Last July, a Harvard Business Review report stated that CEOs spend very little time (an average of 3%) with actual customers. They shared with CEOs that this was even less than the time that they spent with consultants. It isn’t truly surprising, given the nature of the role of the CEO, but most CEOs felt that this was too little time, especially for companies that are trying to restructure along customer-centric avenues. [i] The best way to reach customers is to understand them and the best way to understand them is to interact with them.
Consider this in light of Gallup research that “building emotional bonds with customers can net an average of 23% higher per-customer revenue when done right.”[ii] Gallup’s view is that “executives must…become actively and deeply immersed in the world of the customer.[iii]
For the past four years, Majesco has become deeply immersed in the world of the insurance customer in order to help insurance executives understand the profitable benefits to be derived from customer-centric engagement. What we have learned over dozens of surveys and reports, is that investment in insurance business model transformation is paying off. Insurance leaders are capitalizing on the trends that are facing them. There are other insurers, however, we would classify as followers and laggards. These insurers are fighting their way back into a competitive position, right at the moment in time when they could be reaping rewards right now. They need a quicker way to catch up.
Welcome to insurance’s era of opportunity.
A Majesco report published this week, The Future of Insurance: Future Leaders Setting the Bar in Meeting New Customer Demands and Products in a Multi-Channel World, sheds light on what this opportunity looks like and why it heavily favors insurers that understand customers and engagement across channels, products and services.
The increasingly-rapid shifting of customer expectations, the pace of InsurTech growth and investment, the adoption of new technologies and the growth of new startups and greenfields, are all creating a continuous era of change and disruption. At the same time, the industry is challenged to grow due to the changing needs, behaviors and demographics of insurance buyers. The challenges and hurdles don’t seem so insurmountable, however, when they are looked at in light of the opportunities that seem to be bubbling up all over current and evolving insurance markets. Consider the following statistics and how these are impacting insurance markets:
- 37% of households rent versus own
- 40% of adults under 30 live with a family member
- Only 59% of adults own life insurance
- 22% own both individual and group insurance
- A whopping 70% of catastrophic losses are uninsured
- A $1.3 trillion coverage gap of uninsured losses exists
- 60% of Millennials don’t know how much or what type of life coverage to own
As a result, the future of insurance is top of mind for every insurance leadership team and board. But what about their focus on changing customer expectations? Do InsurTechs have an advantage over incumbent insurers? Do incumbent industry leaders have an advantage over insurers we would qualify as industry followers or industry laggards?
These and other questions are crucial to gaining insights that can shape strategies and plans for each insurer, MGA, Broker or Reinsurer. To help answer these questions, Majesco analyzed our four 2019 surveys including SMB, Consumer, Strategic Priorities and InsurTechs to compare the Buyers’ (consumers and SMBs) needs / expectations to the Sellers’ (InsurTech insurers and incumbent insurers) offerings and plans. We found some interesting results that are shaping Sellers’ future market leadership. For example:
- Sellers are aligned with Buyers for today’s offerings, but not for products and business models expected in the future.
- InsurTechs’ outside-in and customer-first approach is highly aligned to Buyers – a winning strategy that all incumbents must rapidly learn and adapt to.
- Adding channels without a multi-channel strategy will likely backfire if Sellers are not aligned to Buyers’ expectations that they can work together seamlessly.
- Incumbent insurers have numerous blind spots around new sources of insurance, including the Tech Giants’ potential to enter the insurance market. This increases their risk of becoming irrelevant and uncompetitive in a new future of insurance.
How, precisely, are future leaders staying a step ahead of the market?
Insurance companies’ awareness about the internal and external forces of change, coupled with the reality of how they are responding, both in terms of planning as well as doing, is producing the future leaders of insurance. These future leaders are primarily InsurTechs and incumbent insurer leaders. Insurer leaders are defined by their response to knowing, planning and doing, as we described in our Strategic Priorities report. When we look at these statistics, what we find is that insurer leaders grasp the impact of fostering real customer engagement.
In our assessment of InsurTechs in our report earlier this year, we found key areas where they were leading:
- New and innovative products and services were nearly 25% of their business focus. This focus fits a new demographic, culture and economy.
- They had higher growth, with growth rates 10-15% greater than incumbent insurers, based on the Strategic Priorities report.
- InsurTechs are strongly focused on platform technologies, such as cloud and APIs, recognizing the importance of flexible solutions that ease integration and deliver business value quicker and more cost effectively.
- They see partnerships as a catalyst for market growth. These partnerships might include financial backing, capital for underwriting, reinsurance for market expansion, and distribution expansion, particularly with other industry segments.
In contrast, our assessment of incumbent insurers in the Strategic Priorities Report found significant differences between leaders, followers and laggards, including:
- Leaders are 42% ahead in embracing partnerships, ecosystems and InsurTech
- Leaders are 37% ahead of laggards in creating a new business for the future
- Leaders are 24% ahead of followers and laggards with extensive distribution strategies
- Leaders are 20-30% ahead of followers and laggards with customer digital engagement capabilities
All four of these traits exhibited by insurance leaders can be tied to both engagement and the adoption of platform technologies that are more flexible and fit new and innovative business models. And this is just a high level look at what leaders are doing. In our next blog, we’ll dive deeply into the ways in which insurance leaders are listening to customers. We’ll take a closer look at how they are now positioned further down the road to the future — ready to capture the coming wave of new customers with new products. And, we’ll uncover some surprising trends regarding customer’s levels of interest in new sources of insurance. Plus, we’ll share insights and evidence regarding just how quickly insurance’s era of opportunity is now unfolding.
Is your organization an insurance leader or would it like to become one? Majesco is ready to help you capture the era of opportunity with cloud-based platform technologies like Digital 1st PlatformTM, P&C Core and L&A Core and ready-to-use insurance apps available through our Digital1st EngagementTM and Digital1st EcoExchangeTM insurance platform solutions. For more information on how insurers are positioning for growth, be sure to download The Future of Insurance: Future Leaders Setting the Bar in Meeting New Customer Demands and Products in a Multi-Channel World.
[i] Porter, Michael E. and Nitin Nohria, How CEOs Manage Time, hbr.org, July-August 2018
[ii] Ratanjee, Vibhas and Anson Vuong, Cultivate a Customer-Centric Culture Through Executive Leadership, Gallup Workplace blog, May 31, 2019