Next Generation Insurance: Leading from the front.

Social Media's Influence on Insurance Products

2011-07-31T23:35:01Z

Preliminary research shows that Social media can play an important role in creation of new products. Below are few data points in this regard.

1. Pepsi's Mountain Dew DEWmocracy initiative involved giving consumers the power to lead product innovation. Through a video game, consumers were encouraged to create the next Mountain Dew product. The campaign resulted in the creation of Mountain Dew Voltage which, says Cooper, was "one of the most successful product launches in PepsiCo beverage history.

2. Procter & Gamble (P&G) has created a community of 600,000 mothers who help cocreate new products and become word of mouth advocates

3. As far back as 2008, over 60% of online US adults used the internet to research financial products such as student loans, brokerage accounts and credit cards. Of those, over 35% of them applied for these products online

4. 10% of individuals making between $75,000 and $100,000 a year, 9% of those aged 25 to 34, and 6% of men researched insurance policies on social media Web sites

5. When shopping for insurance, 35% of 25 to 34 year olds, and 30% of those earning more than $100,000, said they prefer the Internet to an agent.

On similar lines, social media should be able to influence creation of insurance products by involving the consumers as well as reducing the time to market and cost of launching a new product.

Let us see how this can be done. Take a look at the insurance product creation process. The process involves the following steps

· Product planning - Getting the new idea for the product.

· Business Analysis - Conducting feasibility study, market analysis, product proposal, test marketing etc.

· Technical Design -Marketing and actuarial activities, investment and accounting activities, IT activities, legal and Compliance.

· Product Implementation - Obtaining regulatory approvals, Designing promotion materials, Establishing IT systems for new products, Enabling sales force, Conduct activities and promotion for product creation.

· Sales Monitoring -Monitor the performance of the insurance product.

Social media can play a role in the following

· Getting the new idea for the product - New idea is usually obtained from

o Customers - Create dedicated community for your customers. Ask them what should be an ideal product. Solicit feedback about the insurance product they have bought

o Product development team, Company management, Home office staff - Communities, Discussion forums.

o Market research - Social media can be one of the source of market research.

o Competitors' products and activities- Social Listening.

o Consumer advocacy groups- Social listening.

o Business/insurance periodicals/Social sites.

· Test Marketing

o Use the community created during the idea generation to roll out the new product and listen to their feedback.

o Invite other consumers to join the community and get their feedback.

· Product introduction and Promotion

o Conduct advertising using social media.

o Conduct a contest about creating advertisement for this product.

o Ask the community members to write blogs /opinion about the new products at different forums.

o Encourage them to recommend them to their friends.

As an outcome, I can see that the use of social media probably will reduce time for new idea generation (reducing time to market) and achieve cost reduction. but more importantly it will create a product closer to consumer needs and also help in increasing the trust and transparency between consumers and insurance company.

Did you know that India's largest Life insurer (Life Insurance Corporation of India (LIC) has on average 18% first premium lapse ratio and one of the major reasons for this is the forced selling of policies without caring for matching of products with requirements of the policy holders.

This can be reduced if the product is closer to consumer needs and that is where social media can play an important role

What is your opinion?

References

· http://www.brandchannel.com/home/post/Pepsi-Crowdsourcing.aspx

· http://www.research-live.com/features/feel-the-tremor-effect/2001717.article

· http://www.infosys.com/iengage/resources/Documents/banking.pdf

· http://www.insurancenetworking.com/news/social_media_insurance_technology_mintel_forrester_marketing-24410-1.html

· http://www.freepatentsonline.com/article/Review-Business-Research/190699885.html

Operational Excellence - focusing on "core" capabilities still an enduring goal

2011-06-08T14:35:27Z

Much has been written and read about in the past 2 decades on "core" competencies/ capabilities and how they are critical for a winning corporate strategy. Reviewing this new book published recently with much the same theme reminds me of the long journey ahead and how most financial services and insurance companies are still saddled with an onerous amount of operational baggage that is not suited for competing in the 21^st century.

