How a pesky pandemic reshaped insurance
Covid-19 will catalyse an evolution of the insurance industry, creating more value for consumers
Words like ‘pivot’, ‘agility’ and ‘digital transformation’ have become so prevalent these past few months that they have started to lose their significance. Yet, it is true that Covid-19 has changed just about every facet of life as we know it – and for the financial services industry in particular, there will be profound, unnerving and exciting shifts in how we, as insurers, do business in future. Within the realm of insurance, sales have typically been conducted by members of a physical sales force, who sell financial products to individuals, usually through a face-to-face interaction. As we find ourselves accelerating into a digital world, insurance companies – which tend to move at the glacial pace of a three-legged tortoise – are clamouring to transfer their opera7ons online, while simultaneously expanding their digital service channels. While this has been met with varying degrees of success thus far, one thing has become abundantly clear: we can expect a rise in innovative, more agile financial solutions that are adapted to our new reality, delivered via a seamless online experience. The proverbial silver lining is that Covid-19 has given insurance a much-needed wake-up call, which is set to create far more value for consumers in the long run.
Less complexity, more flexibility
Insurance has traditionally been sold by intermediaries, in an interaction that sees them giving ad-vice to clients. It stands to reason that products have been tailored to accommodate the insights and needs of these intermediaries, resulting in solutions that are layered and complex to cater for high levels of advice personalisation. Intermediaries need this complexity to validate the value that their advice adds to the sale of a product – because, if consumers can access simple products and clearly understand all the fine print in what they’re buying, why would they need intermedia7on? While valuable in helping consumers navigate complex choices, advice does come at a cost, usually built into the product. While there is no disputing that clients need a level of guidance, affordability and value are just as important to cash-strapped consumers – and thus a gap has been created for simpler, more intuitive products, digital advice and online service channels. We need to leverage this new context to drive adoption of digital direct strategies, which will lower the cost base for consumers, while empowering them to make informed choices about their finances.
Consolidation to climb
Even before Covid-19 arrived on our shores, we saw a proliferation of financial solutions, driving an oversupply of commoditised funeral products, in particular. With consumers now experiencing a heightened awareness around illness and death, several new players have entered emerging mar-ket insurance, resulting in a growing number of clients who may be ‘over-exposed’ in terms of their funeral cover. With consumers under increased financial pressure, a consolidation of cover will free up pockets of income that consumers need to navigate tumultuous 7mes. We can also expect to see more emphasis on the consolidation of debt. As borrowing soars, consumers will find themselves facing steep debt servicing fees. Solutions that are designed to consolidate multiple loans will assist consumers in affordably meeting their financial commitments.
Partnering for expertise
This period of transition has given us an opportunity to scan for gaps within our eco-system that will allow us to offer more value to consumers, by partnering with those that are experts in their respective fields. Businesses can create a more holistic value proposition through leveraging the talents of selected partners, co-creating solutions that are tailor-made to the changing needs and preferences of clients.
Redefining how we perceive digital
Created by Dr Ruben Puentedura, the SAMR model is a framework that categorises progressive degrees of technology integration within the edtech field. SAMR refers to ‘substitution’, ‘augmentation’, ‘modification’ and ‘redefinition’, and while intended for the field of education, we can apply this same lens to our current context. You cannot simply ‘substitute’ or repurpose intermediated products and in-person client advice to digital channels, and expect a seamless iteration – these need to be redefined with the nuances of the channel in mind. For example, products could have more flexible features or different payout profiles. They could be priced differently, given that digital channels are more cost-efficient than those that are physical. Twenty-twenty has taught us that the future is far from predictable, and while one cannot anticipate with any degree of certainty the trajectory of an industry, Covid-19 has presented an opportunity for us to become more in-tune with our clients – and highly responsive to the changing land-scape around us.