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Niche Insurance Products in Motion
The pandemic wreaked havoc on wedding plans, disrupting somewhere between 63-80% of all weddings in 2020 and pushing out wedding plans for many couples as far as 2023 and 2024. It also hurt popular wedding companies, such as David’s Bridal, which entered bankruptcy in 2019 and is now emerging to become a much stronger company. Its optimism is certainly fueled by the fact that “weddings are back,” but it is also stimulated by a major improvement in its online presence.
David’s Bridal now has an app, Pearl, which, combined with its online version, touches 90% of all brides in the U.S. Pearl has been monetized (it accepts advertising) and it acts as a value-added service (it’s a wedding planning app) that goes far beyond the sales of wedding dresses.
Weddings make a great case study for niche products in insurance. Brides and grooms are still dealing with COVID-related challenges. Wedding venues, caterers, and suppliers, such as florists, are charging higher prices because of increased demand and increased supply chain issues — which makes weddings a greater risk. Air travel is experiencing less consistency than ever as we saw during this past holiday season. All of these things may make wedding insurance pretty appealing for parents and couples who are spending large sums to celebrate tying the knot.
In addition, online and mobile tools, such as Pearl, the Knot, and Zola, are opening the gates for insurance product placement. Can wedding insurance become embedded in these brands? Can wedding insurance also sell through venue and vendor sites (those who stand to lose revenues through cancellation), or through planners?
In any of these scenarios, insurers must capitalize on niche opportunities with new products, streamlined product development, and easy-to-use integration points. Niche insurance is growing to support new risks, new market segments and customers who want pricing based on their personal risk. In Majesco’s recent thought leadership report, Future Trends: 8 Challenges Insurers Must Meet Now, we discuss niche products, but we also look at a broad range of factors that are affecting insurance, from inflation to supply chain issues, plus unemployment, rising interest rates, and more.
Why should insurers pay attention to niche product demand?
If an insurer (or any company) wishes to grow, there are essentially three high-level options. Add new or change products. Add new or expand markets. Do both. It sounds so simple!
Insurance, however, can be difficult, complex, and time-consuming with products and services that may not appear to deliver value. Many insurers have developed products for niche businesses – like restaurants, daycare centers and more, but must move beyond that to developing personalized niche products that assess risk and price specifically for them, rather than as part of a market segment.
Today’s customers expect more. They want a risk product, value-added services, and an experience that provides them with what they need to manage their lives and humanize the entire customer lifecycle. Part of the humanizing aspect is offering niche, personalized products, services, and experiences that align with their specific risk need and use their personal data. From an increased interest in life, critical illness, and disability insurance to telematic and cyber insurance and more, customers want insurance products that assess their personal risk, lifestyle, and behaviors. Or, at the very least, they want products that are ready to use at the point of need, like wedding insurance, travel coverage, or commuter insurance.
“Life moves pretty fast.”
Personalized, niche product management is rapidly emerging as a strategic and operational approach to meet the changing and growing needs of customers. Companies that tailor their product strategies to new risk, markets, and demographics stand a much better chance of growing than those who are solely focused on expanding market share for their traditional products. Personalized niche products flex to meet demographic and market trends. They stay mobile.
Traditional product-oriented strategies, while still relevant for some products and demographics such as Boomers or Gen X, handicap insurers for other segments – limiting their ability to attract new customers. Insurers need an expanded understanding of what a product is. Today’s insurance product should be viewed to be inclusive of a. ) the risk product, b.) value-added services, and c.) the overall customer experience. This will meet customer expectations for delivering value. Part of that value comes from providing risk prevention and mitigation capabilities and services that help customers avoid loss, while also dramatically redefining the customer experience.
Increasingly, these niche products will include a data-integrated component that will allow for personalized pricing of risk and a better customer experience.
People and businesses are on the move.
If I own a food truck, or I am an urban commuter, or I just like to travel, motion is a part of my risk profile. Motion data (telematics), has the potential to invigorate and expand the niche products that could serve these circumstances.
Are people and businesses covered wherever they go? Commuter injuries are rare, but in some cases, growing. Bus-related fatalities are on the rise. Commuter rail injuries are in decline, but rail accidents are climbing. Aside from traditional transit numbers, every other mobility option seems to be in the midst of change. Ridesharing, bike sharing, scooter-sharing, Uber/Lyft usage, and non-traditional commuting are each growing in usage without adequate, relevant growth in insurance products.
