Up to max. As much as possible. To the extreme.
All of these define the term "N-degree." The head of mathematics has the concept of roots in mathematics, where equations and roots from the ninth degree have existed for decades. How does this apply to insurance?
The digital age of insurance is accelerating and shifting the business landscape. Leaders are leaders — surpassing followers and laggards – recognizing that it is mandatory to succeed in the future of insurance. The digital age has put new technologies, data and opportunities in the hands of business leaders – giving them the opportunity to change their business and customer experiences.
But an even more powerful transformation is in the insurers' market reach with the power of multiple and digi-channel partner ecosystems!
Buying versus selling
In general, today's insurance process is difficult, lacks transparency, is complicated and often time consuming. However, many InsurTechs and existing innovations from insurance companies focus on a "buy" over "sell" method ̵
If distribution channels are easy to use with products that are easy to understand, then insurance has the opportunity to grow through frictionless multi-channel distribution.
With the growing competitive challenges of attracting and retaining customers, insurers need to develop and use a broader distribution ecosystem that engages customers when and how they want to … put them first. A distribution ecosystem can quickly reach more markets, potential customers and current customers with more buying and service options by leveraging a growing range of channels beyond the traditional agent / broker channel. Distribution ecosystems provide new access routes, functions and value-added services that create the impact of the Nth degree – both for customers and insurance companies.
Simply put, this range of channels includes direct to customer, agent / broker, other insurance companies (for products you want to offer your customers), marketplace exchange or platform and embedded — provided in a series of soft, hard or invisible embedded partnerships according to the picture below.
Together, this spectrum of channels represents the new Multi- and Digi-Channel Ecosystem for the digital age of insurance.
Multi- and Digi-Channel Ecosystems — Foundation of the Nth Degree
To compete for the next generation of buyers – millennials and Gen Z, let alone retain today's Gen X and Boomers, insurers must be a part of and offer a range of distribution channels with which they interact, transact and integrate to offer customers innovative, optimized solutions.
In our 2020 customer survey on auto and life insurance, we found that younger generations are open to buying insurance from a wide range of channel options, including:
- For life insurance, they are 33% more open to new channels than older generations.
- The preference gap between new and traditional channels is large for older generations – almost 50% – compared to only 21% for Gen Z and Millennials, which means they are much more open to different, new channels – creating an opportunity for growth .
- The younger generation is twice as likely to buy car insurance from a car dealership website, a vehicle manufacturer's website or have it included in the purchase or lease of a vehicle.
- Millennials and Gen Z are open to buying insurance from big tech like Amazon, Apple and Google.
Insurers who want to compete are poorly equipped to do it alone. They need to create an ecosystem of interconnected channels using a range of digital features to connect with customers whenever and however they want.
Let's face it…. we all interact with a wide range of different entities, companies and individuals on a regular basis. Many of these entities have earned our loyalty and trust, providing a platform for future engagement. Many of these are now becoming channels for insurance — GM, SoFi, Ford, Petco, Airbnb, Uber, Intuit and more. At the same time, we are seeing partnerships being formed in the insurance industry — insurance companies that sell each other's products, use new marketplaces to expand their reach and strengthen the traditional agent / broker channel with new digital functions.
Together, they form a powerful distribution ecosystem that places insurance directly in the way of a customer's life event, where insurance is relevant and needed. Ecosystems have a greater impact on sales because they are an “external” customer strategy instead of an “internal” product / process strategy. This is the transition from selling to buying that is so crucial to today's insurance company growth. It is an approach that naturally reduces infrastructure, operating and investment costs while providing more business with less effort.
In our joint research with PIMA last year, we found that of the wide range of 34 channels, only 18% (or 6 of the 34) are planned – reflecting a very narrow view of channels that significantly limit reach and revenue opportunities and create an open field for those who dare to be creative when it comes to creating a multi- and digi-channel partner ecosystem.
Next Generation Multi- and Digi-Channel Gen Leaders
Who benefits from this wide open field and becomes the next generation multi- and digi-channel leader? Some start first in other financial areas (which provides insights into broader opportunities) while others go directly into insurance. But everyone is competing for the next generation of customers!
Outdoorsy + Roamly – Online rental of recreational vehicles and outdoor travel Outdoorsy said it is partnering with InsurTech Roamly to provide insurance for motorhomes, caravans or mobile homes. With Roamly, commercial and personal insurance owners can safely rent their motorhome, trailer or motorhome in marketplaces such as Outdoorsy without losing coverage or worrying about loopholes. [i]
SoFi Ladder Life, Lemonade and Gabi – One of the best examples of a company looking at the customer throughout life, health, prosperity and well-being is SoFi, a Fintech- organization – under SoFi Protect. SoFi began as a student loan consolidator and supplier and has rapidly expanded to own the entire customer relationship with financial services – life, wealth, health and well-being. Their original focus on student loans has been to capture the next generation of customers – Millennials, Gen Z and eventually Gen Y. They now have over one million members and 7.5 million contacts, where members can represent family units. They created "Vaults" that customers can use to save and spend, for categories such as insurance, taxes, travel, houses, emergency funds, etc. and offer insurance through their ecosystem of partners including Ladder Life for life insurance, Lemonade for tenants or homeowners. insurance and Gabi for car insurance. [ii]
State Farm and Ford – State Farm announced a partnership with Ford for use-based insurance (UBI) using car telematics and connected data from eligible connected Ford vehicles. [iii] Ford vehicle owners will be able to choose the State Farms Drive Safe & Save program, which adjusts the premium to miles driven while rewarding safe and good driving behavior with potential discounts.
