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Insurance providers need to transform themselves from product shops to life partners

12 June 2019 Indranil Bandyopadhyay; Head of Business IT Enablement: Nedbank Insurance

As a highly commoditised industry, insurance companies have typically been required to compete primarily on price. This has been a direct, and understandable consequence of the fact that insurance cover has always been, and still largely is, seen as a grudge purchase by consumers. The perception is largely a result of the industry's own lack of proactivity in terms of finding ways of adding value to the lives of policyholders. So, instead of being considered an invaluable component of an individual's or company's financial planning, insurance is viewed exclusively as a cost that 'has to be incurred just in case something bad happens.'

Obviously this is not a particularly sustainable business model, as today's insurance providers are rapidly finding out. But the realisation also begs the question: What must insurance companies do if they want to be seen to add real value to the lives of their clients? Many insurers believe that the answer to that questions lies in loyalty programmes and premium payback schemes. However, while these initiatives are undoubtedly appealing to consumers, their perceived value is not really sufficient to transform perceptions of insurance as a grudge purchase. This may be a result of the general recognition that these short-term value adds are not free, and most consumers believe, not always incorrectly, that they are in fact paying for the benefits they are being offered.

For this reason, we at Nedbank Insurance believe that the only way insurance providers will ultimately change public perceptions of their businesses and offerings is to very deliberately integrate themselves into the daily lives of the clients they serve. By this I mean that insurers need to find ways of predicting and pre-empting the ongoing needs of consumers, not just in terms of their life or short-term insurance, but across the full spectrum of their daily activities and decisions.

Of course, these types of lifestyle enabling services or solutions are not usually the core focus or area of expertise of most insurers, so achieving this top-of-mind position as an enabler and protector of people lifestyles will require that insurance companies break down the silos that many of them have built around their businesses and partner with businesses that have the expertise to help them deliver the value they must in consumers' lives.

While the shift in perceptions may take some time to occur, particularly as the industry has to overcome a significant legacy of negative feelings amongst customers, it is vital for the survival of the insurance industry that its participants begin to drive that shift. There are a number of ways in which insurers can begin to do that. The first, as already mentioned, is by being willing to enter into partnerships with businesses and service providers that have the expertise to be involved in consumers' daily lives and decisions, and to then find innovative ways of enhancing the value that these organisations deliver. For most insurers, this is a relatively easy step change to make, since they already have relationships with a broad cross section of service providers. The key now is to change the role these service providers play in the lives of insurance customers from reactive, to proactive.

The second move insurers need to make is to begin taking the customisation of insurance solutions far more seriously than has been the case to date. Given that every person, family and business is unique, there is simply no way that an insurer can get away with trying to offer off-the-shelf policies anymore. While most insurers claim to customise their solutions, the truth is that a standard policy has little scope for true flexibility and customisation per client. We need to move into an era of ‘hypercustomisation’, where individual, comprehensive needs analysis is standard practice and getting a full and detailed view of the customers' entire life allows the insurer to develop a bespoke solution that is as unique as the person it is created for.

A decade ago, this would have been an impossible ask. But today, the stellar advances in technology have made it a possibility. In fact, as consumers come to understand the full power of disruptive technologies like artificial intelligence (AI), robotics, Internet of Things (IoT) and machine learning, they are fast coming to expect customised solutions that add value to their lives as the entry level of delivery on their insurance needs. Now the onus is on insurers to leverage these technologies to create a value-adding, customer-centric ecosystem, rather than merely using them to streamline internal processes or offer customers basic automated query responses.

Nedbank Insurance's Celent award-winning single policy administration platform is an example of our concerted efforts to move our value proposition towards this effective application of technology to add real value to our clients. As a point of departure, the platform delivers on the various life and short-term insurance needs of clients under a single insurance umbrella. This not only will allow our clients to customise their insurance solution according to their unique and very specific needs, it also allows us to build a unified and comprehensive picture of our clients that enables us to be far more proactive in delivering digital solutions, backed by effective data analytics and delivered via a single policy system.

The difficult truth is that, insurance is little more than a 'sidebar' to the story of most people's daily lives. When they buy a house, or a car, or have a baby, they add insurance cover. If they aren't required to grudgingly acquire cover upfront, this addition of insurance is typically an afterthought.

For insurers to fundamentally change this paradigm, we need to position ourselves at the forefront of these day-to-day decisions and events. In fact, we need to be able to help our existing or prospective insurance clients make the decisions or take the purchase actions they need to. This really is the only way insurers will succeed in going from mere providers of products, to being solution delivery partners. And that will enable them to tangibly demonstrate the value that they offer in terms of protecting the assets and lives of the people they serve. There is no other, or better, way than that to transform insurance from an unwelcome 'push' product to the value-adding life essential it rightfully should be.

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