How Well Do Insurers Understand Their Customers?
Demographic pundits are curious about how Europe is going to survive economically in the year 2050. The population in all European countries will be in dramatic decline. Many who are within the population will be too old to be working in the economy, and there will be a decreased capability to produce the products that fuel European markets, such as the many consumables created in France.[i]
The North American, African and Indian populations will still be on the rise, but population migration will likely be necessary to create global economic balance.
From the perspective of 2019, 2050 may seem irrelevant. But if there is one thing that insurers should know by now — looking into the future even one day, one year or one decade ahead is important. The viability of the insurance industry is vitally connected to demographic trends, market trends, customer opinion, and new technologies. When we lose touch, we lose business.
This is why Majesco considers it vitally important to keep insurers in touch with demographic, market and technology trends that affect them. In our recent webinar, Achieving a Win-Win in Insurance: How Well Do Insurers Understand Their Customers?, we shared our cross-survey results from our consumer, SMB, Strategic Priorities, and InsurTech primary research to outline the important insights and trends that matter most to insurers. It is this outside-in focus on customers that will help insurers know how to react to today’s trends and consider how they should prepare for tomorrow’s evolving customer expectations and needs.
Generational Shift and the Window of Opportunity
In 2025, just six years from now, Gen Z and Millennials will become the dominant segment in the 30-60-year-old sweet spot for insurance. This is the time during which many of them will have the greatest need for insurance and benefits. This is the timeframe when consumers and SMB owners will be seeking new products and services. Many within this age group will be shifting from renting to home ownership or vice-versa if they are moving to retirement or assisted living homes. In 1950, a population shift of this kind wouldn’t have made much difference because insurance interactions may not have changed with the generational shift. Today’s generational gaps contain dozens of unique behaviors that matter to insurers. How GenZ and Millennials view work and career is different than how GenX and Boomers view them. How they interact with service providers is different. So, instead of just weighing common trends, Majesco asked pointed questions about perceptions and plans.
As we move through some of Majesco’s findings, we’ll look not only at how these customers (we call them buyers) view their own consumer habits, but we will compare those perceptions to actual incumbent insurer (leaders, followers and laggards) and InsurTech (we call them sellers) opinions and plans. Are the two aligned? If not, how far apart are they? In some cases, we’ll see that sellers are preparing to take advantage of the window of opportunity. They are ahead of the curve. In other cases, opportunities are still largely unrecognized.
Insurer Alignment to CURRENT Customer Behaviors and Interests
Majesco found that incumbent Insurers and InsurTechs (startup MGAs, reinsurers and insurers) sellers are largely aligned to current needs within the gig and sharing economy, if not a little ahead of consumer and SMB buyers’ interest. For example, 43% of InsurTechs and nearly 40% of leader and follower insurers are actively planning or developing products and services to serve those within the gig and sharing economy. Between 15% and 36% of insurance buyers are participating in the gig and sharing economy, likely representing the need for insurance.
Insurers and InsurTechs are ahead of current buyer needs regarding the use of IoT devices. Nearly 50% of Insurer leaders and followers as well as InsurTechs are planning or developing their IoT use programs. In the GenX/Boomer category of consumers and SMB owners, only 18-19% are using IoT devices, but that number climbs to only 27% for Millennial and GenZ consumers and SMB owners. This is a case where insurers may actually work to incentivize and drive a trend, since IoT data is sure to play a greater role in the coming years with promised improvements to pricing, risk prevention, claims notification and mitigation and hopefully improvements in health and life expectancy.
Insurers and InsurTechs have gained ground in their recognition of how new technology is going to change insurance with nearly 30% actively planning/developing their frameworks to support the use of new technologies including bitcoin/blockchain, drones, and 3D printing. They are three times ahead of both consumers and SMBs, once again putting them in a position to incentivize and drive a trend with buyers.
Insurer leaders and followers, as well as InsurTechs, are leading at 45-48% with regard to on-demand insurance, with laggards substantially behind. This bodes well given that nearly a quarter of all insurance buyers are using on-demand insurance of some type. Those leading sellers are well positioned to capture this growing opportunity as on-demand insurance continues to innovate and accelerate.
Insurer Alignment to EMERGING Customer Behaviors and Interests
In general, sellers are well positioned to current buyer behaviors and interests. The exception is insurer laggards who fall significantly behind. This bodes well for retaining current customers. But, when it comes to emerging and future needs, sellers, particularly insurer followers and laggards, may not be preparing fast enough. In at least three areas, these insurers need to heed buyer interest to stay ahead.
Sellers are nearly 50% behind buyer expectations in developing new value-added services. Insurer leaders are at the forefront followed closely by InsurTechs and insurer followers and laggards. The survey results are clear – all sellers are behind giving those who quickly act on this opportunity a market advantage.
Social/Peer-to-Peer Insurance Models
The peer-to-peer business model emerged in other industries such as social lending with companies like Prosper and LendingClub, who organize unsecured personal loans for consumers. The introduction of this model in insurance by companies like Bought By Many, Tom and Lemonade are paving the road to social involvement insurance products and riding a wave of strong interest that is reflected in our research.
However, buyer segments significantly outpace sellers by nearly 100% or more, reflecting a significant expectation gap. If these trends continue, social and peer-to-peer coverage will continue to grow in interest. Insurers that can effectively serve individuals by helping them to form affinity groups stand to gain a whole new market.
New Data Sources for Insurance Pricing
The abundance of new data created by digital interactions and activities has opened up exciting new possibilities for improving accuracy and speed in underwriting and pricing. The specific nature of this data provides the level of personalization that buyers are getting from other companies, which is reflected in the high level of interest across all segments but most strongly by Gen Z and Millennials.
However, sellers (both insurers and InsurTechs) are not aligned to this expectation. With buyers showing nearly 100% more interest, compared to what sellers are planning or developing, this expectation gap poses a real threat to sellers. It also offers an opportunity for those who can address it rapidly with innovative new products and services, placing themselves in a leadership position.
What these findings show is that sellers are generally aligned with buyers’ expectations today, but not tomorrow. This means that even though an organization may be well-positioned currently to meet market needs, it needs to be in the prioritizing and planning process in order to capture more market share before the windows of opportunity close. Insurance buyers’ changing behaviors and expectations are defining what the future of insurance needs to look like. It is Majesco’s mission to help insurers, reinsurers, MGAs, startups, and more, make that future a reality by providing next-gen technology, like our cloud-based insurance platform solutions and our microservices-based Digital1st Insurance platform-as-a-service, to rapidly launch, test, and scale innovative new products and business models.
In our next blog, we’ll discuss the preparations insurers need to make to create the future of insurance. What can insurers do to build new business models that will reach tomorrow’s customers? To examine these issues in depth, be sure to watch Majesco’s webinar,
[i] Boussemart, Jean-Michel & Godet, Michel, Europe 2050: Demographic Suicide, The New Barcelona Post, February 25, 2019.
By: Denise Garth