David Connolly, EY Global Insurance Technology Leader, discussed the future of protection with Chetan Kandhari, Nationwide’s Chief Innovation and Digital Officer, at the EY Insurance Executive Forum. Below are a few key takeaways that explore how insurers can innovate their offerings.
1. Integration and bundling evolve into individualized, one-price protections
The practice of bundling home and auto insurance with additional complementary coverages has proven very effective in attracting and retaining customers. In the future, forward-looking insurers will build on that fundamental platform by holistically providing all of the protection needs for their customers under one contract for one price.
That means combining coverages for property and casualty, life and health insurance with income protection, side-hustle and home-based businesses into individualized protection contracts. By reorienting around customer needs, such offerings that combine products and services are a major advancement from today’s bundled policies.
These protection policies will be fully individualized, with underwriting based on real-time behavioral data, not broadly personalized based on static historical data sets. Insurers may lead or participate in ecosystems to deliver the protection products consumers want, but insurers don’t individually offer.
2. Emotional benefits trump functional benefits by building trust
Everybody in the industry agrees that the future of insurance will be data-driven and analytics-enabled. But tomorrow’s top-performing insurers will also excel at making human connections and applying the personal touch at the right time. To a large extent, this is about empathizing deeply with customers. That means dedicating people and teams to understanding not only what customers might buy from you but also how they feel and what they value most in life.
Research shows that consumers value a sense of feeling protected. To deliver that powerful outcome, insurers will need to retrain customers who tend to focus on price, thanks largely to billions of dollars of industry advertising. Appealing to higher-order needs may give insurers back some pricing power.
That level of empathy is critical if insurers are to address one of their biggest barriers to innovation: lack of consumer trust. Consider all the deeply personal information consumers are comfortable sharing with their wealth advisors — all of their financial data and hopes and dreams. Now think about what insurers could do with such data — precision risk profiling, targeted pricing, lifetime customer value modeling, and tips for better living.
Insurers that can dial-up trust with their customers will have a huge competitive advantage during a period of substantial change and intense competition.