The role of the consumer in the creation of insurance products

TRADITIONAL insurers are under greater pressure today than ever before. Even before the pandemic, South African insurers were facing a whirlwind of claims, raising questions about the long-term viability of the industry. Covid-19 only exacerbated that, as did the unrest which rocked the country in July. Additionally, a slew of upstart insurtechs are coming for the traditional insurers’ lunch.

Combined, those factors mean that business as usual simply isn’t an option. Insurance is a grudge purchase at the best of times and if an insurer isn’t meeting a customer’s expectations, they’ll very quickly jump ship.

If they have any chance of meeting – or preferably beating – those expectations, they don’t just need to innovate and adapt. Instead, they need to actively involve consumers in the creation of their products.

Power of customer experience

Most industries today understand the importance of good customer experience. It’s worth pointing out, however, that 73% of customers expect companies to understand their needs and expectations.

That’s as true for insurance customers as it is for any other industry. And yet insurers have been historically poor when it comes to engaging with their customers. Statistics show that more than 90% of insurers worldwide do not communicate with their customers even once a year and that 20 to 40% of their customer base will not receive a single communication all year.

And while the rapid pace of digital transformation over the past 18 months or so may have improved that, the fact remains that no insurer can be certain that it’s giving its customers what they need if it’s not engaging with them.

Digital and adaptability

Fortunately, digitalisation has made it increasingly easy, and lucrative to do so. According to Deloitte research, the likelihood of a prospective client buying a policy once they apply increases from 70% to nearly 90% when digitalisation speeds up the underwriting and application process to approximately real-time. But simply using digitalisation to speed up the application process isn’t enough to differentiate one insurer from another. In order for that to happen, they have to take digitalisation and adaptability a step further by bringing the consumer into the product creation process. Even though some insurers might find that concept radical, it really isn’t. Many mobile network operators already allow people to customise their plans according to how much data or airtime they need.

While insurance is heavily regulated, there’s no reason that it shouldn’t offer similar levels of flexibility. A good place to start is by allowing consumers to choose what they can afford. Rather than trying to upsell a customer on something we already know to be a grudge purchase, let the customer personalise a product according to their budgets. Some innovators in the insurance space are already doing this. Still others have gone a step further and allow customers to only activate insurance when they need it. An example of this is allowing customers to turn parts of their car insurance off when they’re not driving.

Seamless digital experience

None of these changes, however, will matter if the insurer doesn’t offer a seamless digital experience for its customers throughout their customer journeys. So, even if you’ve made it easy to sign up and switch to you from another insurer, you’ve only gone part of the way.

You need to make it just as easy to update details and especially to file and follow up on claims. The situations in which people make insurance claims are almost always emotive and sometimes traumatic. Whether it’s an automotive accident, weather damage to a home or business, or a major health crisis, the last thing you want is to make your customer’s life more difficult. Even forcing them from one digital channel to another, or not allowing them to seamlessly move between channels can result in a negative customer experience.

Instead, you should aim to engender a sense of trust and know they’re being supported and guided through every interaction they have with you.

Engagement and evolution

Having this level of choice on an ongoing basis also encourages consumers to engage with the product. That’s important because they know when their circumstances change. If you give them control, they’re more likely to view your brand favourably and engage with you more frequently.

Critically, these engagements also act as data points, meaning that consumer choices become a part of the algorithm. This, in turn, allows insurers to offer better products and services to their customers. In effect, it creates a virtuous cycle that benefits both the customer and the insurers.

If insurers are going to survive and thrive going forward, they need to understand and embrace this. Doing so can only bring success. Failure to do so, meanwhile, means running the risk of becoming obsolete.