All of these scenarios contain risk gaps in insurance coverage. Not every driver is insured properly. Bike-sharing and scooter-sharing services protect themselves with liability waivers that make users completely unprotected. Many transportation companies carry their own insurance, which of course, won’t pay immediately. Insurers can search these gaps to find areas where new products make sense. In many cases, those insurers interested in supplying niche insurance simply need to look beyond the risk product and into the gray areas.
If an insurer has the ability to utilize IoT and telematic data for location services and the ability to flip insurance on and off depending upon circumstance and location, it has what it needs to offer all sorts of new products that fit different lives and lifestyles.
Travel insurance is perhaps one of the fastest growing opportunities in all of insurance because travel itself is on the rise. Between 2021 and 2031, travel insurance is expected to grow from $14.2 Billion to $124.8 Billion.[i] Though it may not be considered niche insurance, by some standards, in many ways it fits the profile. It is able to be customized along niche lines. It can be enhanced through data and tech opportunities, providing digital service at the point of need. And, it will be sold mostly as an add-on through embedded channels. Are insurers prepared to fit into those channels?
Personalized Niche opportunities in life, health, and illness.
Consider the innovative approaches by some insurers who are delivering value by offering more than just the risk product, such as a new critical illness product that provides DNA testing to support personalized cancer treatments, a new dental product that includes a smart toothbrush to monitor brushing for improved health, and a workers compensation product that tracks and supports employee safety and risk monitoring.
Life and health insurers, long stymied by an inability to expand product purchases through their existing customer base, can now use niche products to create new opportunities while at the same time helping people to live longer. Their innovations will likely be more ecosystem and partnership-oriented, requiring insurers to create or find niche products aligned with traditional product goals. It’s the perfect time for L&AH insurers to innovate because they can now take advantage of data from wearables, scales, and other health-monitoring devices — using niche products as value-added services that return valuable data.
Security as a new niche.
P&C insurance may not thrill the masses, but financial and property security is in vogue. Whether you’re talking about home security, personal and business cyber security, or mobile/vehicular tracking, people increasingly understand risk and value prevention. In each case, security is an area ripe for value-added service and product development.
Personal cyber is obviously a good fit for development because it utilizes both new product development and expanded market development. It is unconstrained by limited channels. It’s nearly unlimited in reach by virtue of the fact that anyone who is online could see an ad and most people online feel some level of vulnerability.
Home and property security companies have lost market share to do-it-yourself video and sensor monitoring from companies like Ring, Arlo, Nest, and Wyze. Some insurers provide discounts for those who have monitoring services, but the more innovative companies are partnering with home data systems to develop whole-home protection that includes fire and flood.[ii] They are using the customer’s desire to prevent damage as a self-selection tool and capitalizing on the customer’s own investment in technology to lower claims risk.
It’s a great example of meeting customer needs in the midst of the customer lifecycle.
Where’s your new niche?
Preparing to meet and grab market share with new products is, strangely, the exact same preparation that insurers need to make in transforming their traditional business as well. Ecosystem and API development can be used in both areas. APIs increase the velocity with which you implement any new or versioned product or process, new customer experience, or value-added service. The value of an API is that you can use it in many cases, making APIs the ultimate “value multipliers.”
According to A.M. Best’s recent Innovation Assessment Report, “The rise of digital platforms and ecosystems will make relationships with customers even more important. Insurers can improve their access to customers and grow their revenue streams by providing additional services.” These new streams and services are the two-way highways of ecosystem flow. In some cases, insurers will be providing them. In other cases, they will be partnering to bring them in.
New, niche development can also spur on the transformation of an insurer’s data strategy. Real-time analytics will give insurers a competitive edge and an improved understanding of how people live, work, travel, and move. In fact, niche products (similar to greenfield development) may pave the path for future core products by allowing for a test-and-learn approach before a larger initiative.
Either way, the time is right to prepare. Majesco has designed and built cloud-based frameworks and modern systems that enable insurers to go wherever they want to go and create whatever they want to create. If you’d like to understand the new tools of innovation that can bring niche products to life, be sure to contact Majesco today to learn about our core, underwriting, data, and digital solutions that are accelerating carriers ability to develop and launch new, innovative, personalized, niche product to drive growth in a marketplace with fast-changing risk. For a quick look at what’s trending that matters to your organization, be sure to read Future Trends: 8 Challenges Insurers Must Meet Now.
[i] Kanhaiya, K, Sourabh E, Vineet K, Travel Insurance Market Research 2031, Allied Market Research Report, Nov. 2022.
[ii] Hippo teams up with Ring to Help Protect Homes from Water Damage, Fire, and Break-ins, BusinessWire, June 13, 2022.