Change is coming to the world of insurance. Learning that lesson requires looking at the products and services that thrived during the pandemic.
If the world wasn’t digital-first before 2020, it is now. Consumers embraced technology solutions to solve everyday problems while confined to their homes. Need to connect with co-workers? We have Zoom. Hungry? Grubhub and Doordash to the rescue. Bored? Netflix, Amazon, Hulu, and a host of other streaming services have you covered.
These companies were born in digital and were able to shift quickly to meet consumer needs. They created new products and updated solutions quickly when problems arose or consumers complained.
While some consumers were already bought into digital products and the speed at which they change, the pandemic pushed nearly all customers into that mindset. Now, consumers expect that level of service from every business they engage with.
That includes the insurance industry. Consumer expectations are that their insurance providers will have what they need and want when they need and want it. In fact, a 2021 World Insurance Report found that 40% of insurance executives reported the pandemic had an impact on their customer retention.
That same report noted that 87% of those surveyed said they planned to invest in digital solutions. At the same time, only 32% felt digital channels were effective in securing sales.
Where is the disconnect? It comes, primarily, from the way insurance providers view their offerings. Do they seem themselves as technology companies that specialize in insurance, or insurance companies that invest in technology? Retention and relevancy in the insurance industry mean embracing the disrupting factor that is leaving these companies behind. That factor is a product mentality.
What Is a Product Mentality for Insurance Providers?
The first, and arguably easiest step, is defining a product as something that your company offers that helps your customers achieve their goals.
While that definition alone may not seem earth-shattering, it is a significantly different angle of approach for established insurers. Typically, these companies start the process by understanding risk and then creating customer solutions from there.
When your focus is on thinking of a product that helps customers achieve goals, that angle shifts. Instead, you’re now solving a customer problem, and the risk evaluation of how to offer that solution is part of the product creation process, not the other way around.
It’s a framing that helps clarify what the difference is between how insurance offerings are normally ideated and built, and how a new customer-centric product approach changes all of that.
The Value of a Product Mentality for Insurers
There isn’t much point in discussing how to make the shift to a product mindset unless you first understand what the benefits for your insurance organization are. And they are substantial.
1. Risk Reduction
The switch to a product mentality means adopting some new ways of thinking and planning how you develop your offerings, as we saw above. This includes a move to a more agile approach — one that gets products and services out to the market quickly.
In turn, this strategy puts the product in the hands of the consumer faster, and rapidly provides an understanding of the reception of the new product and lays the path forward for new product features based on consumer need. Instead of finding out you’ve spent years creating a product no one wants, you can quickly discover the value of the product for the customer and what they need next.
2. Faster User Adoption & Customer Satisfaction
Putting the customer’s needs front and center means solving real problems for consumers faster. Combining speed to market with products that solve the customer’s problems helps insurers realize ROI sooner. Consumers will start using these products before years of planning and development have been invested, shortening the time from product creation to business value. Plus, with the customer the focus of product creation, you’ll be addressing what consumers really want, increasing their satisfaction.
3. Potential for New Opportunities
While technology is an enabler of products and not the focus, the changes to an insurer’s approach to tech can also create new business opportunities. For instance, rapid development, reuse, and continuous improvement are all supported by things like an API-first approach. At the same time, insurers have massive amounts of data available at their fingertips. Combined, these two elements create opportunities for API products used by partners to better understand customers that can be monetized in a multitude of different ways.
Not to put too fine a point on it, but the reality is that insurance companies that don’t follow the lead of disruptive digital-first companies, like Lemonade and Acorns, will be left behind as loyal customers age out of the major consumer base.
Intentionally Shifting to a Product Mindset
Obviously, this is a major shift in how insurance companies should approach their offerings. Working with large insurers who are making these changes, we know that this is a change that comes from both the top down but the bottom up. The executive team needs to be in alignment, and the individual business units do too.
Moving to a product-first mindset requires speed and agility, but doesn’t start with technology. Instead, technology is an enabler of products and processes — not the other way around.
Insurance companies need to approach a focus on products intentionally, through three important steps.
1. Understand the Need for Change
Digging into the need for a product mindset gives the grounding for the institutional changes that are required to make it happen. According to a Capco survey, 66% of respondents say that they would use technology that gave them better visibility to their financial products and personalized insights and were willing to trade personal information to get those insights. As consumer mindsets shift, the industry should adapt accordingly.
2. Foster a Desire for Change at All Levels
Again, the shift to a product mentality must permeate all levels of the organization. This means initial buy-in from the executive team, who will have to champion the culture shift required to be successful. The C-suite must start to think of the business as a digital product company that offers insurance rather than an insurance company that builds software.
3. Conduct a Self-Assessment & Evaluation
It should be clear at this point that the move to a product-first approach doesn’t start with technology. But, for technology to serve its role in enabling the development of new products, the company must first understand where it’s at from an organizational and IT perspective. What needs to change to become more agile? How can processes be altered or re-invented to embrace the idea of continuous improvement and continuously evolving strategy? And how can IT support those changes? What do they need to make this shift a reality?
Change is How Insurers Get to a Product Mentality
Consumers have wholeheartedly embraced what digital-first companies provide. To compete, insurance companies need to adopt a product-focused mindset. Adopting a product mentality is less of a shift, however, than an evolution.
To stay competitive, customer-centricity must be the driver. For established insurers, that requires change — change in culture, change in operations, and change in how development is approached. Technology is a supporter of this evolution, not the basis for it. But the benefits — from risk reduction to potential new revenue streams — are significant.
At DMI, we fully believe that modern businesses need to welcome the concept of change by incorporating continuous strategy. Continuous strategy means redefining what done means for a business and iteratively reassessing products and services for value, then using flexible, scalable technology solutions to support continuous improvement.
If you’re ready to evolve your insurance business into a product-centric organization, contact DMI. We can help you with the big picture and plot the digital transformation path that will get you there.