It’s no secret that the insurance industry has been slow to respond to a marketplace that’s driven by data, mobile, and the rapid adoption of new technologies.

Acknowledging these challenges is one thing, infrastructure overhaul another. A huge barrier to change for many insurance companies is that they simply don’t have the processes, systems, or thinking in place to evolve with their customer and the marketplace. Claims processing, for example, is a drain on resources and customer satisfaction. Pricing is called out for its opaque and confusing nature. Customers often feel like they are overcharged and undervalued.

Innovation teams within large organizations seek to disrupt, but often find themselves pushing water up a hill.

Still, change is afoot …

Big Data and the Internet of Things

As busy as were are, automation, efficiency, and utility drive our lives, at work and at home. We grow increasingly interested in and dependent on technology to not only help us manage our lives, but also give us a deeper sense of ourselves and the spaces we live in.

As data becomes more readily available and people become more comfortable sharing it, insurance providers have a great opportunity on their hands.

There is an incredible opportunity for insurers to tap into this rich dataset, giving them a deeper, more nuanced understanding of their customer. This understanding can then be translated into better services at a lower risk to the insurer and a lower cost to the customer. Everyone wins.

Smart insurers are already implementing such programs. John Hancock (Manulife), for example, launched Vitality in May, 2015 which is currently seen as a best-in-class example of how insurance companies can incentivize customers to share their data. The program is the first of its kind, essentially gamifying life and rewarding customers for making healthy choices such as being active, staying tobacco-free, and getting annual exams. Upon signup, customers receive a free Fitbit and consent to sharing data in exchange for Vitality Points, which can be redeemed for retail, travel, and entertainment rewards. This is a major departure from traditional “rewards” that insurance companies usually offer in the form of policy discounts, which may incentivize some but are, frankly, not that fun. In this way, John Hancock not only gets a closer look at their customers’ data, but they also form a closer relationship with their customers.

Other insurers are taking this more traditional approach, but leveraging new technologies to do so. For example:

  • Liberty Mutual has a Smart Home Verified discount program, which offers discounts to those homeowners who share their data from devices like Nest.
  • Progressive, State Farm, Allstate, Des Jardins (among others) all offer discounts to those drivers willing to install a tracking device in their cars (either via hardware or app).

But Millennials Don’t Buy Insurance

Millennials are proving to be a tricky group to sell insurance to. To be fair, they’re buying less of the things that would require them to do so, such as cars and houses (and if they are buying them, then it’s on a decidedly later schedule). It’s widely acknowledged, however, that insurers are doing a bad job of communicating with them, relying on strategies that sold well to their Boomer parents, but don’t connect to this younger tech-obsessed generation. Having grown up digital natives, Millennials have incredibly high expectations when it comes to speed and quality of service transactions. They want to automate as much as possible with apps that let them see their policies and submit mobile claims. They prefer a text to a phone call and, increasingly, even email. They value transparency and simplicity, i.e., the price advertised is the price paid and the terms are clearly understood. They want what they want, and they want it now. Those companies who can successfully tap into these feelings and values will find themselves rewarded with Millennials’ business and loyalty.

To the Future, and Beyond

To win in this market, insurance companies must not only embrace change and innovation, but also champion it. They must become consumer-focussed, happily tossing aside jargon and opacity. They must become lean and focused. Only then can the industry move forward and into the future.