Innovation is a trend, one that is cultural even before it is technological, and one that has traditionally struggled to gain traction and strength in the insurance industry. This is despite the fact that the industry’s value proposition has always been about creating dynamic products that are designed both to meet the changing needs of consumers and to contain the various risks that emerge from new and sometimes unpredictable contexts.
In recent years however, digital transformation has significantly accelerated insurance processes, offering companies not only new tools and strategies, but alternative business models. The advanced use of big data has put the customer back at the center of the insurance world, and the customer experience is now one of the main levers where companies can intervene in order to improve business results.
The path to extracting value from innovation in the insurance industry has just begun, and it’s a result of the synergy between technology and the human element and the integration of processes that unleash the potential of data and those that enhance personal creativity.
To better understand the extent to which technology development and customer-centricity impact the insurance world, let’s start by providing a few examples.
Insurance industry innovation: four technological developments that support customer centricity
In this interconnected world, insurance industry innovation, if it is to take advantage of the many opportunities for growth and address potentially very serious risks, must use the technologies at its disposal. Cyber insurance, IoT, and connected insurance are three of the most advanced technologies that offer solid support for insurance companies to effectively adapt to a changing environment.
The first example of technological innovation was created to stem the growing danger of external attacks on organizations’ information systems. Cyber insurance is a relatively new market that is on track to reach $22.5 billion by 2026, with an annual growth rate of more than 25%, according to IndustryARC’s 2022-2027 forecast. It’s about protecting the confidentiality, integrity, availability, and authenticity of information: today’s enterprise cybersecurity strategies are designed not only to protect local data but more importantly to control the flow of data traveling between wireless devices and cloud servers.
Internet of Things
The IoT insurance market is also expected to see sustained global growth: the total value will exceed $3 million by 2026. Using sensors and digital technologies and gathering input from internet-connected devices, insurance companies can already monitor and improve their understanding of the status of risk situations, turning raw data into actionable and usable information. IoT technologies applied to insurance make it possible to more accurately assess the risk profile associated with individual portfolios and ultimately improve the company’s overall productivity and profitability. In addition, with the automation enabled by the Internet of Things, insurers can multiply the possibilities of connecting with customers by adding important touch points at particularly sensitive stages such as acquisitions and claims management.
Connected insurance is the innovative business model that develops from the spread and articulation of the Internet of things. It gives rise to a true ecosystem that uses IoT platforms, sensors, and devices to collect useful data to monitor actual user and consumer behavior and translates this data into insights that it makes available to industry players. Connected insurance integrates information from a variety of sources to create knowledge useful for improving the decisions of insurance industry companies. It has an extremely positive effect for the insurance company as a whole, especially in terms of the customer empowerment process by allowing for the development of a solid and significant digital presence in the market through the implementation of channels that individual users can use independently. Connected insurance is part of a shift that is redefining the paradigm of insurance-insured communication.
Customer Communication Management
The small communications system revolution we mentioned above finds one of its most advanced forms in Customer Communication Management (CCM). CCM, which can be understood as both a strategy and a tool, integrates a series of interactive applications that enable the creation, storage, retrieval, and distribution of all communications between a company and its customers, leads, and business partners, all on the same platform. Specifically, a CCM:
- Enables content to be composed, formatted, and personalized by translating data acquired from various sources into electronic and physical communications
- Supports the creation and production of materials used by marketing (from personalized customer messages and new product introductions to transaction documents)
- Provides targeted communications through a wide range of media, including mobile devices, email, SMS, web pages, social media sites, and print media
The goal of the CCM is to ensure that communications aimed at different customer segments—in the case of more advanced software, even one-to-one—are relevant, clear, and consistent, regardless of the channel or mode through which they are conveyed.
From traditional face-to-face model to digitally enabled customer centricity
To cope with the social isolation imposed by the pandemic, many insurers had to quickly digitize the customer and agent experience, moving away, often permanently, from the traditional face-to-face service model. Others provided communication channels that catered to customers who are now accustomed to greater and more meaningful interactivity. Still others implemented loyalty and entertainment programs with the goal of increasing engagement, investing in solutions for automatically producing innovative content, such as interactive videos and personalized mini-sites.
Corporate decision makers—the C-suite—are taking note of the key role that innovation will play in delivering long-term value. But while the industry as a whole presents different scenarios where technology is already being employed to open up new spaces for dialog and for enhancing relationships, there are still few companies who are pursuing innovation in a systematic way. Still, ever-higher customer expectations and the entry of new and fierce competitors (IT companies, insurtechs, corporations) are pressuring companies in the industry, pushing for the kind of innovation that can provide sustainable growth that is fully integrated into all levels of the organization.