The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Booz & Company's Paul Leinwand and Cesare Mainardi)

The emergence of mature service providers with global scale of operations and also in recent times state of the art proprietary platforms that is part of their value proposition significantly changes the value equation for insurance carriers. Most of the operational and systems infrastructure built in the last few decades were based on a paradigm that was centered around executing most of the operations in-house which actually distracts management attention from focusing sharply on core, differentiated capabilities.

For example, if a carrier chooses to compete and I mean really be better than competition (not just be comparable amongst a whole group of peers) based on their underwriting capabilities- they should focus significant organizational energies, financial resources and management bandwidth to continue to make that capability out-distance itself from the competition. Ditto for a carrier that may choose to be just on par from an underwriting standpoint but wants to excel in its distribution capabilities.

In the emerging ecosystem with very mature service providers and partners, insurance carriers need to focus on very select business capabilities that they can make truly distinctive and find the right partners to manage rest of their operations in a cost-effective manner - else, they risk losing ground on multiple fronts to different competitors who beat them on different fronts. Being average or slightly better than average on every front is a sure-fire way to being worse than average from a customer's standpoint and that final value proposition is all that matters when it comes to sustainable and profitable growth.

Agile methodologies in Insurance

2011-03-28T07:49:18Z

Of late some insurers have been trying to implement agile methodology for software development. Insurers who rushed in to implement agile methodology quickly have failed to reap the real benefits of agile. Based on my interactions with a few clients who failed in agile implementations, I have listed here a few tips to note if you are trying to implement agile methodology.

1. You are more than likely to fail in the first 2 to 3 iterations while trying agile methodology. So, Start small and go slow to build the experience in agile.

2. Don't try to make the iterations duration less than 45 days. IF the iteration is too long, benefits of agile are gone. If it is too short , it poses too many risks.

3. Don't take up agile methodology as an excuse to those who don't like to follow the process. Your team is comfortable with following the traditional processes, but agile is used to cut short some of the long drawn processes.

4. Key to agile implementation is agility of the people. Not only of your development team - but also of business, infrastructure, testing and other support groups. If all groups are not aligned, you are not likely to see the benefits.

Video: Web 2.0 in Insurance

2011-03-23T10:54:19Z

Watch Siva Nandiwada, Associate Vice President - Insurance, Healthcare & Life Sciences (IHL), as he highlights how insurance companies can leverage Web 2.0 to enhance business efficiency

Video: Smarter Organizations

2011-03-23T10:52:55Z

Watch Siva Nandiwada, Associate Vice President - Insurance, Healthcare & Life Sciences (IHL), urges insurance carriers to build smarter organizations and create a better foundation. Siva recommends three measures: simplification, collaboration and ability to adapt to changes.

Video: IT Budgets in Insurance

2011-03-23T10:44:50Z

Watch Siva Nandiwada, Associate Vice President - Insurance, Healthcare & Life Sciences (IHL), speak about how insurers use IT budgets for discretionary activities. The percentage of non-discretionary spends has increased in recent times. Siva suggests ways to overcome this challenge with engineering methods and operational efficiency

Social media making serious political impact, wake up call for corporates

2011-02-05T22:06:23Z

This week we saw the confluence of two powerful forces - youth mobilization and social media driving big changes across the Arab world. While the dramatic influences of the social media have often been talked about, it is now moving beyond the realm of glitzy devices and big market cap start ups to the political world. Though only the most optimistic amongst us will see the unfolding changes as creating a better immediate future for the impacted citizens, there is no doubt that the Internet and the blogosphere and its potential impact is now firmly ingrained in the psyche of a large segment of what is often considered a not so modern society. (It is no wonder the authorities even experimented with turning off the Internet and cell networks for a couple of days across entire regions)

Time for corporates to sit up and take notice in more mature markets? You bet. For financial services firms that have only been paying lip-service and tip-toeing into the frontiers and indulging in "social" contact but not so much of the associated "commerce", it is time to think hard on what the underlying forces are that are emerging in their own customer segments. Otherwise, they will be caught by surprise and their 30-year old platforms will be as out of date with reality as the 30-year regimes have shown to be in the Arab world.

