Digital marketeers must find these the most exciting of times to be working in insurance. Combine the amount of actionable data available with the potential of various forms of AI and the future must seem limitless.
Except, of course, achieving that future will involve hard work and tough choices, around what technologies to deploy, the structuring of distribution channels, and what human resources are needed. All very normal for an evolving sector, you may think.
Yet it is incomplete. There may be lots of talk about restructuring and disruption, but there is far from enough talk about the impact all this could have on the relationship consumers expect to have with insurers.
Such talk is needed because many digital strategies will at best disrupt those relationships, at worst put them under significant stress. That stress comes from a crucial tension that the big trends in digital marketing will build within what an insurer does. To move to what some might call the ‘next level’ in insurance marketing, that tension needs to be addressed.
A Next Level
Any insurer that invests a lot of money in data and analytics will want to use it to refine their target markets and deliver the right product to them at the right time. In this way, different segments will be delivering various levels of volume and returns. Alongside this, people perceived to be more than likely to submit a claim, or be expensive to service, will be targeted as ones to avoid. It’s in all these dimensions of granularity that that data and analytics will generate its promised returns.
Another part of this ‘next level’ is using segmentation to exploit life event targeting, so boosting cross and up-selling opportunities. And a further trend to be supported is the move of insurance from being risk transfer orientated to being centred around the delivery of loss prevention services. Let’s dig into each in turn.
Targeting Opportunities
Cross and up-selling opportunities could take months or years to emerge in a form ripe for targeting. You need to keep that relationship more than strong in order for such opportunities to reap results. Yet timewise, granularised pricing pulls in the opposite direction, with its ‘always on’ rating of life events that increase or decrease risk, or move you out of the target market altogether.
It feels like insurance will end up seeking more time and flexibility on the one hand, and relying on less time and flexibility on the other hand. The tension that seems to be inherent in this will hugely complicate customer relationships, sending out diverse signals about what the insurer is prepared to put into that relationship, and what it wants from the customer in return.
Loss Prevention
Something similar happens with the move of insurance from being risk transfer orientated to being centred around the delivery of loss prevention services. Such services rely on building long term relationships in order to avoid turning into just one-off sales. And those relationships need to be full of trust, for what is being prevented is the loss of valuable assets like one’s home. Yet recall what I said earlier: “granularised pricing pulls in the opposite time direction, with its ‘always on’ rating of life events that increased or decreased risk, or move you out of the target market altogether.”
A Time Frame Tension
What we have emerging then is what might be called a time frame tension, between short term on the pricing side and long term on the selling and servicing side. Are insurers wanting ‘to have their cake and eat it’?
What this seems to return us to is that perennial question for marketeers : what sort of relationship do we want with our customers? Around the relationship you choose should be build arrays of signals to both uphold the promises inherent in it and open up sales opportunities. If the former isn’t done right (and that is the risk here for insurers), then the latter becomes monstrously more difficult.
This takes us to a key point for this digital era of marketing. Is it to be orientated around the technology, or is it to be orientated around the relationship? Up to now, it has looked very much like the former, with the latter feeling like it’s in a secondary facilitating role. Looking ahead at the direction insurance is going, that time frame tension I outlined above makes it less clear which will take precedence.
Underwriting is King
The culture of insurance has always been that underwriting takes precedence over marketing. And however digital insurance becomes, I can’t see this radically changing. What seems to emerge then is a sector going firmly down the path of ever more granular pricing and product, but which will then find it difficult to build long term relationships of trust with its customers. In other words, the type of relationship needed to cross and up-sell, be it other products or loss prevention services.
I’ve experience of both cross and up-selling insurance products and loss prevention services. Neither is easy. I fear that that time frame tension will make them well nigh impossible for many insurers to deliver to the extent they hope to.
