In the insurance world, every day brings an announcement about a new digital application that promises to provide a novel and easier way of performing one task or another. But stepping back and looking at the broader landscape, the bigger picture shows that fintech and insurtech have both enabled and compelled companies to revolutionize the way they look at entire markets. They have sparked the making of a radically new marketplace, one that turns business models on their head even as it sits in the palm of the customer’s hand. It succeeds in reversing the gravitational field between consumer and financial services company, placing the customer at the center of this new planetary system, exerting the pull.
The UK, where I work, represents a much smaller pool of consumers than the U.S., but it’s an extremely competitive marketplace with a great deal of disruptive activity that may be informative to companies here. It’s the perfect laboratory for trying out creative new ways to use technology to improve the entire customer journey. These changes are served by digital technology, and have in fact reversed the calculus on technology’s use.
The primary challenge of technology is to understand customer pain points, and to deliver solutions to as many people as possible, to improve their lives. To this end, a simple maxim that I have heard expressed by informed thinkers is that data is the new oil. Traditional means of purchasing goods and services are going by the wayside in favor of a much more consumer-centric, comparison means of shopping—all powered by data. In the UK we are beginning to see an increasingly empowered consumer who not only is able to digitally compare prices, but is also becoming exposed to services that actively “manage” their next best action and find the best offers on their behalf. Add in the momentum towards “open banking” and open data, and the end state proposition for digitally engaged customers could be turned on its head.
The open banking concept means that consumers can consent to making their financial data available to third parties. In exchange, they expect and demand a different approach to, for example, buying insurance and getting mortgages. By “putting themselves out there,” these empowered consumers put themselves in the catbird seat—entertaining the best priced, easiest, and highest value offers of insurance and other financial services.
Digital technology puts the balance of power back in the consumer’s hand. Given the continuing drive toward open banking and open data, these new market forces have caused us to sharpen our offerings and price points and find ways to be indispensably relevant to the customer even as startups and upstarts vie to eat our lunch. Done well, the combination of digital ingenuity, the ability to cross-sell, and the potential to reach mass markets in an entirely different way enables us, in turn, to survive and thrive in a world turning around a new model. In this model, we’re no longer earning large fees out of a small number of elite customers. We’re in a new world where we’re earning smaller fees out of many more customers—orbiting around them, in fact. The winners will be the ones who ask “What is the next best action for that customer? What is the pain point? How can we solve that?”
So the technology battleground becomes: If I, as the consumer, put myself out there, insurers and other financial services providers make offers to me, based on my aggregated financial picture.
As disruptive digital businesses, we are not just building for prime, low-risk, high-end customer for a high return. We need to build for everyone. In the world of financial services – which has generally leaned on getting quite a bit of revenue from a few customers – we’re now seeing that concept turned on its head: The more sustainable value proposition of getting a little bit of revenue from a lot of customers. This revolution turns the low-risk customer mantra on its head. Today’s successful organization understands that you’ve got to have a lot of customers, and earn small amounts of money from each of them. “Provide me just what I need and exactly when I need it, no more and no less”.
Thus, the biggest imperative we face is not developing more shiny new technology that solves isolated problems here and there, but making sure that the products and services we provide are accessible to as many people as possible, at the lowest cost of acquisition. With the aging population in the U.S. as well as the UK, and the retreat of the welfare state, these data-driven technological innovations are desperately needed right now. In a larger societal sense, this is a way to help and empower a massive and much-ignored sector of our populace. It enables them to have more choices, and opens up products and services that were previously closed to them.
How can companies begin to rethink their approach to the customer? In looking at macro trends, customer pools are hard to get hold of—there are some good ways to do it, but it takes ingenuity.
In our industry, the digital customer pool can be found in three concentric circles—we believe that the home, the bank, and the workplace form the structure of most people’s daily life. If you organize your business around finding the consumer, and if consumers are “auctioning themselves off,” there’s a lot less reliance on aggressive marketing campaigns. If you have the technology, you can reach these new empowered customers. And you have all of those customers in a pool, they will come to you as a result of your offering the best and most relevant products and services. Add in some good support and advice on top and you have the perfect mix.
Next time I’ll delve into some of the ways that these concepts are unfolding, with successful, empowering, socially conscious, and yes, profitable outcomes. It seems inevitable that the future lies not with the few, but with many consumers.
