Sunday, 1 May 2016

Selling Life Insurance In The Digital Age

One industry in dire need for an overhaul is the life insurance industry. With all the disruptions in the banking sector propelled by the fintech companies, consumers are going to demand a change in the entire process - from purchase, underwriting to claim settlement. With increase in young insurable population and their higher awareness about the need for protection and pension planning, insurance companies which adopt to the needs of the millennials will do better than the others who choose to stick by their legacy systems.

Currently all 24 life insurance companies in India offer online purchase option for their insurance products but none of them have adopted a digital mindset. Learnings from the success of the new age banks and banking products indicate that a true digital mindset offers new age products, services and solutions which are not available/ cannot be offered in the offline world. Simple hybrid models is not the answer for the future world.

To adapt to the future world, companies need to focus on 2 key aspects which form the backbone of this industry.

1. Customer Experience 
Currently fraught with mistrust and opacity, the customer experience across the purchase journey is an anxiety ridden one.  Any company that manages to completely re-look at the existing process with a clear focus on customer delight will win the day. P2P life insurance start up, New York based Lemonade have started on the journey to revolutionise customer experience by basing their processes on behaviourial science. They are betting big on it to help them improve their underwriting and overall claim response and processing time to improve their policy holders' satisfaction level. To adapt to the new age, life insurance offerings and processes need to have a focus on transparency, agility and most importantly, intuitiveness built into their mindset which will automatically reflect in the way they do business.

2. Personalised Underwriting
With mountains of data easily available, companies which offer personalised underwriting (differentiated pricing depending on an individual's lifestyle) to the millennials will definitely win at the end of the day. This generation will be happy provide access to their personal data if they stand to benefit from it. By partnering wearable devices, companies will no longer have to rely on static data provided at a point in time but can continue to monitor their customers' behaviour overtime to provide a risk cover which is a win win for all parties concerned. Motor insurance companies in the US have already started adopting technology for underwriting. Once customers experience personalised underwriting process from general insurance companies, they will demand the same from their life insurance providers.

I can't help but wonder, in 2020 and beyond, will life insurance companies face competition from e-commerce companies such as Amazon and social media giants such as Facebook who are proficient in data mining and even more proficient in analysing what customers want and providing them with a solution which is not only convenient but also fast. Look what Uber did to the public transportation system!

I believe that adapting a digital mindset for the life insurance industry is far trickier than other industries. The industry not only needs to re-look at their business model but also their age old belief system that insurance is not bought but sold. The one thing that Millennials dislike the most is being sold to. They prefer to buy what they want, when they want and at a price they want it at.  

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