To remain relevant and meaningful for customers, insurers must make deliberate choices to survive. Olav Cuiper, Executive Vice President and Head of RGA EMEA, sat down with SoMe Magazine to share some thoughts on the strategic choices facing companies amid accelerating change in the industry.
Insurers are caught between the past and the future. How should they deal with these two worlds?
Toronto has a beautiful Victorian-style city hall. Behind its tower, which is somewhat reminiscent of London’s Big Ben, you’ll see an impressive, powerful and modern glass building soaring skywards. I often use a photo of the two buildings in presentations because the contrast sums up the predicament faced by many insurers: stuck between the old and the new world. You could, of course, argue that the contrast is beautiful. And you’d be quite right, too, but only if it’s a deliberate choice. And insurance companies must make choices nowadays if they are to remain meaningful to their customers. Without a clear value proposition, they will not survive within these commoditized markets. So, insurers must ask themselves who they want to be, and consumers have to feel that they are receiving value based on these principles.
Stay where you are or move forward?
As an industry, we are constantly talking about innovation, and keeping abreast of all the current trends and developing visions. A vision is no more than a roadmap to the future, but one an organisation must follow.
To put it simply: If insurers all stay in the same place, price will be the only variable. You can see this happening in the U.K. now, where prices are falling. Is this a good thing? In itself it probably is, because apparently things can be cheaper. But at what cost? At a certain point it will be at the expense of quality, and that will benefit nobody. I don’t think consumers really want to achieve savings if it means low prices for mediocre service. If insurers don’t take the initiative, consumers will do so on their own. That’s what fuelled the popularity of crowdfunding not long ago, when banks were reluctant to extend credit. A small-scale version of this is now evident in the Dutch insurance industry, with the increasing popularity of forms of community insurance. Take, for example, what’s known as the peer-to-peer or community solutions approach, essentially an insurance safety net for people with limited access to insurance. Consumers, feeling that they weren’t being served, have developed something that’s really the domain of insurers. Now isn’t that ironic?
Innovate internally or externally?
To start with, innovating is just being honest with yourself as an organisation. Are you capable of developing innovative new concepts at the required speed to attract new customers successfully? Old thinking and new working are not compatible. To become successful in the new world, you really need a different mindset, another mentality, and new skills. You can hardly innovate if you are being held to account on old key performance indicators (KPIs). In such a case it makes more sense not to keep everything under the same roof. You could set something up externally, or procure a smart initiative; you don’t have to do everything yourself. Internally, you can focus on providing excellent service for existing customers as you slowly but surely close your portfolios.
Naturally, RGA would be pleased to take over some of those closed books, but we also have many innovation projects running. The future of the industry is dear to me, and I see so many opportunities to develop new innovative concepts.
Money or meaning?
Price is definitely not the most important unique selling point. Consumers want convenience. And meaning. A product they understand, one that’s easy, and that really solves a problem for them. And it has to be based on trust, not distrust. If a product delivers exactly what the consumer wants, it becomes more about value than cost. Forget those comparison sites for the moment and free yourself of accepted frameworks of thought. Instead, immerse yourself in the world of tomorrow’s customer: the millennial. By millennial I don’t just mean people under 35, but everyone with a “mobile” mindset. “Mobile first” then becomes your number one priority. For large traditional insurers, it isn’t an easy process to implement this new mindset. This can sometimes be a really big deal. And, having done it, you’ll only really have complied with the precondition to become successful. It’s after doing so that the real work begins, the behavioural economics. What value can you offer your customers? And how do you fit into their lives?
In South Africa, Vitality has opened several Discovery Stores. These are one-stop shops in which people can get a health check, advice on what insurance they need, or check it out for themselves. They can even participate in sports groups. It’s all about convenience, convenience, convenience. That’s a key part of all our initiatives with RGAX. The crux is in the execution to develop these services in an optimal manner. If everything is right, word-of-mouth among consumers will do the rest.
Should you invest in a new brand or in a heritage brand?
You have to innovate to stay meaningful and you have to be meaningful to innovate successfully. You could see this as a Catch-22 situation or as an opportunity. New players can bring really useful innovations to the table, but without critical mass there will be little meaning. For them it’s key to ask whether they are getting sufficient traction. Above all, you also need an infrastructure to comply with all the regulations. Therefore, large-scale redevelopment must come from existing insurers.
Legacy in this context is often seen as an obstacle, but try looking at it this way: If you had a choice between receiving a great service from a good start-up or from an established player, you’d probably choose the latter. For this reason we should not discount heritage too soon. Go back to the essence of your value proposition and try to appreciate the value for the future. Think about how we love Heineken, for example, or Levi’s and Apple. These are brands that have known exactly what they stand for over a long period of time, and yet they are in a state of constant innovation. Why shouldn’t this be possible in the insurance industry?
Quicker or smarter?
Innovation often involves efficiency, or streamlining processes to make them quicker and thus cheaper. You could say that you have an innovative life insurance product because the application process is shorter. But asking fewer questions just gives you less data, at the expense of the service. It’s smarter to let the data do the work for you. In America, RGA worked with credit industry leader TransUnion to develop TransUnion TrueRisk® Life, a credit-based insurance score that can allow certain applicants to bypass body fluid collection and examinations. This scoring is highly predictive of longevity and the likelihood the applicant will keep the policy in force. When combined with existing underwriting evidence, TrueRisk® Life provides insurers with a more holistic, nuanced picture of each applicant’s risk profile while helping to accelerate the underwriting process and make competitive offers to qualified applicants across all risk classes. It’s a win-win situation for both consumers and insurers, who will get more certainty about the insurance risk.
Should we still call it innovation?
The danger of the term “innovation” is that all too soon it sounds like it’s “something extra.” But it’s not. It’s your future business. And that must be different. Which international stream do you want to belong to, for example? For a long time, the U.K. and the U.S. have set the tone, but now insurers in Italy, France and Spain are making an impact. That’s where the leadership is coming from. A player like Spain’s BBVA, for example, is showing the courage of its convictions. Something in the company’s DNA says that there’s no such thing as impossible. The RGA Technovate Lab, meanwhile, is seeing promising InsurTech start-ups. Granted, southern Europe was trailing a bit and perhaps that’s why the need to change there has been so pressing. But insurers there have had the courage to set up new initiatives, abandon old or unsuccessful ones, and even to sell their intermediary portfolios and deal directly with their customers. We must all feel that sense of urgency.
Whichever choice you make, and whichever route you follow, at the end of the day it all comes down to leadership. If you take the lead, the rest will automatically follow. And what could be better than that?