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Insurance | Customized product bundles fill range of insurance needs

Insurance | Customized product bundles fill range of insurance needs

Commoditized price offers dominate some markets

Two opposing forces influenced the insurance industry: commoditization and customization. Online price aggregation continued to dominate in some markets. Also enabled by technology and data analysis, major insurance brands moved beyond transactional relationships with their clients to offer products more relevant to particular lifestyle and life stage circumstances.

Although the speed of this transition varied by market, it was global phenomenon, driven initially by start-up brands attempting to meet the expectations of younger consumers. Later marriages and the options of ownership or sharing had implications for insuring homes and cars. New, pay-as-you-use products appeared as alternatives to the traditional model of insurance as an annual purchase.

The broker system remained strong in North America, but price comparison websites continued to dominate in the UK, where one-third of consumers shopping for car, travel, or homeowners’ insurance searched a price comparison website for information, compared with 18 percent who sought advice from family and friends, according to Kantar.

The Chinese brand Ping An, remained No. 1 in value and expanded its financial services, while competitors, like Alibaba, appeared from outside the insurance category. Western technology brands partnered with insurers. Half of the BrandZ Insurance Top 10 are based in China or other Asian markets, with an Indian brand, LIC, appearing for the first time.

Particularly in the fragmented US market, high-value brands, like Geico and Progressive, excelled at using celebrities or unique characters to create distinctiveness. They led industry growth with value rises of 29 percent and 23 percent. Driven by their performance, insurance was the third fastest-rising category in the 2019 BrandZ Global Top 100, increasing 15 percent in value.

Personalizing with data

Progressive navigated the industry tension between commoditization and customization with its “Name your price” initiative. Customer say what they are willing to spend and Progressive designs a product around their needs. In its combination of customization and efficiency, this approach is similar to the appeal of Starbucks, where a barista can customize a basic coffee by adding—or leaving out—specific ingredients.

Until recently, customizing insurance products was difficult because customer data about general demographics, health, or driving habits often was siloed and yielded limited insights. Insurers can now integrate their own data and also link with third-party data. This data enables insurers to communicate more often with customers about their changing insurance needs and market more relevant products.

Some of the life insurance brands partnered with Google or Facebook and required logging in through those sites. The insurers gain rich data that reveals life choices and helps manage risk. GPS data, for example, could reveal visits to hardware stores and signal home improvement activity and possibly home insurance needs.

Other data potentially helped insurers to better assess risk and reduce premiums. In cars, telematic devices serve as the flight records of driving. Similarly, dashcams create a visual record of events that can be useful for assessing the cause of an accident. In certain markets, like the UK, price discounts encourage beginner drivers to accept these risk assessment tools.

Insurers also expanded in to micro-insurance, creating products for specific events. As consumers, particularly Millennials, spent money on new experiences rather than products, insurers grappled with the challenge of understanding risk. The insurance industry, with a history of insuring physical valuables, and even lives, lacks the equivalent actuarial data for insuring experiences.

As insurers looked for growth opportunities, many moved into ancillary businesses. Although life insurance brands probably would not expand into health insurance, they might add second-opinion services. New insurance categories are opening. An online brand called Ginger.io offers health benefits for companies that include supplemental wellness programs such as life coaching and telephone psychotherapy.

Technology and disruption in China

Despite the slower economy in its home market, China’s Ping An increased substantially in value because of its expertise using big data to refine its offering. Ping An has hired thousands of data scientists to help more precisely understand consumer needs and fashion relevant products.

At the same time, Ping An is also active on the provider side, acquiring health-related businesses, such as Good Doctor.com. This development is part of Ping An’s expansion from its core insurance business to financial services and health care. Among its financial services offering is Luxfax, China’s largest online wealth management brand.

The Chinese insurance market was about to experience disruption, as Hong Kong-based AIA, recently entered mainland China. The government approved the market entrance of Germany’s Allianz Group, as the first foreign insurer to enter China without a Chinese partner. And France-based AXA said it would purchase the remaining stake in its Chinese partner, AXA Tianping.

Not all insurance products in China were offered by insurance brands. Alibaba launched peer-to-peer insurance product on Alipay, its mobile payment app, in which insurance claims are paid from the pool of money collected by the insured. Anticipating this kind of disruption, Ping An created a division to develop expertise in artificial intelligence, blockchain, and other technologies.

Marketing and communication

Most of the brands were strong on bundling their insurance offering, combing not only auto and home, but increasingly including other possessions like smart devices. Mobile was critical to this sell, as brands sent regular mobile messages to customers recommending that they purchase additional insurance products. Recent Progressive ads, which had been price-related, shifted to commercials with actors surrounding a home and reassuring the consumer that Progressive can protect many aspects of their lives.

Geico continued to build and sustain awareness with a heavy investment around advertising featuring its memorable Geico lizard character. Geico ads are well received, scoring 138 on the  BrandZ [symbol] Great Advertising metric where an average score is 100. While the brand receives extensive exposure from the advertising, Geico spends much of its media budget on a performance basis, meaning it pays based not on audience size but on the leads generated.

Geico brand equity is strengthening, based on BrandZ analysis. Consumers see Geico as increasingly Meaningful (meeting their needs in relevant ways) and Salient (coming to mind at the point of consideration). The brand has slipped a bit in the third component of brand equity, being seen as Different, a function of being in a category known for product sameness.

To reach Millennials, brands targeted their messaging and relied on mobile communication. Signa featured singer-songwriter Nick Jonas among celebrities in a cross-generational campaign encouraging people to take care of their emotional wellbeing.

Relying on its network of local agents to develop personalized relationships and build trust, State Farm remained a strong choice among consumers over the past few years, according to BrandZ data. Consumers see the brand as Purposeful and Meaningful.

Brand Building Action Points

  1. Be flexible with products

Get comfortable with the tension between commoditization and customization. Think of the business in terms of flexible modules rather and individual products. Mix and match the modules to devise offerings tailored to meet the needs of individual customers. Learn from the example of some of the subscription consumer brands.

  1. Be flexible with communications

Develop and strengthen the memorability of the the big creative idea and the breakthrough character or celebrity and match that strength with targeted marketing. Insurance brands need to create and sustain an identity that makes them distinctive and memorable, but that achievement alone is insufficient without the technology and data to customize solutions at scale.

  1. Explore new opportunities

Investigate the insurance opportunities based on how consumers, often young people, are changing their life priorities, often placing value on experiences over things.