How the insurance industry changes - Part 2

Customer Emancipation & the Need for Personalization (Hyper-Personalization)

Even if traditional sales and distribution channels are still valid and working for most insurers today, it is only a matter of time when the new generation of customers (e.g., Gen Z) will determine where and how insurance coverage must be sold in the future to them. The new concept of Hyper-Personalization puts the customer’s demand for individual and unique recognition in focus. Customers see themselves as special and unique. They ask for receiving personalized attention as well as customized offerings that are adapted to their specific needs. Consequently, insurers must adjust their targeting strategy to optimize their investments in sales and service activities. Furthermore, it also requires rethinking how we view customers in an ecosystem. Customers never “belong” to a single organization but rather to the entire network. By leveraging ecosystems, insurers can compensate for a lack of direct customer touchpoints and gain data to understand and address needs more effectively. Being able to exploit and use Big Data in conjunction with Generative Artificial Intelligence (AI) capabilities is paramount to maintain attractiveness for customers and to optimize operational efficiency.

Usage-Based Insurance (UBI) coverage is one expression of fulfilling customer demand and need differently. Based on consumption and real-time pricing and payment, insurances can for instance work like a parking meter. One example could be drone insurance – i.e., liability insurance for flying a drone, which in many countries is mandatory for devices of a certain size. The coverage is only needed if the drone is in usage. Consequently, the user could subscribe to liability based on a predefined period. The premium in this example could be calculated per minute and subsequently settled and collected.

There is and still will be a market and a demand to sell insurance coverage with direct customer contact, including the aim to establish a long-term relationship. Customer intimacy and consultancy are of high importance here. This type of business is going to be more focused on products that are more complex and need proper explanation and guidance like health/life insurance or richer P&C coverages. It comes along with the most recent discussions about new compensation models, where sales commissions are going to be replaced by consultancy fees for intermediaries.