Insurance as we know it is about to go from 0 to 60 in record time. ADAPT or be left at the starting line.
I want you to think back to the first time you ever heard the word “insurance.” Is there a memory that comes to mind? For me it’s vague, but I do remember a gray-haired, older gentlemen sitting at our kitchen table trying to sell my parents some kind of expensive thing called a Whole Life Insurance policy. I had no concept of what it was. Come to think of it, I am pretty sure my parents had no clue what it was either. I just remember this gentlemen saying “It’s a good investment. Everyone should have it. By the way, I also sell auto insurance. Tell all your friends.” He left them with a stack of literature that seemed nothing more than mumbo-jumbo and looked very foreign. He told them he would stop by or call them later that week to see if they were interested or had questions. He was the classic encyclopedia/vacuum cleaner salesman that used to go door-to-door, but many of you are probably too young to remember that!
Anyway, fast forward about fifteen years. The subject in the story is now you, buying your first auto insurance policy. You may have asked your parents for a recommendation, their agents name perhaps, or maybe you looked in the yellow pages. Ultimately, you probably ended up in an agent’s office. However, if you were lucky enough, like me, you were on the front-end of when companies like Progressive Insurance introduced a partial Direct-to-Consumer quoting experience. For those of you that are not familiar with that experience, Direct-to-Consumer enabled you to key in your info and get a quote online. If you liked the rate, you could purchase from an agent. You might have even received some follow-up communication with your quote in this thing called an “email.” Ok, now I am showing my age a little bit.
Now let’s move forward another twenty years. You are now in your late 40s. You have three children: one fresh out of college, one in college, and one in high school. Your oldest child graduated college and purchased her first auto insurance policy last year. You breathed a sigh of relief when you received your renewal bill and your premium dropped significantly. But think for a moment about her purchase experience compared to the purchase experience you had twenty years ago. She never once had to interact with an Agent in-person. She did all her quoting on-line and even made her purchase on-line. She used social media to reach out to her circle and ask for recommendations on carriers. She researched, quoted, and used on-line tools to determine how much coverage she needed. The communication she received was all-digital, from retargeting on Facebook, to submitting payments on-line, and signing up for communication channel preferences. What a truly different experience. Feels like the norm right? It should, as it’s the world we are most familiar with today.
It’s now present day. Your youngest is at college. She tells you that she has to come home for the weekend to pick up some things she forgot. So she rents a Zipcar (on-demand car service). For her it works, and it’s a cost effective solution. She has no monthly car payment, they provide the gas, and what’s best is that they cover her insurance while she is driving the vehicle. The service is all on-demand and only when she needs it. Pretty cool: no monthly car payment, no monthly insurance payment, and she has access to the car whenever she needs it. Easy-peasy as some might say. At this rate and at this level of convenience, she questions if she will ever own a car or ever have a need to carry a full-blown auto insurance policy.
Now, let’s look five years into the future. Your youngest son has just earned his law degree. He decides to purchase his first vehicle. It’s Ford’s new driverless car. His insurance policy looks very different than the insurance policy you have today. Ford agrees to carry the insurance policy on all the driverless features should he have an accident. Your son carries a very small supplemental policy called a Sup-Auto policy. This is a supplemental policy that would cover claims that result from in-climate weather or claims that were a result of him taking over the wheel. This is a policy that he is able to purchase directly from GM who in turn has partnered with a carrier. The best part is that his supplemental policy is a fraction of the cost of your policy.
Now think back for a moment on the progression of changes in our industry that I just described, the speed of these changes, and the profound impact it IS GOING TO HAVE ON YOUR BOTTOM LINE. I use all caps because this is going to happen, and in fact already IS happening. The role of Agents and Carriers are changing. New distribution channels are emerging. Communication methods and channels are changing as a result of technology. And perhaps the most profound impact is that carrier revenue from premiums is shrinking.
Some carriers are beginning to prepare. They are looking at new strategies and creating new products such as sup auto, rideshare, and Vitality. Others are planning for a potential rebranding-type shift to being more of a data aggregator, providing recommendations to improve life. Some are looking at how to leverage all the new IoT technology to design reward programs, create discounts, and reduce their exposure to claims. However, some are simply choosing to ignore the changes, perhaps hoping they will just go away.
The truth is that change is here to stay, and in fact these changes are coming at an ever-quickening pace. Some are a serious business threat: if you don’t prepare, you could be irrelevant within a few years. We are seeing non-insurers already beginning to gobble up premiums that were once on the books of traditional carriers. And premiums that have yet to bet targeted may be at risk in the future. If you are not already planning for the future, you need to start today. Use data to begin to understand which customers might be at risk for churn: early technology adopters perhaps. Employ predictive analytics to fashion advantageous courses of action. Develop out channel strategies to place you in close proximity to your customers. Leverage social media as a means of developing stronger relationships between your agents/brand and your customers. But most of all, plan for shrinking premiums. Start planning today, as tomorrow may be too late. You don’t want to be left at the starting line.