The traditional focus on products, policies and paying claims will shift to services, experiences and creating value. Put another way, what customers want and need, not what insurers want to sell or have always sold, will be the dominant driver of innovation and growth.
How insurers engage customers and the channels they use for distribution and service will change just as dramatically. In many cases, the “face” or “front door” of insurance will be distribution partners, including banks, manufacturers, health care providers and other high-profile brands outside the industry.
Today, more insurance leaders are recognizing how customer insights drive improvements in products, services and experiences.
In that sense, changing consumer needs and expectations are both an invitation for insurers to innovate and a blueprint for their transformation programs.
To satisfy those rising consumer demands, engage with new customers and retain existing ones, insurers will have to overcome their reputation for delivering subpar experiences and emphasizing standardized policies and traditional channels over customer needs and preferences.
The report, NextWave Insurance: Consumers & Small Businesses (pdf), focuses on nine key customer types that will define the market on the road to 2030.
The customer categories frame both the formidable challenges and unique opportunities insurers face in a highly dynamic market.
Of course, not every insurer will focus on all nine of these groups. But there are common themes across them, including the need for tailored coverage, personalized service and richer digital experiences – all of which add up to increased value.
The main customer types that will define the Insurance market
This group values the peace of mind that comes from knowing that the items they buy – consumer goods, jewelry, travel or concert tickets – are protected from the moment they’re purchased. Embedded finance and a growing market for point-of-sale insurance mean insurers can reach more customers, demonstrate the value of insurance and increase their relevance.
With more people spending more time in the metaverse, there is rising demand for protections that cover digital assets (e.g., crypto keys, virtual identities and brands). Insurers can connect “metazens” by offering bulletproof identity protection that prevents hacks, breaches and theft; business interruption coverage for virtual events; and fully integrated “virtual life insurance,” which could be attractive for influencers.
Some businesses view environmental, social and governance (ESG) as primarily a regulatory matter, but more consumers are putting their money where their values are. Specifically, they want to do business with environmentally and socially engaged companies and avoid those that are greenwashing. They are willing to pay a premium for products and services that match their value.
More consumers want holistic and dynamic coverage for entire lifestyles or “bubbles.” Designing integrated coverage for autos, homes, health, microbusinesses, appliances, travel, identities, and major new purchases is complex, but offers plenty of new revenue and stronger long-term relationships for insurers that get it right.
Consumers are increasingly aware of the value of their personal data and expect more in return for sharing it. Insurers can engage this segment via customized offers, proactive insights for risk prevention and protection management with a portfolio of coverages that changes based on life events. The first step, though, is full transparency about data usage.
Looking to win entry-level business with budget-conscious consumers requires simple, understandable policies that are affordable and available via intuitive digital experiences. The end goal is to engage these customers for the long term, broadening and deepening the relationships as bigger risks emerge in their lives. By demonstrating the value of insurance and proving it can be affordable, insurers can both grow their business and protect the underserved.
By offering tailored protections for gig workers and small home-based businesses, insurers can boost their relevance with solutions that reflect how people live and work today. Such coverages must be easily adjustable and reasonably priced, and solutions for gig workers in specific sectors and roles (e.g., delivery and graphic design) are likely to gain traction.
Today, commercial insurance options don’t necessarily reflect the huge number and diversity of small- and medium-sized enterprises. The priorities for helping small businesses manage proliferating risks are real-time cyber insurance, plus monitoring and recovery services, and real-time, dynamic and usage-based pricing for certain operations. Every small business will appreciate 24/7 digital support and access to expert advice when necessary.
Like the ESG devotees in personal lines, small-business owners are increasingly focused on sustainability. These customers are most drawn to insurers that have sector-specific expertise and services that help them further “green-up” their businesses. An authentic commitment to ESG and true depth of understanding of the risks they face, along with ecosystems of solutions to cover those risks, will drive further engagement and loyalty.
Shifting consumer needs are an invitation for insurers to innovate in pursuit of growth and to stay ahead of new competitive threats.
Though not every insurer will serve the full range of customers, those that put customers at the core of their business will gain a competitive edge.
They’ll also need to master a few crucial capabilities:
- Real-time risk protection: AI, machine learning, automation, digital platforms and data analytics enable insurers to deliver personalized protections and services – instantaneously and at scale – in homes, vehicles or anywhere.
- Ecosystems and partnerships: As industry lines blur and barriers to entry fall, insurance will become ubiquitous for all types of purchases and companies; insurers can orchestrate their own ecosystems and embed in those led by others.
- New risks necessitating new products: Evolving societal norms and cultural values – from the rise of ESG issues to personal data ownership to virtual worlds – have created new risks and thus require product innovation from insurers to provide the necessary coverages.
Senior industry executives have been asking: How can we make sense of and navigate these trends in pursuit of growth? It starts with envisioning how to meet the changing needs and expectations of different customers by developing intelligent micro-segmentation and hyper-personalization capabilities, aligning offers, operating models and transformation investments to win in a hypercompetitive environment.
AUTHOR: Chris Raimondo – EY Americas Insurance Technology Leader / Contributors: Charlie Mihaliak, Isabelle Santenac, Ed Majkowski, Peter Manchester, Anita Sun-Young Bong