New rules for customer engagement in the insurance space
THE social ecologist Peter Drucker once famously said that culture eats strategy for breakfast. If you look at the crux of that statement, you'll see that seemingly simple human motivations, desires and behaviour - if not properly understood - can be a powerful force in undermining even the best-laid business plans.
As the life insurance industry innovates, we face this tension. We know that customer expectations and behaviours have already shifted in such a manner that there is no longer loyalty for "transactional" brands.
Compounding this conundrum is the very nature of insurance itself. In order to process a quote, customers face lengthy questionnaires or invasive and time-consuming medical exams. Premiums are priced on the assumption that all individuals within a group will continue to live their lives in the same fashion.
After signing up for insurance, there is an absence of positive or meaningful interactions between insurers and customers unless there is a new sales opportunity or a need to file a claim.
How can the insurance industry rewrite the rules of consumer engagement in a way that addresses these fundamental gaps?
A recent independent consumer study, commissioned by SCOR Global Life/ReMark, explored this topic through 8,000 insurance customers in 14 key life markets, including five in the Asia-Pacific.
The insights show a high consumer-trust deficit and a lack of shared values in the underwriting process in the Asia-Pacific. Overall, life insurance consumers are suspicious of sharing their personal health data. Consumers in Japan (56 per cent), Malaysia (43 per cent), and China (39 per cent) reported the most reluctance to share.
Underwriting requires 100 per cent participation. Generally, insurers seek eight categories of health information, ranging from smoking habits to personal or family medical history. In this region, respondents on average said that they would be willing to share about only four out of the eight types of information.
A total 41 per cent of consumers indicated that they were uncomfortable sharing data across the typical channels (such as online questionnaires, face-to-face with an advisor, over the phone with an insurer or with a nurse). The fact that a significant number of people are uncomfortable sharing personal health information in the underwriting process presents an industry-wide challenge.
At least some consumers see no upside to sharing personal data. In other words, revealing more information about yourself can only have a negative effect - your premium will go up or you may face exclusions - with no commensurate reward for a healthy lifestyle.
LIFESTYLE CHANGES
Bear in mind, a "reward" or incentive need not only be financial. In fact, the strong desire among consumers in pursuing positive lifestyle changes is also a powerful lever.
The survey found that nearly half of millennials (45 per cent) and Gen Xers (42 per cent) in the Asia-Pacific are currently members of wellness programmes.
Further, wearables penetration in these markets is high. For example, nearly half the respondents in China own wearables. Of those who do, there is a strong link between wearables and healthier living aspirations. In the Asia-Pacific, 71 per cent of consumers who own wearables say that they believe their device will help improve their lifestyle and 55 per cent said their device can alter their behaviour.
Interestingly, while there may be high distrust for sharing health data directly, consumers indicated that they are willing to receive a wearable device from their insurer. In fact, half of wearable non-owners in the Asia-Pacific said they would welcome it.
Overall, there is an opportunity for insurers to consider incorporating a wearables-based approach to transforming the existing underwriting process, promoting active lifestyles and introducing lifespan protection offerings. In fact, the need for insurers to integrate life and health services is not only feasible, but inevitable.
DYNAMIC UNDERWRITING
Being a partner in daily health decision making means thinking about solutions like dynamic underwriting, an approach which leverages wearable data to remove some of the biggest pain points on the customer's end. Such data can also activate bespoke wellness programmes and personalised premium pricing for an individual based on "biological age model" (BAM), rather than merely chronological age, which is a traditional "one size fits all" approach.
This type of approach uses wearable devices to assess the biological age of individuals, and to price the premiums accordingly. Combined with a wellness platform, this innovation facilitates continuous positive engagement between the insurers and their customers. The objective is to motivate consumers through customised, individual information to live a healthier lifestyle based on the data they provide. In short, this is a game-changer for our industry, and with leading insurance companies starting to adopt biological age modelling, the trend is set to grow.
Innovation without customer-centricity can feel dehumanising. As our business leaders begin to think about how to respond to external changes in the digital space, big data, advanced analytics and medical advancements, it is important not to overlook the new rules of consumer engagement that will govern this space:
Innovating with a human-first approach can ensure that at the end of the day, both insurer and consumer are driving towards the same shared goal - better health.
