Big Tech companies are breathing down the necks of insurance companies. Giants like Amazon, Apple and Google have upped their innovation games in recent years, setting the customer experience bar higher than ever with their data-centric, consumer-focused business models. Now, they’re using their insights to venture into the financial services sector, competing with insurers at what they do best. In response, insurers must innovate, or they’ll risk losing relevance with their customer base.
“Everything evolves – and innovation to me is something that really pushes things forward,” said Jeffery Williams, senior analyst at Forrester, a global market research company that helps organizations exceed customer demands and excel with technology. “The [insurance] customer has evolved, and much of that has been born through how they’re engaging with their other service providers outside of the insurance sector.
“Look at the big tech companies and how they’ve actually been able to help their customers transact differently. A huge focus of big tech is to make the customer experience more seamless and reduce friction points across their customers’ buying journeys. So, customers are becoming more and more in tune with simplicity in their dealings with their service providers.”
The auto manufacturing sector is also full of “ecosystem orchestrators,” according to Williams - companies that are capitalizing on their proximity to the customer to really simplify the customer journey.
In August 2020, Tesla co-founder and CEO Elon Musk officially launched Tesla Insurance, a competitively priced comprehensive insurance offering designed to provide Tesla owners with up to 20% lower rates. According to the firm, Tesla Insurance is able to provide insurance at a lower cost than the standard auto markets because it can “leverage the advanced technology, safety, and serviceability of [its] cars” and can price the insurance based on the benefits of Tesla’s active safety and advanced driver assistance features.
Following the announcement, outspoken entrepreneur Musk said Tesla has a “much better feedback loop” than traditional insurers. He added: “Obviously, somebody does not have to choose our insurance. But I think a lot of people will. It’s going to cost less and be better, so why wouldn’t you?” Essentially, what Tesla and other auto manufacturers are doing is using their proprietary data, insights and connections with customers to, in the words of Williams, “simplify the insurance buying journey, and help their customers manage their financial lives”.
“These are all things that are happening outside of the insurance sector, and for insurers, it just means that we need to step it up a bit and start really thinking about ways that we can leverage technology to innovate,” said Williams. “And that’s happening. I think we’re seeing that bear out, particularly in this COVID world.
“I think innovation is going to be a big part of how the insurance sector drives growth, creates new product opportunities, and how it seeks out new market opportunities in terms of partnerships and things of that nature. It also really drives financial results - driving revenue, driving margin expansion, driving share prices - these are all things that are going to be the result of innovation.”
At the end of the day, innovation is a means for keeping up with the change that is around the insurance industry, keeping pace with changes in customer expectations, and helping customers live their lives differently.
This all ties into the notion of ‘connected’ insurance and the opportunities that connectivity presents to the insurance sector. According to Williams, ‘connected’ insurance shifts the narrative away from insurers just writing a policy and paying a claim to really helping customers live better, safer and more financially stable lives. This more meaningful connection, driven partly by innovation, will improve the customer experience tenfold.