Top 4 Emerging Customer-Focused Insurance Business Models!

Top 4 Emerging Customer-Focused Insurance Business Models!

The insurance industry is evolving fast, and going by the experts’ predictions, almost one-third of the previous insurance models will be replaced soon. The reason being technology-based opportunities, and fierce competition, changing customer preferences are forcing insurers to look for greater business models to serve customers in an enhanced manner.

The behavior of customers has changed significantly due to COVID-19. Almost 59% of customers revealed they put customer experience at the top of the priority list when choosing a service provider.  So, this means that an intelligent customer-centric strategy is imperative for any business to survive in 2021.

The Changing Customer Mindset

There will be hardly any customer who would join hands with an insurer who treats him poorly. Insurers have realized that the impact that is left on a customer’s mind after interacting with the customer service center has a major role to play in persuading the customer to buy any product or service.

Healthy interaction is extremely important for the same, and this is the reason almost 88% of firms have started prioritizing customer experience in their contact and call centers. This clearly means a brand needs to invest in the same if it wishes to deliver a positive customer experience, with 62% of firms now ready to invest for meeting the changing customer needs.

The Customer-Centric Organization Challenges

Customers have become a lot selective when it comes to choosing their favorite brand. Earlier, winning brands were those that offered great service, treated customers with respect, and built long-term relationships. However, with the rise of Smartphone usage/social media, customers have got the opportunity to compare the products and services of a brand easily across various devices, resulting in a huge challenge for insurers.

As per the research, insurers are finding it hard to cope with this challenge of becoming a customer-centric firm, especially due to inefficient sharing of customer information within various insurance departments. Most of the firms have their products and services lined up way ahead of customer experience and now putting customer needs and expectations ahead of the same is a huge challenge in itself with respect to the new change.

4 New Customer-Centric Insurance Model Refinements  

1.P2P Insurance Model

There are times when unclaimed premiums lead to conflicts amongst policyholders and insurers since not every customer is interested in donating the amount to a charity.The Peer-to-Peer (P2P) insurance business model is the way out, eliminating premium settlement disputes. It is also preferred as an emerging business model for accessing low-cost insurance coverage as compared to other traditional insurances.

This insurance business model pools the customers who share a minimum of one relation- family, friends, or interest (clubs/ community), serving two-fold benefits:Each member knows about other members, claims initiated/processed, and funds available. So, regardless of the information pooled by the insurer, there exists a transparent association amongst peers.

Now, due to the fact that there is a social connection between members, there exists a zero fraudulent insurance claims processing For example, in the U.S.A, insurance frauds amount to almost $80 billion per year.

2.Social Good and Transparent Insurance Model

At present, artificial intelligence is being used extensively to enhance the knowledge and capabilities of insurers but not customers, leading to information asymmetry. Now, the question arises, for how long will customers be neglected for the same, and if not, what is the solution? Information transparency is one thing that insurers are fast-acting upon.

Of course, insurers share policy information with consumers but still, most of them rely heavily on agents for uncovering information shadows to arrive at the actual coverage price, terms, etc. So, here a lot depends upon the intentions and knowledge of the agents.

Insurers need to translate policy, including documents related to terms and conditions, into easily understood information that clearly states what is being covered and what is not, boosting transparency between insurers and customers.

For example, Lemonade (an American Insurtech for homeowners, renters, and pet health) adopted the transparent and instantaneous end-to-end insurance process. This made their customers more aware of their respective coverage/claims, adding to the customer experience simplicity at large.

Apart from this, Lemonade donates the premiums that are unclaimed to areas of social causes their customers care and feel about. From its beginning in 2015 till now, Lemonade has successfully sold more than 1.2 million policies through their AI bot (Maya) and in complete transparency!

Since about 46% of millennials wish to make a positive societal impact, Lemonade has collaborated with 92 charities and donated around $8,46,849 gathered from unclaimed premiums.

In a similar fashion, Hedvig, a Swedish InsurTech, has effectively given back 80% of the unclaimed insurance premiums to customer-chosen charities. This goodwill has put these brands in a better position in the eyes of new and existing customers.

3.B2B2C/API-Based Insurance Mode

Also referred to as an open-source platform solution, an API-based model helps connect processes and people with assets and technology infrastructure to manage user interactions.

In such a model, apart from usual distribution channels, customers can easily use 3rd party apps for buying/accessing insurance policies. Automation has a vital role in this type of insurance business model. Here, the API can be installed by any other customer-focused digital application without human/manual intervention.

For instance, in January 2018, Allianz stated that it would be offering its Allianz Business System (ABS) parts to other insurance firms for free. Interested firms can install the API (basically a software chunk for connecting 2 different apps) and proceed to sell Allianz insurance policies to their own customers.

Lemonade, after working on the transparent business model, has also expanded to this model type. In October 2017, the public API was launched by the company, permitting anyone to distribute Lemonade’s insurance policies through their apps/websites.

ShaiWininger, Co-founder, President & COO, Lemonade, explains, “It takes years to pull together the licenses, capital, and technology needed to offer insurance instantly through an app, which is why it’s almost nonexistent. Today’s API launch changes that. Anyone with a slight familiarity with coding can now include these capabilities in their app, in a matter of hours.”

4.Microinsurance Model

The biggest limiting factor for microinsurance’s success is nothing but distribution. For instance, in the U.S.A, almost 18% of the premium corresponds to the distribution cost, and this excludes advertising and marketing costs. For microinsurance, availability isn’t an issue!

The new microinsurance business model focuses on maximizing policy reach and distribution. Workflow automation solutions such as automated customer query resolution, document processing, etc., enhance the efficiency of microinsurance models:

Aggregator Model: Unlike traditional retailers, agents, and utility/mobile network operators, etc., there can be intermediaries for microinsurance policies’ distribution. The reason being they can easily provide access to a large consumer base and can even increase the same with free/premium coverages.

For instance, a European aggregator, Check24, collaborated with HDI insurance to develop AurumPROTECT, with exclusive availability through aggregators’ channels.                       

Utilizing alternative insurance sales force: In order to distribute microinsurance policies at the maximum level, banks have been one of the best options available for ages. But, when it comes to short-term policies, utilizing other products’ agents for offering insurance as an ancillary product can be a good option!

For instance, Ola, one of India’s leading cab aggregators, provides you with different travel-related microinsurance policies that are underwritten by Acko General Insurance.

Conclusion

Undoubtedly, becoming an insurance firm that is customer-focused will put you ahead of the competition at large since growth and scalability are directly related to customer experience now. The above-listed business models will surely help you transform from a “good” insurer to a “loved” one in the eyes of customers.

However, it is essential to focus completely on these models to leverage their potential and look for alternative options like opting for insurance agency services for managing time-consuming and repetitive tasks to save time, cost, as well as money.