Several studies from EY, PWC and most recently MunichRE stress how insurance carriers that can adopt new technologies will lead the innovation pack and secure a competitive industry advantage. If carriers can incorporate traits found in companies such as Amazon, Google or Apple, they will have a customer-centric organization that is efficient and can react to every customer event, action or selection.

Establishing a ‘Algorithmic Business’ Model

According to Peter Sondergaard, SVP at Gartner and Global Head of Research: “Algorithms define action and in today’s digital era, dynamic, digital algorithms are at the core of new customer interactions”

Amazon has built an algorithmic business’ model, enabling them to provide hyper-targeted member recommendations based on item based purchases. This technology generates 10% to 15% of incremental revenue for

If insurance carriers were to adopt an algorithmic business model, they would be able to individualize customer service and increase cross selling of products based on plan changes or products they’ve viewed. This algorithmic or predictive technology could also benefit carriers in several other ways:

  • Be Proactive: A member recently had a child, will they consider life insurance in the future?
  • Segmentation: Which customer segment would be most interested in a bundled product offering?
  • Tailored messaging: Which product messaging resonates most with a particular audience?

Leveraging Artificial Intelligence

Google uses a machine-learning artificial intelligence system called “RankBrain” to help sort through its search results.  According to Bloomberg, “Google’s decision to deploy AI into search shows that companies are starting to entrust their most valuable businesses to systems controlled in part by machine intelligence. Facebook Inc. uses AI techniques to filter the newsfeed that comprises the personalized homepage of the social network and Microsoft Corp. is using artificial intelligence to increase the capabilities of its Bing search engine.”

KPMG points to three areas that machine learning could address challenges facing the insurance industry:

  • Improving customer service: Review, analyze and gauge all interactions between customers and service center representatives or sales agents to improve the possibility of getting the right products to the right member.
  • Improving efficiency: With a large percentage of internal resources dedicated to manual tasks, any adoption to automation will positively impact operational costs. For example, machine learning can expedite claims processing time from months to several minutes.
  • Improving competitiveness: While both improved compliance and efficiency can provide a competitive edge, getting the right product to the right member and improving the overall customer experience will increase brand loyalty and drive the competitiveness of the organization.

Building a Trusted Brand

When thinking about customer lifetime value, Apple has successfully created an ecosystem of offline and online experiences that have been the benchmark for ensuring brand loyalty. “What other company has the public and the press waiting breathlessly for each new product release? The bottom line is whatever that new Apple product is, consumers trust that it will be smart and sleek and that it will improve the way they communicate, work or spend their leisure time. What’s more, they’ll enjoy the experience of making the purchase.”

Taking a page from the Apple playbook, here are a few ways that carriers can build a trusted and profitable brand:

  • Aesthetics: Focus on the details of your user experience, from font size to mobile optimization; it makes a difference.
  • Transparency: Provide members with a way to understand exactly what they are getting; keep statements and descriptions simple.
  • Insurance Literacy: Gain an understanding of the insurance literacy of your population so that you can provide information and content in a format that is appropriate and easy for them to understand.
  • Personalization: Develop communications based on personas and customer journeys.

While not every carrier will end up becoming the next Amazon, Google or Apple, they can certainly learn from these companies and potentially accelerate their own growth and customer success.

The study conducted by Munich RE can be found here.