Modern Insurance Magazine


What price perfection?


What price perfection?

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As the field levels, UK insurance players can cost effectively become heroes.

Digitisation is finally running through the insurance world. The value chain of manufacturers, distributors and end customers, variously working on first name terms over decades, is becoming more of an online ‘value ecosystem’ of interdependent functions. The industry is experiencing a seismic structural shift. It will make differentiation harder, but not necessarily more expensive, argues Christian Barnes, Head of Strategy at AML.

Demand shapes supply

The shift is partly driven by the ever-changing demands of an increasingly complicated world. A growing range and volume of less predictable risk; for example, ‘thinking’ robot error at all levels, from semi-autonomous car to potential global systems breakdown. Or the prolific unpredictability of the consequences of climate change and the indirect consequences of policies to mitigate it – leading, for example, to a greater focus on ‘stranded assets’. And then the myriad risk complexities of a global pandemic, with consequent regulatory pressure to deliver value in a time of unprecedented crisis.

Bespoke solutions over relationships

Today, businesses need a raft of real solutions that suit their specific challenges and opportunities. The general insurance public are looking for cover amongst a similarly growing diversity of risks – within and outside the home, health and motor. Intermediaries in all segments crave efficiency, time and cover for themselves as they are held increasingly accountable.

Rules blunt weaponry

Indeed, another driver in this industry shift is regulation itself. Asset Management has seen pivotal moments with RDR, Mifid and beyond, and most recently with the self-declared ‘more assertive’ and interventionist FCA’s ‘value to investors’ initiative.

Insurance will similarly continue to see the removal of tilts and bluffs from the field of play. Among far reaching demands on product delivery, one directive of the FCA’s recent Fair Value regulation, for example, hugely diminishes the insurance industry’s weapon of price elasticity by outlawing two-tier existing customer/acquisition pricing. Policy loopholes are continually being closed and further analysis demanded, to ensure fairer outcomes for risk owners.

Commodity breeds disloyalty

Alongside changing needs and regulatory attention, the forces of digitisation, data analytics and full-blown AI can fast reduce today’s differentiators to commodity status. Just as they are doing in the wider Financial Services industry, and services in general.

So, if not through product or service features – nor even price or personalisation – how will those key components and stakeholders of the emerging online value ecosystem distinguish between heroes and villains in the future? What will halt the slide into a ubiquitous, homogenised, faceless soup of perfectly personalised solutions? In short, how will we choose providers and distributors to work with or buy from? How can providers and intermediaries influence choice? How will the industry attract much needed new, young talent?

The force of personality

We believe, with some irony, that it will come from the very legacy that has caused inertia and delay in bringing the changes we now see coming down the tracks. The initial appeal and persistent loyalty among individuals in the industry reinforces that it is our limbic brain that responds first to events and initiatives, ahead of our more rational capacities. In other words, we don’t generally buy from, or partner with, people we don’t like or trust.

Players in the new value ecosystem need somehow to express, as organisations, those same appealing, engaging and retaining attributes of character and personality that individual relationships have done for so long.

Understanding trust

Arguably, part of the cause of delay in change in the insurance industry is attributable to employees, on average, being older than those in every other financial services sector.

With a relative lack of younger blood to drive change in functional delivery, the legacy of individual relationships has largely meant a continuing reliance on relational trust – the more emotive aspect that makes us feel, through experienced behaviour, that we can rely on certain people to behave according to our expectations in all circumstances.

For relational trust to diminish in favour of the more faceless, digitised new online value system would likely mean a significant commercial loss to players in all roles. In that event, trust would be rooted strongly in a more transient, transactional sense for all stakeholders, where a dip in a performance metric can lead to rejection. Players could move from hero to villain in a brainwave.

Hearts on sleeves

So, it should be no surprise that many invest in brand. Stakeholders in all roles and functions, from manufacturer to customer to employee to influencer look, often subconsciously, for organisations that share their values. Increasingly they are seeking this out consciously, to bolster their own reputations through displayed affinity with the ‘right’ partners.

A clear and simple articulation of those values, the purpose and the wider world view is fundamental in making choice easier and in an organisation’s favour. It has to be authentic and ‘owned’ by all. It deserves time and financial investment. It needs to reflect and direct behaviour such that an experience is consistent with the declared – and is consistent over time, too, at all touchpoints.

Accessible to all

But it doesn’t necessarily require huge, paid comms campaigns.

Brand articulation, activation and management, today, are not just for the big players. In comparison to the time and sums that organisations are having to invest to play in the new online value ecosystem, the fundamental value of a strong brand is relatively accessible.

Building the enduring relational trust that has been the preserve of individuals’ relationships, is an investment that can pay significant dividends.

Christian Barnes, Head of Strategy at creative ad agency AML Group