Kyle provides revenue and sales analysis for all Advicent go-to-market teams. These analytics optimize Advicent pipeline forecasting, marketing strategies, and leveraged media channels to improve efficiency of sales operations. Kyle is interested in combining his three passions: tech, data analytics, and marketing, to drive success.
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In order to take a look at the future of an industry, it is often imperative to understand where it came from. Winston Churchill once advised a young teenager who was wishing to get into politics to “Study history, study history. In history lies all the secrets of statecraft.” Historical trends reappear over and over again and can help identify what will happen next in a number of industries. As such, to learn about the future of the insurance industry, we should first take a look back, as presented by Angela Strange, at the first insurance market and how many insurance companies moved into the Fortune 500.
The first insurance market started in Edward Lloyd’s coffee house in London in 1686. Its purpose at the time was for sailors to ensure their ships and cargo were covered before setting out overseas. These early insurance deals lacked many of the details that individuals today would find necessary such as the concept of differentiated premium prices correlated to a person’s risk tier. In these early days, the UK government would sell a life annuity at the same price to a 20-year-old as they would to a 40-year-old. Of course, this practice of handing out generic insurance policies could never make it in the private sector.
Today, we can easily illustrate and comprehend different risk tiers. For example, if you are currently X-years-old with these characteristics and lifestyle, we expect you to live X amount of years. By combining life expectancy tables, probability, and statistics, insurance companies are able to develop a crude model to turn a profit. Going back to the maritime example, it would have been helpful for the insurer to be asking these risk questions. How well trained are the captain and crew? How well built is the ship? How long is the trip? How dangerous is the route?
Increasing risk data points
Now to the modern day, whether you like it or not, the internet is collecting data on how we live. This data can come from apps like Waze, Fitbit, Drivewise, Calm, Nest, and many others. These data points can then be used to assess and appropriate risk in a way that has never been done before. This advanced understanding of risk leads to higher profits by attracting more clients in low risk pools and lowering the costs that individuals in high risk pools can bring.
Embracing digital disruption
According to a recent article from Deloitte about insurance in a digital age, consumers want insurance companies to fully embrace digital disruption. Deloitte also addressed ways that insurance carriers can acquire more customers by doing this. Specifically that carriers should adopt more sophisticated segmentation strategies for potential clients’ buying journeys and identify the priorities that compete for their wallet share. In short, Deloitte is suggesting financial service companies understand their customers better.
Interestingly, this analysis fits in very well with the rise of many large financial institutions. What do GEICO, TIAA, Farmers Insurance, and State Farm all have in common? These companies, among others, started with a niche demographic and then expanded into larger markets. The most obvious, GEICO, stands for government employee insurance company. GEICO started out selling insurance only to government employees, but now you see their ads all over TV, selling insurance to the masses.
Niche financial services companies excel at serving their specific demographic because they understand their buyers better than the competition. These companies often do exactly what Deloitte sees as being crucial for the industry moving forward: understand the target buyers’ desired journeys and their buyers’ priorities with regards to wallet share. For instance, Next Insurance provides small business insurance at scale by classifying specific industries and professions within them to different risk pools.
Competitors are now entering the insurance market by looking back at some of the old trends and using them to innovate. Companies are beginning to use new data points to analyze risk with more detail and use it to their advantage. These companies are gaining buyers by understanding them in more detail and providing insurance catered to their needs. The insurance world is changing, will you keep up in 2019?
To learn how a private wealth advisory practice with $130 million in AUM increased their revenue, prospects, and conversions rates by implementing NaviPlan, click here.