Addressing Hidden Needs in a Mature Insurance Marketplace
A recent TechCrunch article spotlights Lemonade, an insurance upstart that is boldly reimagining the customer experience. The young firm has already made waves with its use of cloud technology and artificial intelligence to sell insurance, and now it is going a step further by crowdsourcing a full rewrite of its insurance policy from scratch, with the goal of devising documents that consumers can actually understand.
Lemonade has correctly identified a critical pain point for insurance consumers—the underlying product is begging for innovation. Traditional policy documents are inscrutable and full of legalese and were never written with customers in mind. The policy is a great place to start the insurance product revolution, but does Lemonade go far enough?
The US personal insurance market is a mature industry, with numerous life, property and casualty issuers competing heavily for customers. Our Financial Services Department’s Insurance Industry Research shows that the market is undergoing significant upheaval, with so-called “Insurtech” disruptors targeting incumbent distribution models and entrenched back-office processes. In addition, new coverage needs are emerging due to external factors such as the increasing incidence of catastrophic natural disasters and changing demographics and the changing nature of work. To the layperson, the products being sold have largely remained the same for decades.
A few new niche entrants such as Slice and Sure are disrupting the market by targeting specific market segments and creating flexible, customer-focused products to meet their needs. For example, Slice offers on-demand home and auto insurance designed for Airbnb hosts and Uber rideshare drivers. Customers can turn the insurance on or off in seconds via a smartphone app, paying only for the coverage that customers need, when they need it.
The time has come for traditional carriers to get comfortable with the technology available to take a more nimble, agile approach to new-product development. The market holds significant opportunity for growth if insurers are willing and able to precisely target unique customer niches and offer new, innovative spins on classic insurance products to meet customers’ specialized needs.
Market Strategies advocates an exploratory path, and we work with insurers that are taking a different approach to understanding what people need, want and are willing to pay for. We help our clients look at target market segmentation research with a fresh perspective and develop solutions that truly meet each segment’s demands and desires.
We are discovering a world of untapped opportunity. Here are a few ideas:
- On-demand insurance for new drivers: For many households, auto insurance premiums skyrocket when the oldest child gets his or her driver’s license. With the rapid evolution of vehicle use monitoring, why not enroll customers in a policy that sets rates based on real-time monitoring of who is in the driver’s seat?
- On-demand convenience: Today’s consumers seek immediate response and gratification. Does your firm offer life, auto and home insurance products that can be turned on or off at the click of a button? To capture and maintain market share, insurers must offer levels of convenience that fit today’s on-demand lifestyle.
- Insuring the cloud: These days, consumers’ digital assets are every bit as valuable as their physical property. Insurance companies should offer customers coverage that protects their online lives from loss, theft or damage.
In the past, insurers had to invest years of research, testing and expense into product development, but with the advent of new technology, carriers can be much more agile. By taking a carefully honed, data-intensive, iterative approach to product development, it is possible to launch innovative, category-killing products in a fraction of the time.
If your firm is looking to offer a compelling new insurance solution to meet an acute market need, email me. Product development doesn’t always follow a straight and narrow path. Often, it pays to follow the opportunity wherever it may lead.