Customer Experience

Voice from the Customer: They're Unhappy

Early in November 2021, immediately following the release of the SMA research report Crowdsourcing and Open Innovation: Powering the Sharing Economy, which explored the shared economy and its implications for insurance, I received an interesting email in the CEO of a shared shipping start-up. The CEO stated, “I just wanted to show you which i have discovered the hardest problem to resolve as the CEO is the fact that, after talking with 12 different insurance providers, I am still stuck on finding someone to write an insurance policy for me! I don't know you can overstate the tsunami of change that insurers are attempting to avoid. It's frustrating in my experience as a CEO trying to get my company going.”

My instant reaction was – exactly what a powerful voice, and just what an engaging, if troubling, customer statement! I immediately reached out to him to go over his predicament.

In our SMA research, we have discussed the way the shared economy is empowering individuals and businesses to gain access to specialized skills, resources, goods or services from anyone, anywhere, anytime based on a sudden need. The modification is spawning new business models and leveraging the mixture of crowdsourcing, open innovation and technology. These start up business models are challenging decades of business assumptions, models, pricing and growth which were in line with the principle of ownership, instead of access or subscription. Consequently, the fundamentals of insurance, from risk models to pricing, services and products, feel shockwaves. My discussion using the CEO about his business supplies a great but jolting example of the requirement for these start up business models, new risk models and (especially) new insurance products. He decided to perform a webinar to explain his needs and the frustrating experiences for our SMA Innovation Communities.

During the webinar, the CEO shared his experience and powerful insights for insurers:

It was easier to obtain $2 million for investment funding rather than find insurance. The funding would likely be completed within 30 days. Contrast that with finding insurance coverage: After talking to more than 20 insurers, brokers or agents, over nearly Twelve months, there is still no coverage. He found two companies, one of these works together with Peers (the non-profit company backed by shared economy companies), which are bringing insurance for this market segment. But he's still awaiting confirmation.

Outdated insurance business models don't fit the market today needs. That old models are based on historical actuarial models, rather than real, point-in-time data (i.e. coverage when driving and shipping something). The possible lack of visibility into capabilities of insurers and independent agents and the language barrier (the coverage needed is inland marine, which implies using a boat instead of land surface shipping) make it especially difficult to find exactly the right coverage.

Finding the right independent representative is “tricky” because of referral chains, lack of skill sets, unclear representations, and agent incentives. In seeking coverage, he was relayed through many in the industry that, “Insurance hasn't updated the company plan since the 1800s, so you won't find anything.”

What performs this mean for that insurance industry? Mildly put, listening to the voice of the customer should be a wake-up call. The lack of understanding and wherewithal to respond rapidly to new market needs opens the door to new competitors and also the potential loss of customers.

Just like many other industries which are being disrupted and transformed, insurance must reimagine its business models – in the mission to the customer towards the product, pricing, operational and revenue models. Historically, insurance has been concerning the change in the chance of a loss in one entity to a different in return for payment. In the current fast-paced, changing realm of emerging technologies, new business models and shifting industry boundaries, is the fact that focus limiting our opportunities? This experience with a “could-be” customer clearly suggests we are a minimum of limiting our future, otherwise risking it altogether.

Other industries (and companies) are noticeably redefining their visions and concentrate to compete within this new world. At the 2021 Electronic devices Show, the media noted that Ford CEO Mark Fields sees Ford as rethinking itself like a mobility company instead of being based on its legacy being an automotive company, and Ford is delivering several new services and experiences through the auto. Even Google's CEO, Larry Page, has acknowledged that it is vision statement – “To organize the earth's information making it universally accessible and useful” – is simply too narrow, as reported in a Nov. 13, 2021, Fortune magazine article, “Google’s Larry Page: The most ambitious CEO in the universe.” Page is creating a future by leveraging emerging technologies to reshape the company beyond the legacy like a internet search engine.

Yet the view that insurance vision and business models are shackled in decades or perhaps centuries of tradition is, unhappily, very real. This notion is reinforced in a Jan. 21, 2021, Forbes article titled “Insurance: $7 Trillion Goliath” that compares banking with insurance in accordance with change and innovation. The article notes that 15 years ago banking was a lumbering, vertically integrated giant that was largely untouched by the technology revolution. Today, however, there are a number of “Davids” like CoverHound, Lending Club and Square which are challenging traditional banking “Goliaths” with some digital “slingshots.” The article further observes that insurance has also remained largely untouched by the technology revolution, but that we're realizing the emergence of “Davids” who will challenge the traditional “Goliaths,” leveraging we've got the technology revolution to disrupt the traditional business assumptions and types of insurance.

Insurers must redefine their vision and reinvent their business design, with the new and emerging technologies, the growing quantity of real-time data, new market trends and far, a lot more. When they don't, they risk facing an interruption that'll be devastating, if this could have been transformational, creating new relevance in a rapidly changing world.

The reimagination of businesses in the context of today's world and tomorrow's potential already are defining and revealing future management and winners. Will insurance remain focused on risk transfer products? Or can we look more broadly toward offering products and services that provide much more, enhance the lives or businesses in our customers and meet the needs of a reimagined business design, like the shared economy?

The choices significant. Are you reimagining your company, considering the impossible as the new possible? Insurers need ingenuity and outside-in thinking to reimagine their business like a Next-Gen Insurer and ignite a vision of possibilities.

If not you, then someone else will. So dream the impossible and become a Next-Gen insurer