Structuring, organizing, and encouraging innovation in the insurance industry is certainly a complex undertaking. It is an ambitious goal, no doubt about it, but today, thanks to digital technology, it is also an accessible goal. This is the case for all those companies who, in an attempt to put the customer at the top of their priorities and at the center of their business processes, have established and implemented digital marketing practices focused on achieving customer centricity.
Let’s pause for a moment: what do we mean by customer centricity?
What is customer centricity?
According to Gartner’s famous definition of it, customer centricity is nothing more than “the ability of people in an organization to understand customers’ situations, perceptions, and expectations.” The individual person involved in the brand relationship becomes the focal point of all decisions related to the delivery of products, services and experiences.
Customer centricity in the insurance market: for holistic customer relationship management
An insurance company that intends to develop genuine customer centricity must have access to a panoramic view of the customer situation so that it can anticipate the customer’s needs. In particular, it must:
- know the customer’s preferences with respect to certain offers
- calculate the likelihood that the customer will remain loyal or switch to a competitor
- make reliable predictions about how the relationship may evolve in the more or less distant future
Put another way, innovation in the insurance industry means employing technology to get to know one’s customers in depth, to distinguish them from one another, and to guide them—this is what all companies are striving for today.
To accrue the knowledge needed to put the customer back at the center of the relationship with the company, today’s insurance industry players have extremely effective tools at their disposal, thanks to which they are able to make their data analysis system even more accurate. They can use the results obtained from these analyses to build profiles that are as accurate as possible and create products and services with a high degree of personalization. This process of continuous modernization—of the infrastructure and working methodology—results operationally into a customer experience that is made for each person: smooth, comprehensive, timely and efficient, capable of meeting consumers’ expectations and of adapting perfectly to their characteristics.
To achieve an experience marked by authentic customer centricity, an organization must be able to move in several directions simultaneously: designing purchase and subscription paths that are frictionless, offering products that are affordable relative to the real possibility of spending, and above all, offering holistic customer relationship management.
Influencing each other, technological evolution and a renewed awareness of the role played by the customer foster the shift to a customer centricity paradigm. This assertion, which has its theoretical validity, also has—and this is the aspect that interests us most—a concrete spin-off in terms of achieving business results: the commitment to ensuring that the insured gets what he or she wants or needs, at the time, in the place, in the way he or she wants or needs it, goes hand in hand with the business need to build ever-higher profit margins.
While ease of purchase and the speed and security of transactions are an indispensable prerequisite for establishing contact, they are not enough, however, to carve out for the company a dedicated and, to some extent an exclusive” space, where it can establish a relationship with the individual customer that is destined to last. In fact, even now, the moments when customers actually interact with the insurance company are limited: purchasing the policy, renewing it, and requesting information. This means that most insurtechs have only two, perhaps three, meaningful opportunities to engage and impress the customer.
To activate and nurture loyalty processes, the only ones that can ensure a long-term relationship, companies must reset the funnel. On the one hand, they must multiply the enabled touchpoints, the channels manned and the informational content and, on the other hand, they must also simplify the purchase process, which must become more interactive, fast, efficient, and easily navigable. This must happen in every stage, from the consideration phase, when the customer evaluates the products most appropriate to his needs, to the decision phase, and the subsequent payment. And it must go even further, in the period following purchase and subscription, the true test of customer centricity strategies, where the relationship must be kept vital by enriching it with stimuli, personalized insights, and opportunities for exchange.
Optimizing communication: this is how innovation is achieved in the insurance industry
According to McKinsey, insurance companies, whether they want to grow or consolidate their acquired positioning, need to design value propositions that are not only about products and actuarial mechanisms but incorporate actions that are aimed at increasing customer engagement. This is where orchestrated strategies among different business functions, especially those in marketing and sales, that aim to modernize and digitize distribution and communication platforms play a decisive role. This means developing a more detailed profile of each segment, generating proposals based on customers’ unique needs, and personalizing offers and messages.
Putting customers and technology at the center to achieve true innovation in the insurance industry does not mean “owning” the customer relationship. Instead, it means taking charge of customer problems to try to solve them as efficiently as possible, avoiding information redundancy and repetition, minimizing wait times, streamlining front-desk operations, and ensuring attentive and effective remote service.
Using the right mix of automated tools and content, such as interactive videos and personalized websites, any company can leverage every interaction opportunity to create valuable relationships and transform any communication, including transactional ones, into decisive moments within a truly innovative customer experience.