Changing customer preferences open opportunities for insurers to manage emerging risks better

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Understanding and aligning with customers’ requirements quickly is critical for insurers in today’s fast-changing risk landscape.

It’s no secret that the preferences of today’s customers are rapidly evolving. Driven by the digital revolution and bar-raising online retail experiences, the priorities of today’s insurance customers are radically different from a decade ago. Couple those expectations with a changing risk landscape and it’s clear modern insurers face complex challenges.

Identifying customers’ expectations

Digitization has disrupted the ways policyholders and insurers interact. Increasingly, customers prefer digital channels and seek an omnichannel experience.[1] However, simply providing an omnichannel experience is not enough. An end-to-end intuitive customer journey goes a long way in attracting and retaining customers while establishing better customer loyalty.

Customers value convenience, personalization, and prompt service delivery. With the emergence of digital players in all lines of insurance, it is easier than ever for customers to switch providers.

Policyholders are also aware of the power of data. Sure, they are concerned about privacy, but customers are willing to share personal information if it translates to cost reductions or more personalized and value-added products.

Evolving customer preferences may also hold the key to ways insurers can more tightly manage the changing risk landscape. Let’s see how.

Better customer awareness can spur policyholder collaboration and new revenue streams

Customer segments – individual and business – are open to sharing additional data with their insurers and paying supplementary fees for personalized risk control and prevention services, according to the World Insurance Report (WIR) 2019 from Capgemini and Efma.

Individual customers with comprehensive coverage and tech-savvy customers are quite willing to share data and pay for personalized risk control and prevention services. A closer look reveals a positive correlation between individual customers’ awareness about risk and policy coverage with their willingness to share data and pay more. (Figure 1)

Figure 1: % of policyholders willing to share additional data for risk control and prevention services vs. % willing to pay for these services, 2019

Changing customer preferences open opportunities for insurers to manage emerging risks better

Source: World Insurance Report 2019, Capgemini.

When it comes to business clients, those who say their current policy doesn’t cover emerging risks comprehensively are highly amenable to sharing additional information with their insurers to receive more personalized services. Customers who believe their current policy comprehensively covers emerging risks are more willing to pay for personalized, value-added services to control exposures. (Figure 2) Better awareness of their existing policy coverage for emerging risks translates to business clients’ willingness to share data or pay additional fees for personalized risk-control services.

Figure 2: % of business clients willing to share additional data for risk control and prevention services vs. % willing to pay for these services, 2019

Changing customer preferences open opportunities for insurers to manage emerging risks better

Source: World Insurance Report 2019, Capgemini.

A clear opportunity exists for insurers to improve collaboration with customers – both individual and commercial – by increasing their awareness of emerging risks and policy coverage.

Advantages of customer awareness include their likeliness to share additional data, which helps insurers generate information-rich insights about customer risk exposure and design more targeted offerings. Aware policyholders are also more willing to pay for personalized risk control and prevention services such as risk consulting.

Proactive risk control and prevention services improve customer loyalty

Add-on services, personalization, and policy flexibility profoundly influence nearly half of customer decisions to continue with their insurers – more so for tech-savvy individuals and large businesses, according to survey results from the WIR 2019.

By proactively offering customers personalized risk control and prevention services, insurers may improve their ability to manage emerging risks while meeting customer expectations more effectively – and in doing so, reduce customer churn.

Pre-emptive risk control and prevention services can lead to significant savings for insurers because claims will shrink as risk is mitigated, and occurrences staunched. A proactive approach will be especially crucial for managing potentially catastrophic emerging risks – such as cyber threats, rising natural disasters, and new epidemic diseases.

New and emerging risk scenarios may be profitably covered using new insurance models

Customers are enthusiastic about new insurance models such as usage-based insurance, on-demand insurance, or parametric insurance. (Figure 3) These innovative insurance models can help insurers cover new risk scenarios sustainably and profitably to manage the changing risk landscape.

Figure 3: % of customers interested in new insurance models, 2019

Changing customer preferences open opportunities for insurers to manage emerging risks better

Source: World Insurance Report 2019, Capgemini.

For instance, UK-based insurer Legal & General partnered with New York InsurTech Slice Labs to use the latter’s Insurance Cloud Services (ICS) platform to provide on-demand, pay-per-use homeshare coverage, thus addressing new risks arising from the sharing economy.[2] Machine learning, big data technologies, and behavioral science power Slice Labs’ platform, introduced in 2018.

Similarly, French multinational insurance firm AXA launched a dedicated entity, AXA Global Parametrics, to explore index-based solutions to more efficiently cover climate risks. Parametric insurance uses a parameter correlated to a client’s damages or losses. A wide variety of threats – such as adverse weather affecting businesses or causing crop losses – can be covered. AXA identifies cybersecurity, health, and mobility as other high growth areas for the parametric insurance model.[3]

As customer needs evolve within today’s fast-changing risk landscape, agility and speed to market will become even more critical, and insurer success may be contingent upon the ability to understand and align with policyholders’ requirements quickly.

Download a copy of World Insurance Report 2019 to delve into the evolving risk landscape, explore changing customer preferences, and find out about opportunities for insurers to develop more comprehensive risk management products.

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[1] Capgemini, World Insurance Report 2018, https://worldinsurancereport.com.

[2] Insurance Business Magazine, “Legal & General pioneers use of Slice ICS in the UK,” Terry Gangcuangco, December 14, 2018, https://www.insurancebusinessmag.com/uk/news/technology/legal-and-general-pioneers-use-of-slice-ics-in-the-uk-118910.aspx

[3] AXA press release, “AXA launches AXA Global Parametrics,” March 9, 2017, https://group.axa.com/en/newsroom/press-releases/axa-launches-axa-global-parametrics

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