Edward Hadley on May 6, 2015
In our recent coverage of the LIMRA conference, we shared how life insurers are looking to make the transition to lifestyle companies. To do this, providers are exploring how to best leverage digital technologies and customer data to introduce more tailored products and value-added advisory services. The goal is to move beyond ‘one-and-done’ transactions and create stronger customer dialogues that build loyalty and business.
A great example of this data- and technology-fueled product innovation comes from John Hancock. According to CIO.com, the 153-year-old insurer is the first in the U.S. to offer policyholders discounts of up to 15% for wearing Internet-connected Fitbit wristbands.
The fitness-tracking service is part of Hancock’s Vitality program aimed at integrating wellness benefits with life insurance. Customers earn points for various activities from tracking their daily habits with Fitbit to running in 5ks, getting flu shots, and more. In addition to calculating policy discounts, these points can be redeemed for gift cards, discounted hotel stays and airline travel.
Michael Doughty, president of John Hancock Insurance, had this to say about the initiative:
“We want to make life insurance more immediate and relevant in the daily lives of our policyholders and help them connect their financial well-being to their long-term health. The latest advancements in wearable technology are encouraging people to take a more active role in their health, and it’s time we applied these innovations to create ‘smart life insurance’ and recognize and financially reward consumers for their positive actions.”
John Hancock’s use of Fitbit follows similar initiatives in the auto insurance industry, such as Progressive Insurance’s SnapShot and State Farm’s InDrive, that use Internet-connected devices to transmit information about customers’ driving habits in exchange for lower rates. Going forward, these types of technology-infused products will become the norm across all segments of the insurance industry, as providers look to attract and retain digitally savvy audiences.
As we hear from insurance executives, there’s no shortage of ideas for innovative insurance products. Most often, the main obstacle preventing product development teams from bringing these new ideas to market is existing systems, which aren’t equipped to manage increasingly targeted insurance products and their underlying business processes. Attempting to customize these systems ultimately takes too long and costs too much, creating a prohibitive environment in which to test and innovate.
Fortunately, there is a path forward. Successful insurers are creating an innovation ‘fast lane’ that combines cross-functional teams with modern development platforms to support the introduction of new products. Rather than getting bogged down by legacy systems, these teams are able to quickly deliver self-contained applications, with capabilities spanning the quote-to-buy process, customer self-service, back-office administration, claims and billing.
This approach has been successfully employed by a number of insurers, including Liverpool Victoria (LV=), which recently won a Celent Model Insurer Award for its fast-track innovation initiative. Leveraging Mendix along with agile methodologies, LV=’s fast-track innovation team has launched two new end-to-end insurance products at a cost five to six times lower than using traditional development approaches, saving an estimated £5 million while helping to sustain the company’s growth.
From traditional insurers like John Hancock and LV= to tech giants like Google, the race is on to bring innovative new insurance products to market. Those insurers that fail to grasp the move to a digital environment will find themselves falling behind and losing customers to faster, more tech-savvy competitors.
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