John Hancock and Amazon – John Hancock announced the integration of its Vitality program with Amazon Halo, enabling Hancock's Vitality customers to use the Amazon Halo Band to earn Vitality points based on their daily efforts for a healthier lifestyle that should mean a longer life. [iv] Amazon Halo Band, a portable health and wellness device, will measure and analyze users' activity, heart rate, sleep and tone of voice to provide individual health insights and help encourage healthier habits – and thus earn vitality points.
Google, Allianz and Munich Re – Google works with these two global insurance companies to cover cybercrime and related risks for client companies using Google's cloud services. [v]
The Guarantors and Real Estate Companies – The Guarantors are a Fintech company that provides innovative insurance products and financial solutions for residential and commercial real estate professionals as well as their residents and tenants. Their goal is to be the most trusted "go-to" brand for insurance and financial solutions in the entire real estate industry. [vi]
Chubb – Launched Chubb Studio "digital insurance in a box." Partners can access their products, services and claims digitally and integrate what they do into what their partner do – embedded insurance.The first products offered include: Health & Wellness, Home Content, Gadgets, Travel and Small Business. [vii]
And on the horizon are more companies whose first focus is financial services (such as banking), but who will be well positioned to offer and provide insurance.They also have the motivation.With low interest rates and increased competition from digital leaders, banks need to grow their service portfolios.Consider their customer bases and the effects if they go into insurance?
Verizon – While Fintechs globally has competed for the next generation of bank customers by offering them customized accounts when they turn 18, Verizon has now jumped into the game by offering mobile bank with its own checking account for the younger generation. The new tool, called Family Money, has two options – monitorable control for parents to observe and track what their children are paying for and a "savings vault" account with real-time alerts, rules, spending limits and locks. Verizon uses Galileo for API and payment platform and they offer bank accounts and a prepaid Visa card through Metropolitan Commercial Bank. [viii]
Google – Like Verizon, they compete for customer relationship. Google "Plex" accounts are a mobile checking and savings account directly integrated into the Google Pay app. They work with about ten financial institutions, ranging from large national banks to regional banks and credit unions, and customers will be able to choose which one they want. [ix]
Walgreens – Walgreens launches a bank account later in 2021 in partnership with MetaBank, including a debit card, as a way to complement their current services and improve its loyalty program and customer adaptation. [x]
H&R Block – H&R Block offers, in partnership with MetaBank, an Emerald Prepaid Mastercard account that will do more than accept tax refunds charged to it, including allowing customers to withdraw cash , pay bills and perform other money management tasks. [xi]
Each of these has tried to insure themselves and these efforts are further evidence of their customer strategies.
Distribution Partners 'Ecosystems – Go to N Degree
Market Leaders and Competitive Market Position The future will be how insurance companies create distribution partners' ecosystems that leverage their strengths and embrace partners to fill gaps and expand market reach. It's all about the multiples!
In our 2021 research on strategic priorities, we found that insurance companies with new products blow away their traditional product counterparts to exploit partnerships and ecosystems across many different areas of the distribution spectrum mentioned earlier. Unfortunately, too many insurance companies seem to get stuck in their traditional channels rather than expand channel choice and reach and meet the customer wherever and whenever they want.
We see great efforts being made in new business models, products and services from FinTech, InsurTech and seated insurance companies that are focused on capturing customers whenever and wherever they want through a broader market network of partners. But the challenge for those who do not adopt an ecosystem for distribution partners is that they will have fewer opportunities for partnerships the longer they wait, which limits their market reach and growth opportunities as a new generation of buyers increasingly turn to alternative channels.
The question is … are you ready and willing to take your distribution strategy to the maximum … to the N degree? Your customers are waiting.
[iii] "State Farm® and Ford cooperate on use-based insurance," State Farm press release, 27 August 2020, https://newsroom.statefarm.com/team-up-with-Ford-on-DSS-usage-based-insurance/  [iv] O & # 39; Donnell, Anthony, “John Hancock Integrates Amazon Halo With Vitality Program , "Insurance Innovation Reporter, August 28, 2020, https://iireporter.com/john-hancock-integrates-amazon-halo-with-vitality-program/
[v] Sims, Tom, Google offers alliance cyber insurance, Munich Re to cloud users, insurance journal, March 2, 2021
[vii] https: //studio.chubb.com/
[viii] Reich, Garret, Verizon Infiltrates Banking with Neobank-Like Strategy, The Financial Brand, June 21, 2021 https://thefinancialbrand.com/116546/garret-verizon- infiltrates-bank-with-neobank-like-strategy /
[ix] NerdWallet, Google, Walgreens and H&R Block want to be your bank, Tampa Bay Times, June 26, 2021