Predicting the future with certainty is impossible – we don’t have a crystal ball. However, we can observe trends outside the insurance industry to see how various sectors are evolving their customer interactions and service models, driven by competition and new market entrants.
One significant reference point is the retail sector, which has implemented numerous changes over the last decade to retain market share and increase customer satisfaction. Successful companies like Amazon, Vinted, and AliExpress have thrived, while others like Debenhams and HMV have struggled. These outcomes highlight how well—or poorly—these organisations have capitalised on market opportunities.
So why is the focus on retail crucial for insurance companies?
Smart insurers recognise the need to think more like retailers if they want to stay relevant, capitalise on opportunities to compete, and offer differentiated customer service. Many advisors predict that personal lines and some commercial segments will shift from a “cover and settle” model to a “predict and protect” environment. This shift necessitates a transformation in how companies collect and use data and how they interact with their customers to provide added value beyond traditional claims methods.
“Back in 1999, an organisation we worked with employed a futurologist. Despite his unconventional methods of drifting around the office in shorts and a t-shirt, holding meetings on space hoppers, and providing all staff with jelly beans, he accurately predicted several innovations.
This included mobile wallets, smart screen technology, digital assistants like Alexa and Siri, machine-to-machine communication, and voice-controlled streaming audio services. However, despite rapid technological advancements, the insurance segment has remained largely unchanged. The rise of comparison sites and sophisticated online services hasn’t fundamentally altered customer dynamics, which still revolve around renewals and claims.” Mark Boulton, Dufrain Insurance Specialist
Imagine a future where your travel insurance company notifies you of flight delays, provides a £50 food token if your flight is cancelled, and books a hotel for you—all without you having to spend money and reclaim it later. Where commuters receive real-time updates on roadblocks, and vehicles automatically book themselves for service and notify breakdown services of their location. In case of an accident, emergency services are dispatched to the vehicle’s precise location. At home, you might receive alerts about potential leaks and remotely allow a plumber access through a smart lock.
While this may seem like a distant dream, it is possible today. The key lies in data availability, understanding risks and individuals at a granular level, and securely sharing that data with other service providers. Some may argue that sharing personal data infringes on privacy, but surveys consistently show that most people are willing to share their data if it results in better services or reduced costs.
In the past year, insurance premiums have surged due to inflation, poor home underwriting results, and increased costs for vehicle parts and repairs. Yet, companies like Aviva reported a 9% increase in operating profit in 2023, with rising sales, reduced costs, and strong financial performance. Similarly, Zurich Insurance Group posted a record operating profit of $7.4 billion, exceeding expectations.
While some personal lines-only businesses haven’t seen similar results, the future of insurance will depend on market pressures and competition from disruptors. For now, it’s business as usual, but the industry must prepare for a future driven by data and enhanced customer experiences.
Contact us today to learn more about what our insurance team is learning and sharing with our clients or view our recent work with Howden Group Holdings.