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GLOBAL 2016: Insurers broaden their coverage to meet risks of a changing world

Digital start-ups challenge category niches

Both business-to-business and business-to-consumer brands developed new products to meet the insurance needs of globalized and interconnected times, when potential risks seem more unpredictable and disruptive, and include not only calamitous natural disasters, but also events such as cyber-attack and terrorism.

Property and casualty insurers offered products to manage the risks resulting from new businesses enabled by digital commerce and the sharing economy, such as Airbnb and Uber. And for the times when personal information is criminally misappropriated, insurers also covered identity theft.

Some business-to-business insurance brands expanded into advice and consultancy roles, particularly in human resources, because talent is so vital to success, and an effectively managed human resource department can limit business risk. These new practices also helped insurance brands be more differentiated and less commoditized.
Even as major insurance brands pursued these new opportunities, however, smaller financial technology brands targeted niches of the insurance business, often with specialized, digital, price-driven products. In addition, a prolonged period of low interest rates has impacted the investment return for some insurers.
Met Life re-appeared in the BrandZ™ Insurance Top 10, based on its strength in the USA. The Insurance Top 10 increased 2 percent compared with a 21 percent rise a year ago.
Managing more complex risk
For the business-to-business brands, risk has gotten more complex, with known and unknown factors potentially threatening businesses and corporate reputation. Insurance decisions once made on a tactical level now more often command the strategic attention of the CEO.
Even as business-to-business brands expanded the kinds of risks they insured, they continued to respond to natural disasters and other similar events. Unusual flooding in the UK and Ireland as well as the explosions in the Chinese port city of Tianjin created claims for Zurich.
Because of their size, major insurance brands faced intense government scrutiny and regulation. Under the US Dodd-Frank reforms that followed the global financial crisis, insurers such as AIG, MetLife and Prudential were considered too big to fail and thus required to maintain high capital reserves. MetLife argued against that designation in a court battle and won. The brand intends to spin off its life insurance business so it can operate as a more nimble entity.
For most brands, the key communication challenge in a largely commoditized category remained having a proposition that clearly adds value for people’s lives and explaining that proposition in a clear and compelling way. Insurance brands looked for emotional ways to sell a complicated, low-engagement product.
Geico continued to use the gecko lizard in its ads, which mostly emphasized price. These ads drove awareness, presenting the product in a way that is likeable, memorable and, by virtue of its communication style, differentiated. The campaign’s deeper signal is that Geico offers a simpler and approachable way to buy insurance.
State Farm adopted an approach that encourages customers to customize a menu of options to create a policy that best meets their needs. State Farm, traditionally positioned as “a good neighbor,” promoted many community-based service projects in partnership with a well-known U.S. TV host.
Anticipating disruption
Agent networks remained a core channel for acquiring and retaining customers, but young people were less inclined to use them. When they see a need for insurance, young consumers are more likely to shop online, connecting with a disruptor brand or a brand aggregator - a kind of Travelocity for the insurance category prevalent in the UK.
Allianz, which enjoyed a positive year, particularly in the property and casualty business, focused attention on developing its digital capabilities to reduce the impact of smaller disruptive digital competitors. France’s AXA formed AXA Strategic Ventures, a venture capital fund to support the development of digital disruptors for the benefit of AXA. It also launched Kamet as an incubator for insurance technology products.
Smaller disruptor brands, like Oscar, Lemonade, or PolicyGenius effectively used digital communications to reach millennials and other audiences with specialized products that eliminate or blunt some of the pain points in insurance purchasing. Lemonade, for example, takes a peer-to-peer approach, introducing an insurance model built for the sharing society.
In the peer-to-peer model, individuals purchase property and casualty policies for a lower cost because of the shared risk. The approach differs from traditional insurance because individuals form the risk pool and receive a refund if money is left when the policy terminates. Founded by technology entrepreneurs, Lemonade is managed by veteran insurance industry executives. Other peer-to-peer start-ups include Friendsurance in Germany, Guevara in the UK, and TongJuBao in China.
Not all technology advances disrupted the category. Most insurers have online programs that help individuals understand their risk at various life stages. State Farm received U.S. government approval to test the use of unmanned drones for assessing roof damage during claims adjustment.
Global growth
Brands continued their international growth. To expand its presence in Africa, AXA acquired a 7 percent stake in African Reinsurance Corporation. It also increased its commitment in India, raising its stake in a joint venture with Bharti Enterprises from 26 percent to 49 percent. The French company offers life insurance as well as property and casualty coverage, along with asset management and banking, and operates primarily in Europe, North America and Asia.
In China, where the insurance industry is growing rapidly, large insurers leapfrogged into new products to meet the evolving needs of the rising middle class. Brands like China Life and Ping An have become diversified financial services providers whose broad offerings include even specialized investment products to help parents afford overseas education for their children. China Life operated with almost one million agents throughout China.
AIA, which serves 18 Asia-Pacific markets, increased the value of new business in China by 45 percent, driven in part by an increase in the agent sales force. Allianz entered a joint venture with Baidu, a leading Chinese Internet brand, to access an enormous digital audience of potential customers.
While the Chinese insurance brands are trying to gain customers, because penetration is still relatively low, they are also working to establish lifelong relationships with existing customers by selling them relevant products for each life stage. The brands heavily use digital and mobile to accomplish both of these goals, even using location technology to offer temporary insurance based on a particular experience, such as a skiing holiday.

Brand Building Action Points

1. Be present.
Salience is important. Be out there, but also give consumers reasons to select the brand because it is different in some meaningful way, and also because it reaches people with the right message at the right time.
2. Be consistent.
Make sure that all of the touch points are connected. The agents need to live the brand the same way it appears on TV, online or anywhere else. The customer journey – from first car to life insurance policy – should be seamless for the brand.
3. Be relevant.
Innovate with products that meet each customer need. Consider both the needs that change with life stages, but also those that result from societal developments. Insurance brands can cover the risk of a weekend ski trip or renting one’s home to travelers.
4. Seek useful insights.
Analyze big data intelligently to meet customers’ actual life needs, and not just the business needs to upsell and drive revenue.
5. Be in the conversation.
Business clients are talking about the risks of an uncertain and connected world, such as cyber security and terrorism. Demonstrate that the brand has the data-driven insights to understand and manage those risks and, consequently, free up the client’s capital for other initiatives.
6. Define the brand clearly.
Define the brand clearly before circumstances define or redefine it. The issues are complicated today and the full stakeholder set includes the public and governments. Being unknown is not a brand advantage.