Social Media for Life Carriers - a fad or a disruptive force

2010-09-25T01:18:00Z

A lot has been written and discussed about social media potentially transforming the way Insurance carriers conduct their business with the consumer of tomorrow. And why shouldn't it be? After all, Facebook, LinkedIn, Twitter memberships have crossed 800 million, use of social networking among all age groups is growing exponentially and there's no indication that this juggernaut will stop anytime soon. No doubt the Gen X and Gen Y consumers of tomorrow have social media engrained as an integral part of their daily lives. And social media, if leveraged the right way, does complement and benefit the entire value chain of marketing, sales, servicing and even product design and innovation for all carriers.

However, with all the buzz around social media being a disruptive force and a game changer, widespread adoption has been rather anemic among all Insurance carriers, more so among Life carriers than P&C carriers. Surveys indicate that while all large and medium carriers are spending more and dabbling in the social media world and that their marketing and sales budgets have experimentation with social media at the top of their agenda, still they have kept their budgets and plans unchanged for traditional channels of marketing, distribution and servicing. And are cautiously optimistic about social media providing them business benefits large enough to reduce spending in traditional channels.What could be the drivers and reasons behind this? Is social media too new and unproven in the Insurance world?

One reason for limited adoption can be attributed to Insurance carrier's low risk appetite and traditionally conservative approach to new business practices and technologies.Or is the worry more around reliability and credibility of information and how and what to use it for? Are carriers concerned about the compliance and regulatory aspects of using information found in the social media world? OR Is the traditionally value conscious Insurance industry really not convinced about the ROI they can achieve with social media?

My subsequent blogs will attempt to explore the opportunities and challenges related to widespread adoption of social media among Insurance carriers around:

• Usage, Reliability and Credibility of information found in the social world

• Compliance, Regulations and Privacy aspects of social media tools

• Measuring value and ROI from investment in social media tools

What do you think? I would love to hear your views and perspective.

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Cost Reduction AND Customer Focus

2010-08-17T23:43:28Z

Most organizations struggle with finding the balance between reducing operational costs in the organization and the need to service customers better. How to measure the trade-off is not well understood and even then very rarely practiced- however, it forms the core of competitive behavior in a market that is now increasingly price conscious but poses the danger for major carriers in terms of losing customer loyalty as they strive to reduce costs across the board.

The value of customer focused operations is usually measured along the following lines and business case for the same is justified accordingly

- Producer or customer demand for competitive service models that meet market expectations (example- self service capabilities) => table stakes, no real justification needed!

- Customer Satisfaction surveys (example- Dalbar) in addition to benchmarking analysis at industry level => survive as a leading brand, marketing justification!

- Cost of acquiring new customers vs. retaining existing customers and/ or cross-selling => sales cost based justification!

]]> As one would notice, the above focus of customer focused improvements do not really address the core expectations of operating cost optimization that most operations organizations are typically measured on. Cost reduction usually focuses on optimizing the resources deployed to service existing customers, the above metrics are usually not quantified in typical ops improvement initiatives.

One of the challenges in using some of the above metrics is the responsibility of sales goals in the organization. While the above parameters can easily be tied to revenue performance of the company, the division of responsibility at the executive level between operations and sales goals usually forces a reluctance on the part of the operations organization to identify tangible metrics for improvements from a revenue standpoint.

The usual result of a purely cost-focused approach to operations improvement is a sub-optimized initiative that does not capture all the potential benefits that can improve the Return on Investment for the initiative. Companies need to take a comprehensive and balanced approach to setting goals for their transformation initiatives in order to realize the full spectrum of benefits and optimize the RoI from their investments. Focusing only on one silo (operating costs vs. revenues) would lead to weakening of the competitive position as more nimble players gain the upper hand by winning more eyes & minds from existing & potential customers.

