Split Personality: Designing for Divergence
Traditionally, large insurers have aimed at providing solutions for the general public, and have attracted most of the market as a result. This ‘one size fits all’ approach is facing new challenges as the insurance market fragments into smaller consumer groups with different needs. There are several strong market signals that point to a growing divergence between two distinct groups that have polarising preferences in how they buy and interact with their insurer. These groups have always existed, but the largely homogenous market has so far served them poorly. With digital pioneers and a growing range of new market entrants, this is starting to shift.
Cost and control needs are driving a micro-embedding revolution
At one end of the scale, price and control are key. Some of us want to be covered for what we need and only what we need. The ability to control and select the exact amount of cover required, optimizing cost, is in increasing demand. As such, bundled insurance policies will become less important to those of us who prefer to source multiple ‘micro-policies’ from different providers. Whether buying for single journeys, paying by the mile or embedding insurance into products and services, we’ll be covered only for what’s needed. A recent study by MIT shows 57% of people are open to sharing personal data to get the best price (MIT, 2019) and will be more open to using 3rd party apps such as Brolly to manage and visualise cover across multiple providers.
The need for simplicity and peace of mind is driving an ‘anything anywhere’ mindset
At the other end of the scale, some of us are driven more by convenience, simplicity, and peace of mind. There is a growing need to form deeper, loyal relationships with providers we trust with the expectation that they act on our behalf in our best interest. We are seeing a rise in the popularity of convenience services in markets such as energy, where companies like lookaftermybills.com are auto-switching customers between different tariffs. Comparable services in insurance will give us peace of mind as the administrative burden of traditional insurance is removed, safe in the knowledge that we’re always covered, whatever we do. We’re increasingly prepared to pay a premium for the ‘never seen but always protected’ policy. Use of personal data can be a valuable way for insurers to tailor and optimise cover automatically, in real-time. However, providers seeking to build trust will need to remain aware of growing consumer interest in taking back ownership and control of digital identity through services like Jolocom.
These two consumer groups will continue to exist side by side in future as providers customise new products and services to meet their ever diverging needs and preferences. Insurers who continue to deliver mass-market alternatives with the aim of ‘attracting a large base’ will likely fall in the middle and attract fewer customers as time goes on. Those that think digital transformation and lean management will be the antidote may find themselves only exacerbating their problems, building digital versions of out-of-date products and services. Now more than ever, it is time to recognise who you are for and purposefully design for divergence.
Written by Findlay Guerin & Tom Simmons