The poet John Donne famously wrote that “no man is an island.”
If he worked in insurance, he might have added that every group insurer is an ecosystem. As the industry surges ahead with major advances in technology and data analytics, the need to develop strong partnerships to meet the demands of this changing industry landscape is imperative.
Far too often new high-tech entrants are viewed with alarm by more established group insurers, but “us vs. them” zero-sum thinking results in everyone losing. Given a rapidly digitizing marketplace and rising customer expectations, the desire to remain isolated for competitive reasons is futile – and can be fatal to group insurers. Almost overnight, even companies devoted solely to technological innovation, from Nokia to Blackberry to Yahoo, can find that their core offerings are obsolete. How can carriers hope to keep up?
Building Data-Based Distribution Platforms
One answer is to develop a robust ecosystem. Large problems require large solution sets, drawing on knowledge, experience, and platforms that one company can rarely muster, but a combination can.
Data provides a bridge to connect businesses within – and outside – the industry. Although an insurer may be able to deliver deep risk experience and expertise to analyze increasing amounts of group life and health data, this may not be enough to gain a competitive advantage. Even the ability to identify highly precise rating factors and pricing algorithms could fall short. Carriers need to implement pricing models under real-world competitive conditions, and then adapt as circumstances evolve. This requires strategic partners who can deliver customer-facing, well-tested digital platforms to collect data and provide solutions in ways that are attractive, engaging, and intuitive.
Life is constantly changing, so group insurers must build online platforms that can change too, housing and transferring data between algorithms based on important events in employees’ lives that affect the group rating approach. Such platforms should also facilitate better communication between the insurer, employer, and insured. Early evidence suggests web-based engagement could increase market penetration and persistency by enabling more personalized offers, easy-to-understand explanations, efficient and engaging enrollment and claims processes, and an improved overall customer experience.
The problem is that few carriers on their own can combine data analytics, front-end decision support, behavioral insights, and effective mobile and web-based distribution. The solution: partnering with an array of traditional and non-traditional companies to explore and test new dynamic pricing models and also effectively guide new platforms to market.
Digital Insurance Partnerships in Practice
To see how this can work, consider the following real-world example from Mexico of a critical illness product targeting diabetics in the lower middle market.
Nearly 10% of adults in Mexico – approximately 9 million people – have been diagnosed with Type II Diabetes, and 6 million more may be undiagnosed. Reaching this group more effectively means offering a fully digital critical illness product through multi-functional collaboration, which includes:
- Working with digital service providers to develop a web-based platform offering online convenience from the point-of sale to renewal time
- Partnering with digital marketers to promote the product via social media
- Producing relevant, practical, and local social media content for people with Type II Diabetes to help create an online community – part of a basic health program ecosystem
- Forming alliances with medical lab centers and call centers to arrange A1C tests and offer discounts for improved test results upon renewal
- Teaming with app developers to provide product enhancements, health information, and advice straight to customers’ smartphones
- See also: Product Development: Expanding Life Insurance for Diabetics
Translating an idea into an outcome is never easy. Impose too many limitations and creativity could be stifled, while too much exploration could result in endless “play” and no product. The key is to pursue innovation while maintaining focus on profitable results – for all project partners.
Contact RGA to learn more about dynamic pricing in group reinsurance.