Cross Selling- Can it be more successful

2010-08-11T09:20:33Z

Insurers have been focusing on cross sell to address the issue around revenue growth. However a study indicated that, 99 percent of insurance advisors feel it's critical or important to cross-sell effectively, only 46 percent consider themselves successful at it. So what are the key issues?

1. No single source of data - Presence of disparate systems storing data in multiple systems/data sources.

2. Absence of defined processes and systemic support to enable cross selling

In these market conditions, each insurer needs to ponder on the following:

1. Do you have a cross selling strategy in your organization? Is there a measurement mechanism in place? What percentage of business comes through existing customers?

2. Are there relevant processes and systems in place which enable and track cross selling?

3. Do you have a focused effort to provide necessary training and tools to enable people on the field to engage existing customers about new products that are relevant to the customer needs

In my future posts I will dive deeper into each one of the above aspects. In the meantime here are few interesting artifacts which can give you further insight

1) http://www.insureme.com/insurance-agent/successful-cross-selling

2) Infosys - Predictive Customer Interaction Management | Offerings | BPM-EAI

3) 8 Ideas for Cross Selling Success - Yahoo! Small Business

Looking forward to hearing your comments and experiential insights on this topic

Smarter Organization - Simplify

2010-06-28T09:20:09Z

In my previous blog I mentioned the need for Insurers to "Simplify", "Collaborate" and "Adapt" to emerge as "Smarter Organizations". I would like to elaborate on the need to "Simplify" in this blog.]]> Insurers are entering new markets and geographies through acquisitions and setting up their own offices. Insurers in new geographies have initially set up their own enabling functions like IT, HR, finance etc to allow organizational agility instead of relying on corporate office. However as the organizations grew in each of the geographies the siloed nature of the support functions has increased the cost through duplication of efforts, infrastructure and processes. Simplification reduces risks and frees up cash.

Few insurers have realized the need to Simplify their operations to show productivity and reduce costs. Few initiatives for simplification include

1) Creating single digital nervous system for key functions such as HR & Finance to enable faster flow of information
2) Setting up of shared services structures for Infrastructure across subsidiaries
3) Single instances, server consolidation and virtualization
4) Integrated planning, performance management processes across entities

Increasingly Corporate CIOs are given the responsibility to reduce the IT costs by simplifying the underlying structures, processes and systems. Such a transformation is possible only with the direct support of a CEO and CFO.

Time To Get Personal

2010-06-23T01:57:51Z

The percentage of 17-year-olds with a driver's license dropped from 75% in 1978 to under 50% in 2008. Even if you go up two years, the drop is still significant, from more than 90% of 19-year-olds in 1978 being licensed drivers to only 77% of them 30 years later.

The reason for this shrinking of the pie seems to be a) movement towards urban areas with abundant public transportation and b) evolution of digital commerce.

With the rapid evolution of technologies, the second aspect above could only accelerate the change in consumer needs vis-a-vis protection. Auto manufacturers are already doing everything possible to get the demographic into a vehicle - ranging from making the vehicle equate to a "computer-on-wheels" to introducing "community cars" for the infrequent drivers.

The underlying question though is - will this trend influcen a change in the personal insurance products? Can the consumer demand an auto-insurance product that he/she pays for on a need-basis? Can the consumer demand a true "personal protection" product that will insure the individual regardless of the risk?

I guess the answer to all the questions above is Yes. It will be imperative for carriers to understand, engage, sell-to and service the new demographic in ways that they have never done before. How they will react and who emerges as a leader remains to be seen. There is no doubt, however, that it is time to get a lot more personal with the consumer base.

What do you think?

