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From Products to Solutions

Helping People Manage Everyday Risks in the Post-Outbreak World

Affinity
COVID 19 Coronavirus

By Paul Monks | June 19, 2020

With COVID-19, the flaws in product-led insurance have been laid bare. Only a technology-enabled, solution-oriented approach can bridge the gap.

Affinity insurance1 products have traditionally been set up to minimise the risks of everyday life, which tend to remain static over long periods of time. As such, many insurance products have evolved incredibly slowly, if at all.

In a slow-moving insurance market, it becomes difficult to quickly redesign products to match significant changes in human behaviour. A tweak to match a minor change – perhaps – but a global pandemic that is set to change the way people see the world for good? This is something else entirely.

Due to the advancement of globalisation, this novel coronavirus knows no borders, and so it respects none of the frameworks put in place by the insurance industry to neatly package risks and match them with people’s needs.

It is time for the Affinity insurance world to move away from being led by products.

At Willis Towers Watson Affinity, we have long believed it is time for the Affinity insurance world to move away from being led by products. The key to helping people manage the new risk landscape is to take a technology-enabled, solution-oriented approach that has the power to closely track human behaviour and – crucially – adapt to it. The pandemic has come to show that insurance solutions, not just products, are the future for organisations that offer insurance to their end-customers if they are to stay relevant in these rapidly changing times.

COVID-19 has highlighted the flaws in a product-led approach

As the pandemic hit, many insurance policyholders were frustrated to find that their cover reaches only so far. While insurers are no doubt suffering losses and paying claims as a result of the pandemic, for every successful claimant there are others who either have policies that are not going to pay out or had not arranged cover at all.

At the heart of this frustration is the way the insurance market typically operates for most mass market risks. A model that bundles risks into marketable insurance products only works so long as that particular package is deemed a good fit for the would-be policyholder. Unfortunately, this mindset means that, all too often, the question the industry ends up asking is ‘Do you want to buy this product?’ and not the more pertinent ‘What risks are top of mind for you and how can we help you manage them?’.

Part of the reason for this is that it is simply easier to bundle and sell a product than it is to design and continually redesign the product around true consumer needs. It is when consumer needs and behaviours change – as they have so markedly during this pandemic – that the limitations of this approach are laid bare.

The new normal demands a solution-oriented approach

The coronavirus pandemic is driving one of the most significant behavioural shifts in human history, ushering in a new era where everyday people are much more attuned to the importance of risk management.

Of course, there have always been risks associated with everyday living such as leaving home or driving a car, however, since the outbreak began, people are now passively refactoring their risk management from the ground up – whether they realise it or not.

The subconscious feeling of invincibility that can come as a by-product of routine and familiarity has fallen away. Instead, people are keenly aware that there is little in life they can fully control, including their ability to fully protect themselves and earn an income.

This outlook shines a harsh spotlight on protection products in particular. Payment protection products, commonly referred to as PPI, have been traditionally designed to protect people from the burden of just one of their outgoings if they lose their job or are unable to work. In the context of a pandemic, where income risks include being furloughed, the shortcomings of payment protection products are clear. These products will typically only cover hospitalisation with a virus, and not something so far-fetched as a government-imposed lockdown.

Meanwhile, many people are adjusting to working from home and may never go back to the kind of office-oriented lives they once had. As their everyday lives continue to change, people will be more likely to respond to propositions that help them solve their new pressing risk management problems. An example of this would be personal cyber insurance cover. This type of cover has become essential for many businesses, but with so many people now set to be working from home, there is likely to be a much stronger interest in personal cyber cover than ever before. An increase in online fraud and phishing scams during the pandemic has brought these risks to the forefront of people’s minds, indicating the great potential this cover has as an insurance offering for the future.

As the new normal matures, cover must evolve or die

The new normal will not reveal its final form overnight. Since countries have been impacted on different timeframes and with different severities, they are taking a broad spectrum of different approaches to tackling the virus. This will shape their progress towards a new equilibrium and the nature of consumer behaviour that follows.

Domestic and overseas travel will naturally resume, although it will be an entirely new frontier to be approached with caution. Even when travel becomes more possible, each individual will need to make a judgement call on whether they can accept the risks involved. While some countries are beginning to form travel ‘bubbles’ to allow citizens to travel to other countries with similar virus management policies and controls in place, every indication suggests international travel is unlikely to bounce back to pre-pandemic levels.

That casts a shadow on traditional travel insurance products too. Travel insurance at no extra cost was once a mainstay of packaged bank accounts and credit cards, which also attracted the attention of the regulator. That dark cloud is now compounded by a complete refactoring of attitudes towards travel. In the short-term, people will show little interest in travel cover in the traditional sense, and while redesigning the product for domestic use could better match people’s interests for now, travel cover must be entirely rethought over the medium-term to reflect a true picture of the risks as seen through prospective travellers’ eyes.

Technology-enabled solutions will bridge the innovation gap

The pronounced shift in consumer behaviour, which will continue to evolve for months and years to come, has clearly already left a yawning gap between the solutions people need and the products the industry is offering.

One approach to address this gap would be to simply design a new range of products that fit the new landscape when it emerges. Taking the earlier example, travel insurance could be altered to become more domestically focused. However, the same problems will ultimately prevail; the redesigned products could just as easily fall out of kilter with consumer behaviour again as it evolves. While product redevelopment might have its place, the true value of insurance for the future will be unlocked through the protection from emerging risks.

In the past, certain retail insurance products have been subject to regulatory intervention when they fell out of sync with true consumer needs. An agile, solutions-oriented, digitally-delivered approach to Affinity insurance puts consumer needs at the heart of the offering, meaning it is far less likely that this mismatch will occur. Innovative risk management solutions delivered through technology should be all the are more adaptable to change, avoiding the ongoing problems associated with product redevelopment.

The ability to harness real-time data and analytics will mean insurance programmes (and prices) can be continually readjusted to make sure they are enhancing the given product or service in the most effective way. Tracking consumers according to their demographic profile will open up the opportunity to provide them with the most appropriate insurance offering at the right time. This will naturally help avoid the regulatory scrutiny of the past, since consumers will be offered products that match their profile, and the overall offering will be much more flexible as a result. Well-designed insurance solutions can help people feel comfortable taking those calculated risks again, helping shape the ‘new normal’.

Technology-driven insurance solutions are the key to connecting the dots between insurers, clients, end-consumers and a changing world to make sure an effective solution is always available, remains relevant to the end-consumer and, is ultimately, profitable.

Willis Towers Watson Affinity consults with organisations to ensure that their insurance programmes serve as a valuable and credible extension of their business whilst improving customer satisfaction and driving long-term customer retention.


Footnote

1 Affinity insurance refers to the sale of insurance products by organisations whose core business is not insurance. An example of this would be a mobile network operator offering you device insurance when you buy a smartphone.

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