The challenge and opportunity: Millennials represent a paradox for the insurance industry. While Money reports that Millennials will have more buying power than any previous generation, they are also the most underinsured. The Transamerica Center for Health Studies (TCHS) reports that while Millennials had an unprecedented 23% uninsured rate in 2014, as of 2016 this number has dropped to an 11% uninsured rate. Millennials are the new golden ring for insurers – but only if they can only attract and retain these elusive consumers.
New approaches are required
Much has been written on how to best attract Millennials to purchase insurance products. As a group, Millennials are greatly under-insured and firms see a potential pot of gold in winning this new customer group. Several large insurers are focusing on attracting this cohort through marketing campaigns using sports figures, social events, and humorous advertising messaging to attract Millennials.
Insurers may be getting it wrong. Despite these efforts, Millennials engage with their insurers the least compared with any other generation. Access is more important than messaging when doing business with Millennials. The 25 to 35 year old group has grown up with the web and access to cell phones. They are comfortable browsing the internet, messaging, and buying a wide range of products and services over their mobile devices. According to the KPCB 2016 Annual Internet Trends Report, Millenials are not only early adopters of technology. They require new methods of access. Millenials continue to push the envelope to require new distribution channels which are rapidly evolving due to technology and distribution. Just as one in five shopping malls are forecasted to close due to a changing buying pattern driven by the ability to browse, compare, and shop online, Millennials are the leading indicators of a shift in insurance buying habits. A recent study found that young people spend an average of three hours a day on their smartphones. Because they now expect every website they use to interact with companies to be well designed, insurers who expect spruced-up insurance web sites alone will not win the day. A major insurer recently celebrated a new customer web site only to have one of the first questions: “but where is the app?” The old adage “give the man what he wants” certainly holds true to the new generation of Millennials. Affluent buyers will do business in the format that they find is best suited to their life styles. They are more than comfortable researching and purchasing goods and services over the internet-in fact they almost insist on having an easy to use, fast purchase experience.*.
Fortunately, technology has evolved to meet customer expectation of both fast and easy. By leveraging advanced analytics and automation, insurers can target customers, assess risk and conclude a purchase in a much shorter timeframe. Let’s take Bob as an example:
Analytics for customer segmentation and automated underwriting
Bob is married, 30 years old, gainfully employed, and has recently become a proud father. While he has given some thought to purchasing life insurance to protect his expanding family, he is busy and has not taken any action. Firms could leverage expanding family, financial and demographic data to proactively identify Bob as a good prospect and proactively reach out to him.
A direct to consumer or targeted marketing campaign based on customer analytics can significantly touch more qualified prospects. In this example, let’s say Bob is contacted directly through an insurance app on his smartphone with an invitation to apply for insurance based on his profile. Now that you have Bob’s interest, how do you provide a meaningful and quick buying experience? Bob is guided through a series of personal and health related questions. Based on health analytics, Bob’s profile indicates he is an excellent prospect and using automated underwriting capability, he is offered a $500,000 life policy within 10 minutes. Bob is happy with a good customer experience. Experience has shown that up to 75% of purchases can be done via straight through processing if they meet certain medical guidelines. The remaining prospects are quickly routed for any indicated medical tests to move along the transaction. If a better mousetrap is possible, what is keeping insurers from creating and deploying more innovative, easy to use, platforms?
The challenge for insurers is threefold:
1. How to attract and target customers you want to do business with?
2. How to provide a quick, high-quality quote and purchase experience?
3. How to adequately manage underwriting risk?
Leveraging automation, analytics, AI and design thinking
The skills, tools, and approach to accomplish these three tasks are available today. If an insurer lacks the skills or the experience, partners can be of great assistance in providing or sharing such levers. A customer survey at the June 2017 EXL Digital Transformation Summit indicated that over one-third of customers looked to partner with suppliers to round out the skills and technology required to rapidly digitize operations. The trick is to create, then test, then refine, and finally build to scale. Let’s look at each of the challenges presented.
How to attract the right customers? First off, what is the correct prospect profile? By leveraging existing underwriter analytics, a clear picture of what groups have the lowest risk and greatest likelihood to buy insurance or any product can be obtained.
Once identified, this data becomes the springboard for two independent projects: targeting and obtaining. This requires access to hundreds of customer variables for millions of prospects and the ability to mine credit bureau data. This data can be used to segment the lowest health risks coupled with the highest credit scores within a ZIP code to establish a target profile to generate sales leads.
Having identified and contacted the targeted prospect list, the next step is to use design thinking to deliver a best-in class customer experience when delivering quotes for policies. Leveraging design thinking lets insurers approach the quote process from a consumer perspective customize it to meet the needs of individual consumers.
For example, design thinking could minimize the number of questions a customer must answer to get a quote. Say every person who requested a quote was asked whether they had ever been diagnosed with several common conditions.
The insurer could use design thinking to identify that many customers requesting quotes didn’t have any conditions. Changing the quote process to ask whether a consumer had been diagnosed with a condition in general, and then only showing the list of common conditions to those who answered yes would speed up the quote process and cut down on the number of questions.
Artificial intelligence can also be used to create a better quote experience. These advanced programs can use machine learning techniques to anticipate the next questions for a customer and lead to a quick quote.
At this stage insurers can also better manage underwriting risk by creating an automated underwriting program that can quickly analyze buyer behavior that may or may not result in a claim. If an insurer does not have such a rules engine, then they may benefit from utilizing a third party tool to automate such insights. In the example of Bob, once he inputs his personal profile, an automated underwriting system can rapidly rank his insurability, do a price look up and present an on-line quote. Robotics and automation also ensure that the customer experience is preserved when someone decides to make a purchase.
These tools can automatically validate a quote to ensure its accuracy, and then convert it into a policy. This speeds up the process for both the consumer and underwriter.
These disruptive technologies mean risk is shifting, decreasing and becoming more transparent, which require insurance companies to change how they fundamentally assess and manage risk and how they appeal to new generations of customers. The take away is those insurers who are able to leverage technology to effectively target the underserved and provide access and speed stand to benefit from the changing buying habits of prospects of all ages.
1. www/kpcb.com 2016 Internet Trends Report, May Decker