Insurance: Selling Fear – Selling Hope!
Insurance business is probably one of the few businesses that has managed to successfully institutionalize the concept of selling fear; fear of a scary tomorrow. A business where consumers pay money upfront for a service or benefit that they may never need.
There probably lies the temptation of Financial Services companies to bundle insurance offerings with banking and investments, where unlike insurance, the focus is on selling “hope”; hope for a better tomorrow.
We are constantly bombarded with "negative" man-made or natural messages. Younger generations have grown up with the exposure to, and awareness of, "dooms-day scenarios". So much so that there is a certain resilience that has crept in. With the invulnerability syndrome growing ever stronger the fear of “impending disaster” starts diminishing. With the fear factor receding, what should the insurance industry do? How to cope with the societal level change which is less risk averse? How to sustain a business that relies on one single principal- selling fear?
The answer to this challenge may be rather simple. Some of the 1st adaptors among the insurance industry have already started on the journey to mitigate the risk. Several approaches are visible. They can be broadly classified in the following three categories:
- Lifestyle relevant granular insurance: Granular insurance offerings that the users can associate with on individual merit like phone, reading glasses, bike etc. as against bundled products which include several objects and risks that are not relevant.
- Support community participation: Empowering peer2peer & usage based support for sharing economy trends- eg. Offerings for people who share cars with family members, colleagues’ or friends. Another example could be enabling peer2peer claims management to empower the community to self-regulate.
- Service based approach: Participate in service offerings towards the consumers where the insurance component is part of the service rather the offer itself. Examples of this are already visible where insurance companies start car rentals, promote healthily living, safe driving etc.
The whole industry is re-contemplating its position in the society "encouraged" by technology and distribution disruptions. Changing life routines have led to the dissolution of traditional priorities and with new ones emerging, it might be a good idea to move away from the temptation of pre-bundling. Instead allow the consumers the power of making their own choices about what they want to buy (Granular Insurance), How they want to buy and use (Usage based insurance, Peer2Peer claims…) and how they want to engage (Service based approach).
Hope seems to come in smaller bites. Weening ourselves away from the habit of fear driven customer engagements is not impossible but needs paradigm shift on our industry’s approach towards customer engagement.
If you have any question or want deeper insights in the research findings, please feel free to reach out to me.
At DIA Munich 2018, Oct 17th and 18th, Tieto launches Insurance-in-a-Box [iiB] for Life and Pension (L&P) and extends the General Insurance (P&C) platform. Feel free to visit the campaign site and download the brochure.