Insurance Trends in 2011 and Beyond
Companies must invest in product development, new marketing tools and new channels to find success in changing consumer landscape
Our population makeup is changing in several ways. First, the U.S. minority population is fast approaching majority status. By 2050, more than half the residents of our country will be Hispanic, Asian or African American. Second, the Baby Boomer generation — the affluent segment that accounts for 26 percent of the U.S. population — will start moving into retirement this year. And, over the next decade, 32 percent of the population will be comprised of Generation Y (those born between 1978 and 1994).These demographic shifts are significantly impacting today’s insurance industry, and will continue to be felt for years to come.
Other factors affecting the industry include the rise of digital commerce and mobile devices. These have made life easier for consumers, who no longer have to physically drive to a store to purchase a product. Perhaps because of this, consumers are choosing their products and services differently than they have in the past. They also have a new set of influencers shaping their decision-making process. For example, Generation Y consumers generally tend to be highly influenced by peer groups rather than media, advertising or insurance agents. With the growth of multigenerational households, family members are also becoming influencers for Generation Y.
New technologies are rapidly changing the insurance landscape, as well. Customers now expect to be able to communicate with insurance companies on various channels, including their mobile device. As with demographic shifts, insurance professionals must adapt to these technological changes to survive.
Many insurance companies are already shifting gears from focusing on cost-reduction to focusing on aggressive growth. Insurers will drive growth by focusing on the customer (through customer segmentation and analytics), by introducing new and simpler products and by establishing or growing direct digital channels. Companies must invest to ensure the simplification and modernization of current IT architectures.
In addition, insurers will need to establish or grow new channels — online, mobile, etc. — in order to drive growth. Products and services will be more customized and personalized. We’ll start seeing insurance carriers experiment with new models, such as pay-by-usage, micro-insurance and monetization of different products, including paying for products and services by cell phone minutes.
We’ll also start seeing more bundling of products— though not in the traditional sense, where the customer receives a discount after purchasing more than one product, such as life plus LTCI. The new bundling model will allow consumers to pay for a bundled “protection” product. In addition, insurers will need to drive growth by re-segmenting markets and using social collaboration platforms to create awareness of their products.
It’s an exciting time for the insurance industry, as these consumer trends continue to shape the industry dramatically. Companies that understand and adapt to the changing marketplace will find success. A good first step is to shift your mindset from a traditional business model to an innovative one. «
Sanjay Mohan is associate vice president of financial services and insurance at Infosys.