Complexity for customers, operations and sales agents
For most customers, taking out insurance is an unpleasant experience. They feel unsettled and overwhelmed with the multitude of different products, terms and conditions and tariff variations. In addition, complicated specialist terminology makes it difficult to understand the product world on offer — “simple or intuitive” are not words that spring to mind.
This product complexity with its manifold product variations also represents a significant hurdle for insurers themselves. Even relatively simple products require long development times. The slightest product modification may take several months to implement and involves considerable effort. Ultimately, both the broad product range and the portfolio of existing contracts, built up over decades, result in an almost insurmountable complexity in terms of portfolio management, IT and claims processing.
Every day, sales agents face the challenge to explain complex products to their customers in simple terms. In addition, customers confront them with cut-price insurance offers from online comparison sites. However, in many cases the level of coverage is not directly comparable. These hurdles encumber sales and complicate cross-selling.
New modularity as a solution
In order to become truly customer-centric, insurers’ product ranges not only have to become simpler, they also have to change structurally. No customer thinks in terms of insurance products, they think in terms of risks they perceive in their individual situation. It is therefore crucial that providers abandon conventional thinking in terms of segments and products and instead align themselves with their customers’ working and living environment – life realms.
A “home” realm, for example, combines insurance components such as home contents, building, liability, electronic devices and legal protection to cover all related risks associated with customers’ homes. Other life realms already defined by European insurers are mobility, family or health.
From the customer’s point of view, this means understandable risk and hazard coverage in a life realm through an insurance product that can be individualized by flexibly configurable modules. The structural change therefore no longer signifies marginally expanding a given core product into a product bundle, but rather providing a large number of equivalent modules. This modular product kit then allows all existing individual modules to be flexibly combined into new products.
New modularity follows standard product model
Switching to this new modularity offers the great opportunity to standardize the existing product architecture across all divisions into a simpler and company-wide, uniform product model. This promotes innovation, accelerates product development and significantly reduces administrative effort.
The development of a module begins at the level of elementary products. These can be flexibly combined into so-called products and sales products. This reduces the effort involved in maintaining separate tariff generations and considerably improves manageability.
From a sales perspective, the technology-based advisory process is also very important (see Figure 2). During the advisory process, modular products are configured and compiled. The offer is created by entering limited basic data into the quotation system. In the “home” realm, for example, this would be place of residence and floor space. Only a few parameters are required to generate an initial price indication (fast quote). By including additional modules, the coverage is adjusted to customer needs and the premium is parameterized accordingly. A system-supported plausibility check of the data entered ensures consistent advisory quality and avoids coverage gaps as well as duplicate coverage. Automated advisory processes also ensure compliance with legal requirements (e.g. IDD) and documentation obligations.
A win-win situation for customers and insurers
- Customer-centricity: Products are consistently designed along life realms from a customer point of view that uses a simple language, which improves customer understanding of the insurance cover.
- Sales empowerment: Modular product design is a clear competitive differentiator in the market and increases cross-/upselling potential, as sales activities are targeted along the customer’s life realms.
- Process simplification: Processes in the operating units are simplified and accelerated by standardizing administration of the product world. In addition, the modular structure enables lean product innovation processes.
Ensuring successful implementation
zeb has already successfully supported the development and introduction of a modular product world for bancassurance insurers in the pioneering Italian market. Project experience shows that starting with a pilot life realm reduces risks and effort and simultaneously ensures successes.
When designing modularity, the following questions arise:
- Which life realms and (sub-) divisions should be included?
- Which modules should be selectable per life realm?
- Which services complement the insurance product range?
- How can conditions be adjusted without creating tariff generations within the modules?
- Which plausibility checks are required to avoid coverage gaps?
- Which discount system is used for the life realm model?
The modular product system within the life realms offers advantages for all distribution channels. Experience in the Italian market shows that bancassurance is the ideal pilot distribution channel. This is mainly due to the fact that banking products can easily be integrated into the life realm perspective—advice within the scope of a life realm thus facilitates banking and insurance product sales. Regulatory and technical aspects also provide a tailwind, as PSD2 and data analytics can be used to provide a holistic view of the customer’s financial security needs.
Furthermore, our project experience shows that a straightforward advisory process combined with the intuitive design of the solution concepts encourages bank advisors to overcome a quite common reluctance towards insurance products. As a result, not just sales figures increase significantly but also the cross-selling rate—by more than 10%.