focused on, including: partnering with local colleges to prepare and attract talent, reskilling existing employees, embracing workforce flexibility with remote work, accelerating digital transformation operationally with the next generation core, data & analytics and digital. All of this will help insurers both capture institutional and industry knowledge and reduce reliance on those who leave, redefine jobs and roles more aligned to value work, and leverage next-generation technology that will make roles broader and more efficient. The end result is a reduction in siled and transactional roles, and a higher level of satisfaction and experience when employees engage with customers and channels.
Leaders are finding ways to find and retain talent that is critical and fundamental to building and growing their new digital customer-focused businesses.
The secret sauce
What separates leaders from others? What is the secret sauce that increases the chance of success?
Basically, what separates successful leaders from others is their focus on strategy – both operational and strategic. Leaders implement their strategy.
Embrace curiosity given the continued pace of change and the need to see the world from the customer’s point of view. Curiosity fosters innovation.
Courage, because transformation and innovation are difficult and sometimes result in failure. However, learning from failure can create success.
Keeping the “pedal to the metal” by staying focused on priorities and initiatives that enable the strategy, including resources and funding. Even leaders can be tempted in an uncertain economy to overreact by cutting budgets, reducing technology investments and pulling back on innovation. Recent history has shown that would be a huge mistake. The dot com crash of 200-2001 and the financial crisis of 2007-2008 showed that this strategy was short-sighted.
Those who continued ahead and even increased investment in the face of the big market challenges got ahead of the competition and were better prepared to respond to the rise of InsurTech competitors and the covid pandemic accelerating digital expectations!
While we don’t know what major disruption is next, we know we need to be prepared and putting the pedal to the metal focused on operational and strategic transformation and innovation will make the difference!