One of the highly valued business assets for many companies is their very brand itself. Some brands can connote luxury, some can convey youthful enthusiasm and others can represent strength and durability. In a highly conservative industry such as insurance, which has historically been focused on making sure that it was possible to deliver on long-term promises, the brand strength conveyed by being in business for a period spanning generations has traditionally been a good thing. During times of transition, however, this can also become something of a liability. For example, as financial power is transferred generationally, the idea that “what worked for my parents won’t necessarily work for me” has the potential to become very real. This can be particularly true if the product and service offering that appeal to one generation are diametrically opposed to what another wants. A brand that tries to be all things to all people runs a real risk of landing in a marketing “no fly zone” where they fail to inspire anyone. Retailers and consumer goods manufacturers have realized this for years, but insurers have largely avoided this.
Recognizing that even the most iconic of traditional brands may have trouble gaining traction in new places, MassMutual’s experiment with Haven Life had been broadly discussed. The new brand is able to go to places the parent brand can’t … and can do so without creating an unexpected or undesirable blow-back if an experiment goes sideways. No “New Coke” here!
So the recent merger of Penn Mutual and Vantis is particularly interesting. Penn Mutual acquires an existing brand that is already going direct to consumer. As a division within PM, they can continue to do this under the umbrella of the bigger and strong mutual. Experimentation can take place freely without risk of brand damage and as time goes on some of the more successful ideas can, presumably, make their way more gradually into the parent company offerings.
As Millennials grow in influence and purchasing power it won’t be surprising to see more companies buy or create flanker brands that allow them to new opportunities and different business models concurrently. At one point, GM tried to save an iconic brand by touting it as “not your father’s Oldsmobile”. Of course the trouble was that it wasn’t clear who the brand was targeting but it was pretty clear that it managed to alienate both traditional and new buyers alike. The brand was one of the first to be relegated to history as the industry framed a new path forward. Stay tuned; this promises to be a very interesting ride.
A new auto insurer, Root, offers the chance to purchase a policy, file claims, and monitor driving behavior, all from a smartphone.
There are certainly plenty of traditional insurance elements to Root’s approach. Root files for approvals with regulators and is a licensed insurer, it still collects demographic information in addition to driving behavior (though the CEO hopes to change this over time), and its CEO comes from Century Insurance Group. Regulators in other states may ask for changes to Root’s approach, it remains to be seen what the actual claim experience is like, and investors may decide to back other investments, certainly. But it points to a few elements naysayers do not (or will not?) recognize:
- Capital, for now, is abundant
- Smartphones are considered good enough for capturing driver behavior
- There’s still plenty of runway for considering customer convenience and experience
- Underwriting is shifting to be based more on individuals and their behavior
Will Root knock out an Allstate or a State Farm overnight? Probably not. But Root and firms like it put additional pressure on insurers to make the processes of buying insurance and submitting claims less painful.
The use of drones by Travelers to survey damage from Hurricane Matthew is an excellent application of new technology to the insurance industry. It lowers risks for everyone in the process, it allows a more rapid response for policyholders, and–rather than technology replacing human jobs–it serves to bring new and old skills together and allow existing resources to be more effective at what they do. While the general media loves to talk about drones delivering tacos, this is the area where the tech will have true impact to people’s lives.
According to A.M. Best , the workers’ compensation industry is on track to continue its streak of profitability for the fifth year. The agency cites favorable frequency and reserve developments, premium growth, and the effects of implemented technology. However, rates are declining and favorable reserves may not last. In a highly-regulated industry such as workers’ compensation, investments in agent and customer portals; analytics, sensors, and wearables; claims administration systems; and core systems replacement are key to ensuring superior customer service and lasting profitability. For more details, see our recently published report.
As the DOL regulation deadline approaches for 2017, insurance CIOs continue to be concerned about their company’s approach and how to have their distribution compensation and other systems prepared in time. Some insurers will change their product offerings and distribution of offerings in preparation. The report from Ignite Retirement Research (as reported in Retirement Income Journal) outlines how Defined Contribution (DC) plan advisors are also planning to adjust product offerings to meet the regulation. The report’s finding is that 8% will reduce offerings of annuities, with over a quarter expecting index equity mutual funds to increase for DC plans, but it seems likely both numbers will rise as the deadline approaches. The general trend toward indexed annuities and mutual funds means less demand for annuities from DC plans, which will will have a disruptive effect on the market, adding more uncertainty for annuities providers and advisors and concerns for CIOs who need direction from them for system modifications.
The smaller employer market has many of the same issues and challenges that larger companies do but it can be a difficult market for suppliers to get traction is because of a lack of economies of scale and, at times, a lack of technical sophistication. Solutions which can work well in larger environments where there is potentially a greater dedication of staff on the employer side to functions such as human resources and benefits management, can struggle in a world where the employer-side of the equation is represented by individuals that may wear “many hats”. Technical issues can exacerbate the problem, requiring extra effort from the supplier side, subsequently depressing margins. Zenefits’ announcement this week of a suite of HR and payroll apps targeting this market represents a potentially interesting approach. Although the product, known as Z2, is not necessarily a completely new concept, the idea of creating a function specific “app store” that brings together diverse capabilities including payroll, absence management, performance management and expense management through a series of key partnerships could prove very attractive in this space. One particularly interesting element would be further extending the idea of a user experience that is both intuitive and easy to engage. While the target now is very clearly small business, it isn’t hard to imagine this going up market over time or helping to further redefine how benefits can be delivered to plan members in the future. The idea of an “app store” experience can also be extended in many different directions as both efficient for delivery and familiar to end users.
A recent piece from Wharton highlights the growing importance of carrier providing a “delightful experience” to the insured and/or the beneficiaries as well as acting as a trusted advisor throughout the customers’ lifetime, providing continuing value. Novarica has written about how millennials are not just interested in the price and risk transfer characteristics but in the lifetime value of the carrier and the experience the carrier provides. Millennials are much more likely to switch carriers if they have a poor experience. Analytics can help carrier gather metrics around how well carriers are doing and what they need to improve. In particular, on claims an intelligent process facilitate through analytics and workflow and differentiate claims between simple and complex, providing an optimized experience.
Rather than choosing to ignore the undeniable emergence of self-driving cars, Allianz had chosen to engage in this development by leveraging its resources, data analytics capabilities, and risk management skills. What better way to understand the future than to help create it. By understanding the capabilities and limitations of the software and having access to enormous driver data sources, Allianz will be well-positioned to define emerging risks, new products and their risk appetite.