How to establish the right insurance business model
It’s not as simple as selecting from a suite of pre-set options.
By Martin Stewart : 12th of September 2021
When it comes to creating your insurance business model, it’s not as simple as selecting from a suite of pre-set options. Instead, you should assess the various key components involved and then piece them together to create a bespoke business model optimised for your own unique market, target audience, goals, and competencies.
These key elements are your customers, value proposition, financial model and capabilities. Together they provide a framework for not only establishing your operations, but also assessing the changes that are happening around you (and adjusting accordingly) and analysing other companies to understand how they’re competing in order to inspire disruption and change the insurance game.
In establishing your own business model, ensure you do the following.
1. Prioritise your customer experience
Customer experience is a key area of competition for insurers and capabilities in this area should be a critical part of your business model. As customer expectations evolve, so should your services and competencies. Whether it’s 24/7 support, mobile-friendly platforms and functions, seamless user experiences, rapid claim processing times, or simply an effortless claims process full stop, staying in-tune with what the market wants should be an essential element of your business model.
And make sure you test this out in the field. Forget about Net Promoter Surveys or talking to Agents at your annual conference. Try being an anonymous customer of your own business: call your 24/7 support line, use your online applications, ask to make a change to your policy or try lodging a claim. Take your agents out for a few drinks and see what they really think.
- Evolve your customer experience capabilities
- Remain aware of customer expectations
2. Establish a strong value proposition
In a competitive market, your point of difference plays a big part in determining your position, and not just in the market but in the eye of the customer. If the majority of your customers are millennials, then you could be expected to establish a clear and demonstrable position on issues like climate change, and other environmental and social issues.
This could mean becoming a net zero emissions or paperless company (and will in turn inspire other players within the space to lift their game as well, giving you ‘pioneer’ status). Make sure you really embrace this and the result is not just lots of marketing fluff. Don’t be like the CEOs of GM and Ford who flew their private jets to Washington DC to beg for assistance so they could avoid layoffs in the GFC.
- Understand your audience
- Include value-added and socially responsible solutions
3. Lock in a reliable financial model
It’s important to maximise your fiscal efficiency across the board to free up time and resources for overhauling core technologies, entering into new markets, and expanding capabilities. Assess your day-to-day operations—can you drive down costs by automation or eliminating unnecessary work?
Avoid just creating savings by slashing staff numbers or outsourcing to cheaper locations. For example it may seem a saving to outsource your help desk to an offshore business but it’s far better to make your systems and processes easier to use and more efficient so customers do not need to call the help desk in the first place.
- Pinpoint opportunities for cost efficiency
- Identify how these funds will be reinvested elsewhere in the business model
4. Choose your capabilities cleverly
When it comes to defining your capability pool, ensure these decisions are led by technology. Powerful technology can accelerate your efficiency, productivity, and competencies, allowing you to satisfy more customer demands sooner. On the other hand, legacy systems can inhibit service delivery, so if you define your capabilities without the tech to support them, you run the risk of losing customer sentiment as a result of lagging and lacklustre internal processes.
Take a leaf from Elon Musk. His aim is to have Tesla’s fully built by robots. He employs engineers to make robots, and the robots make the cars. Steel, glass, paint, lithium, plastic, rubber etc. goes in one end of the factory and cars come out the other.
- Ensure technology is at the core of your capability decisions
- Keep your technology contemporary so as to evolve your capabilities
5. Continuously optimise your business model
While this checklist can help shape your business model moving forward, it should in fact be adapting all the time. Therefore, never take a ‘set and forget’ approach to determining your business model, but rather keep your finger on the pulse of technological developments, customer expectations, and evolving markets to ensure your business model is always optimised.
These days you never have a chance to rest on your laurels. The competition is not the businesses you know about but the emerging InsureTechs and other Innovators that entering the Insurance market. They will used to a world where decisions are made and acted on quickly and are well-funded by growth focused investors.
- Don’t take a ‘set and forget’ approach
- Adapt your model to meet the demands, trends, and advancements of the evolving landscape
Tick all of these boxes and you’re on your way to establishing an agile business model that not only keeps up in a rapidly evolving post-pandemic world, but can survive within it.