The digital economy has given rise to customised products and services that meet specific customer requirements. Insurers are embracing this trend to drive competitive advantage. Claudette Steynberg, product manager at SilverBridge, examines how mass customisation can balance these new requirements with traditional business models.
“Today’s insurance market is no longer driven by a one size fits all approach. Reflecting a much broader shift in consumer product development, insurers are offering customisable solutions geared towards individual market segments instead of the generalised demographics of the past.”
Yet, within this environment, there is pressure to balance a more measured approach towards product development and the fast-paced innovation and creativity needed to differentiate from agile insurtechs. Incumbents have a wealth of customer data at their disposal, but they need to leverage that as an advantage when it comes to analysis and customisation.
“Similar to how cloud-computing has changed the software landscape with the emergence of ‘as-a-service’ models, so too will the impact of mass customisation see insurers able to provide usage-based products and pricing. The technology already exists, it just needs to be fine-tuned and applied to the local insurance sector.”
This will change the way marketing, product development, and sales are managed. Consumers are already clamouring for tailored ways of improving their everyday lives. Just think of how online shopping has become a bespoke experience with shopping trolleys saved, recommendation engines, and even coupons developed to suit specific consumer buying habits.
“Now imagine the extent at which insurance can take these examples and integrate them into their existing data. Being able to take social media information, customer feedback and profiles, and other sources of data, roll it into meaningful analysis, and then create segments specific to groups of individuals will take insurance into the future.”
This will empower insurers to compete more effectively with insurtechs and level the playing field in terms of the hearts and minds of customers.
Mass customisation provides a way to tailor certain features of a product while keeping costs closer to that of mass-produced products. For insurers, this is the more generalised solution giving way to a slightly more nuanced one.
“One of the benefits of this is that consumers will be able to combine different insurance options to suit their specific needs. So, even though there is a customer perception that these are tailored offerings, the mass customised solutions are based on existing solutions. It is just in the way they are integrated that gives the sense of being a ‘new’ product.”
For the insurer, the benefit is that it entices increased consumer buy-in while keeping product development costs low as no products would need to be developed from scratch. Mass customisation seems to be an inevitable part of the global journey for organisations irrespective of industry sector. It is in how they are willing to adapt it into existing business models that will set the scene for local growth.
“Insurtechs have disrupted the insurance market. However, those insurers looking at capitalising on their experience and relationship with customers, can benefit from the learnings provided by the successes of these start-ups.”