Insurance exists to give policyholders peace of mind. It is designed to answer a policyholder’s 3 a.m. “what if” questions. What if my house catches on fire? What if a car crashes into my family’s restaurant? What if my grandfather slips and falls? The first answer that should pop into that policyholder’s mind is, “It’s okay, I have insurance.”
But today’s “what if” questions are not the same as yesterday’s, nor will they be the same tomorrow. To retain their customers and maintain their relevance, insurance companies need to ask some questions of their own. What new business models should insurers create to keep their competitive edge? How will they appeal to the customers coming of age today? What kind of peace of mind are their current and future policyholders looking for, and how can insurers provide it?
New product ideas can come from anywhere:
- Insights from sophisticated analytics on unmet market needs, such as BOP designed for small restaurants
- The agent who has to tell their client that their travel insurance does not cover cancellation costs due to their child becoming ill
- New offerings from tech giants like Amazon and Google
- An insurer’s own employees, based on their personal experiences, such as their frustration with the arduous, paper-based process of obtaining life insurance
European and Chinese insurers are the frontrunners in this trend toward new, more specific products. Zurich, for example, now offers bicycle insurance with comprehensive coverage against theft, damage, and breakdowns – including additional transportation costs if the bike is in the shop. Zurich’s wedding insurance policy covers everything from the bridesmaids getting sick to the breakup of the couple before the wedding. Chinese insurers, meanwhile, are offering creative products to meet specific market needs, like policies against baby formula recalls insurance aimed at new parents.
While these may sound like very specialized products today, imagine the coverages that have not been dreamed up yet that will become standard in the future while those common today may become increasingly rare. Cyber insurance is a perfect example – ten years ago cyber security hardly registered on most large companies’ radar, but today addressing cyber risks is de rigueur.It is worth noting that these examples are not one-and-done policies (such as a Lloyd’s policy for Angelina Jolie’s lips). These insurers have identified a specific needs that exists in their market – tainted baby formula, for example, has been a very real problem in China in the past – and have worked proactively to offer unique products to cover that need. They are addressing risks that not so long ago either did not exist, were not as pervasive, or were not typically insured. Not only are their products inventive, some also have creative and risk-reducing associated services such as microchip-style trackers for bikes in case of theft, advice and incentive programs, and even additional concierge-type services.
Obviously, with product development heading in this direction, ease of configuration becomes essential. Modern core systems provide the necessary product configuration capabilities and allow their use to be spread throughout the business in addition to their traditional home in IT. These modern capabilities are vital tools for insurers looking to take advantage of sometimes-fleeting market opportunities and increase their speed to market. Insurers with modern core systems are best positioned to be able to take advantage of perishable insights from analytics and fresh product ideas.
To find new opportunities, insurers should think about the questions that keep their prospective customers up at night and determine which are ripe for a new insurance offering. Insurers have the potential to create the new products that will keep them relevant and competitive – and they can start by asking, “What if?”
This blog entry has been republished with permission
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