Insurance has been with us for over 2000 years, but until quite recently it has always been a business of people. But times change, and these days it’s a business of technology. Started by insurers and now being finished by customers, technology has made the business more efficient, but a lot less personal. Put the two together and you come up with an industry struggling to define what a customer relationship even is and how to compete on anything but price.
Customers have the upper hand as they use the power of the digital marketplace to go online to compare rates, get recommendations, and more on any device at any time and in less time than it will take you to read this blog. Without the personal advisory relationships that agents once provided, cost has become the factor in choosing a policy. And why not?
Insurance companies aren’t giving customers good reasons to stay and they need to. I hear a lot of discussion about the internet of things, sensory technology and gamification as a means to build a relationship, but I disagree. Although those technologies are certainly reshaping the industry and likely favour early entrants, those technologies will be commonplace sooner than we think and like all technologies, no matter how bright and shiny, are candidates for commoditization.
So what to do? The only viable strategy seems to be the one largely abandoned: the hard work of building customer relationships that add personal value. Not by setting up shop around the corner and bumping into customers at the local coffee shop, but by building relationships digitally, so like the insurance industry of previous decades, you know your customers well enough to sell, as well as advocate for them with real-time context and a personalized customer experience. Much as we like to think that there’s a silver bullet to all this, there isn’t, and it’s obviously not an overnight transformation, but maybe it doesn’t have to be.
To illustrate this point I like to tell the joke about the two men on a safari. Out in the bush two men suddenly see a lion running towards them. One man quickly puts on his running shoes, while the other says he must be crazy to think he can outrun the lion. But the genius of putting on running shoes, and of course the punchline, is that he doesn’t have to outrun the lion, he simply has to outrun the other man.
The business analogy is clear. You don’t have to have a relationship with the customer that matches the depth and breadth of relationships that insurance agents once offered, but you do need to be better than your competitors. The caveat here is that the longer you wait to start building advisory relationships, the further ahead your competitors will be and the closer the lion will be to eating you.
So I’m asking insurers to stop thinking that technology alone is the answer to all ills. Instead insurers need to also focus on building relationships and knowing their customers better, but in a way that fits with 2016: diving into the data. Long term it’s about engaging insurance customers as individuals.
The current model where customers only engage with their insurance companies when buying a policy and when filing a claim just won’t do. You can’t have a relationship engaging with someone once a year. What about all the time in between? That’s where the relationship needs to be fostered.
In the digital era, maybe you can’t have a personal relationship the same way as before, but insurers certainly can have a more continuous relationship with customers based on the insured assets and where the customer is located.
Let’s use car insurance as an example. A number of companies have started to gamify the car insurance cost process. Using telematics they’ve done away with standard payments and instead charge customers based on how safely they drive. That’s innovative to be sure and engaging for now, but how long will it last? Soon enough all insurers will offer that service and after a while most will reach a plateau and just drive the way they drive. Instead what might be of longer term value is for insurers to use that same technology to recommend servicing. Maybe as an added value insurers could notify customers of factory recalls, maybe a series of online driving courses, or match drivers for car pools, or alert the driver to an impending hail storm or flood where the car is located?
We could go through other examples for home insurance, health insurance, etc., but the point is to begin to think about what customers will perceive as value and act accordingly. The goal is to engage the customer and build share of mind so that when there’s an opportunity for cross-selling or upselling, the incumbent is the natural first choice of the policyholder. When insurers are seen as helpful advisors, it’s easy to build loyalty and cross-sell additional products.
The reality is that no insurance company wants to cut rates in a race to the bottom, instead it’s imperative to add value to the experience of customers. Gain trust and loyalty and keep it because competitors are just a click away. What are you offering that makes you stand out and how can you keep your insurance customers from jumping ship? Answer those questions as concretely as possible and you’ll have your running shoes laced up and lions eating your dust.