New entrants—more customer-centric and digitally sophisticated than most established carriers—are transforming the way insurance is bought and sold.
Their scalable, digital platforms, augmented by analytics, threaten the traditional distribution model. At the core of their new operating models, powerful multi-industry partnerships are redefining insurance distribution ecosystems.
Established carriers urgently need to form similar partnerships—and Accenture research shows that 72 percent have already done so, or plan to. Getting the partnership strategy right starts by understanding the new entrants’ true intentions.
Targeting the lucrative distribution portion of the insurance value chain is a no-brainer for new entrants in the insurance market. No fewer than 65 percent of the recipients of the US$4.9 billion that has been invested in insurance fintech companies and startups over the past five years are focused on distribution.
For the most part, these players aren’t interested in underwriting and taking on risk—it’s just too commoditized, requires too much capital, and is too heavily regulated. But they do want to own the customer experience. In fact, they promise to deliver a much better one.
Delivered at low cost via digital channels and convenient, point-of-purchase touch points, the new entrants’ value propositions appeal to insurance consumers hungry for a simplified, transparent and personalized buying experience. They also provide an opportunity to gather a wealth of customer data, build customer loyalty, and establish robust residual revenue streams.
Consider, for example, how many auto dealers and manufacturers now offer insurance as part of a car-buying or car-sharing package, or the number of retailers that link insurance purchases to reward programs.
Rising to the challenge
The industry is starting to rise to the new entrants’ challenge. Accenture research shows that 59 percent of carriers are prioritizing a more customer-centric distribution model, and 48 percent have already built a customer-centric hub that leverages data and analytics for an improved service experience (or plan to do so in the near future).
But the established carriers still hesitate to take bolder steps. Fewer than half (43 percent) are planning or have completed the acquisition of startups or innovative competitors, for example.
Carriers that have partnered with new entrants are already reaping the rewards, leveraging their natural advantage as underwriters to strengthen their own customer relationships. Since the start of their global partnership in 2009, Allianz and BMW have tripled their customer insurance business.
Act now, or lose out
How can insurers create customer experiences that are at least as good as those the new entrants are offering—ideally, better?
The experience of the leaders suggests they need to develop more customer-centric business and operating models, execute multiple models simultaneously for both the core and the digital businesses, and integrate the lessons learned about customer-centricity from new partners, broadly, across the enterprise.
The following considerations are a starting point:
Develop tailored value propositions and identify new product or service offerings, and then evaluate which non-traditional partnerships and business models will complement them.
Rethink the product design approach to enable personalization at scale.
Develop a digital strategy that aligns to four fundamental objectives of the customer experience:
- Execution of fully-informed and real-time interactions.
- Expansion of awareness and extension of reach.
- Delivery of highly personalized experiences.
- Creation and distribution of rich, interactive content.
Build cost-effective and flexible back- and middle-office operations. Support them with a flexible technology infrastructure to make the economics work.
Define a win-win partnership model. Align on the key success factors upfront through clearly articulated success metrics, well-defined customer segments, and a single brand promise.