Smarter Organizations

2010-04-29T12:59:34Z

While industry outlook for 2010 seems better than 2009, it still doesn't seem favorable towards either revenue growth or profitability. One of the key challenges each insurance company needs to ask is how can they work towards becoming smarter enterprises in 2010 and beyond? For insurers to be smarter enterprises, firstly they need to simplify their people & operational processes and technologies & systems. This could mean business process optimization, application/ technology / asset modernization towards gaining more efficiencies and effectiveness. Insurers that invested in simplifying their processes by leveraging technology a few years ago are reaping the benefits during the recession.

Secondly, organizations need to continuously collaborate & learn new ways of doing business. This could mean entering new markets, launching new products / variants, launching new service offerings, new channels of distribution and innovation in customer service. Recent recession has forced many insurers to start thinking this way. It can be quite easy to go back to old ways as the market opens up. It is only possible if leaders create a culture of learning in the organization and walk the talk.

Lastly, organizations need to adapt to the changing environment. Changes in demographics, changes in talent availability, changes in financial markets and regulations. These changes would be visible only if the organizations have the learning orientation and are nimble /simple. Complex organizations would find it very difficult to adapt to the changes in the environment . Insurers that have tried different ways of doing business, innovated on the distribution channels, launched new products and services faster than competition in the past would be able to adapt well to the changes in the environment. Changes in technology such as social media, blogs could provide significant impetus towards growth and improving the stakeholder experience. It depends solely on how quickly insurers can adapt and deliver business value.

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Consumer 2010- Opportunities for growth!

2010-04-18T07:00:00Z

With the markets looking up, recession receding, insurance industry is no exception and is poised for growth. However, the industry is facing a new consumer- one being careful, more mindful of what and where to spend - an indelible mark left by the brutal down turn and recession.

Reason? The great downturn of 2007-09 has impacted people from all strata of the society - the well heeled, middle class and the poor - alike, and the dent has been deeper than any in the past with capital losses ranging from 70% to 90 % in many cases. Though the recent market recovery has brought back some of the value, the scars are still raw- with the average investor still keeping away from the market.

There is a major change in the consumer buying behavior at all levels - moving away from the indulging type to the need focused, necessity driven model. From a rapid spend consumerist economy, we are moving into the more careful, thoughtful set of consumers who will look for value over class and jazz for every penny they spend.

Major retailers like Wall mart are focusing on furthering quality, enhanced service and need fulfillment than promoting indulgence. Financial Services firms are vying one another to cut down the fee. Many carriers have started to relook at their product portfolio trimming the frills and furs and exploring products that fulfill the basic needs for protection and savings. Exotic products with higher fees and charges are losing the glamour. Simple products with superior service quality are the need of the hour to retain the customer and grow.

Better customer segmentation, analytics and intelligence are critical to position the right proudct and grow in this market!

iPads & Tablets- potential to accelerate online product research for complex insurance & retirement needs

2010-04-14T11:08:34Z

With Apple's popular iPhone/ iPod Touch / iPad devices expected to be in the hands of nearly 1% of the global human population sometime in 2011-12, you have to wonder if this is more of a gaming driven user adoption curve or would there be more practical uses emerging for the latest iteration of the device that has been labeled as "magical & revolutionary" by its makers.

One thing is clear- the iPad is the same size as a regular business folio used by many executives and for those too busy to be accessing laptops while on the go, it is going to be an innovative addition to have a notepad sized connected device to carry around all day. A basic behavioral change that will be enabled is for users (both as consumers & business professionals) to be able to access more frequently various news & publications pertaining to their interests. A potential extension which would arise is for a more connected user to engage in higher levels of research into their own product or service needs- while it would not necessarily tilt consumers away from an innate tendency to rely on personal touch (agent/ advisor), it is definitely going to enhance their awareness and also enhance their connection with other similar user profiles.

For financial services firms, the iPad is going to liberate their user segments from the small form factor of the Blackberry & other smartphones for regular transaction capabilities such as account browsing, trades etc. It is also imperative for carriers to enhance their social media vehicles and ensure a platform for consumers to interact with each other and also with potential prospects who would be researching financial services offerings (example- retirement services) prior to any purchase even if such purchase is ultimately done through a personal selling channel.