The fundamental principle of the insurance and financial services sector has long been protection from risk — and that still holds true. What has changed is risk itself, with new types of loss or damages emerging almost daily. Fortunately, new insurance models and products are entering the market to reduce financial uncertainty and make accidental loss more manageable for businesses and individuals alike.
Though these innovative insurance solutions are adept at meeting changing customer needs and market trends, it is also critical to remember the foundational purpose of the insurance industry to grow your business successfully.
Look Back to Look Forward: The Evolution of the Insurance Industry
Throughout U.S. history, insurance evolved as new risks emerged, shaping and changing the industry as we know it. The insurance market looked much different not that long ago, so it is important to look back to understand the path forward toward new insurance models.
1752: The Philadelphia Contributionship established insurance as an industry and created more responsibilities for regulators.
1920s: More than 120 million life insurance policies were owned in the U.S.
1930: Life insurance policies reached $117 billion — a high at the time.
1945: The U.S. government enacted the McCarran-Ferguson Act, which shifted the majority of insurance regulation to the states and declared all policies should be in the public’s best interest.
1990: The Unfair Claims Settlement Act was added to the Unfair Trade Practices Act by the NAIC, helping to protect consumers against unfair claims settlement processes.
1999: The Financial Modernization Act established a framework to permit affiliations among banks, securities firms, and insurance companies. It also reformed certain regulations that may prevent insurance companies from more competitive business practices within the newly integrated financial services marketplace.
2010s: The internet and other digital technologies have a major impact on how insurance is sold and how insurers evaluate risks.
Through each of these changes in the history of insurance, risk was a constant — and so was the need for trust. The importance of trust in the insurance sector cannot be overstated, especially as innovative insurance solutions emerge. As we know by looking back at the evolution of the industry, people will only seek protection from risk in those they trust. Fail to establish trust, and people will find help elsewhere. How can you build trust and meet customer expectations to boost your business? With technology.
How to Improve the Customer Experience in Insurance and Build Trust With Technology
Technology in the insurance industry allows for greater transparency and accountability in organizations. It also helps insurers more easily set expectations with and fulfill their promises to customers. With each of these actions, trust will inevitably increase over time.
What’s more, new technological innovations in the insurance sector aid insurers in capturing an increasing amount of consumer data. This data can be used not only to offer more personalized packages but also to assist in assessing risk, reducing claims, and making business practices more efficient. When combined, insurers are creating operational value and meeting customer needs at the same time — all while establishing trust with customers.
Beyond that, many of these same innovative insurance solutions make it easier for consumers to purchase products and customize their options. With so many more insurance distribution models and channels than there were even a few years ago — the most recent being digital marketing and peer-to-peer (P2P) groups — insurance companies, including those in the affinity space, can embrace a wider array of technologies to increase trust, remain competitive, and keep pace with the evolution of the insurance industry.
What Technology Means to the Affinity Insurance Market
While technology is essential to establishing trust with customers and ultimately moving the entire industry forward, it’s an especially critical component of the affinity insurance market. The affinity model historically has been transactional, which is why it has been more challenging to adopt new strategic models — ones with a greater focus on using technology to improve the customer experience in insurance overall.
To better serve a younger market of Millennials, Gen Yers, and Gen Zers, who are much less loyal to products or services than other generations, those working in the affinity insurance market can look for new ways to leverage technology in the insurance industry. They must also offer more innovative insurance solutions that can reach consumers where they spend a great deal of time: online.
Just because the industry is moving forward with new technologies, however, that doesn’t mean leaders can forget the fundamentals that got the industry to where it is today.
Blending Innovation in the Insurance Sector With Traditional Fundamentals
Using traditional insurance fundamentals will help buyers understand the importance of coverage and risk reduction. Innovation, on the other hand, makes it much easier for buyers to secure and customize coverage. The likeliest convergence points for these two concepts can be found in the following areas:
Consumers often weigh the customer experience over any other facet of the purchase decision. Cost is important — most people are happy to get a deal — but they also value convenience. Improving the customer experience in the insurance industry by adding greater ease to the quote process, for example, is just one way to offer consumers convenience — as is allowing for greater customization to their policies and plans.
With younger generations being 33% more open to buying insurance through new channels (such as Amazon, Apple, and Google), providers can remain competitive and provide the best customer experience by exploring partnerships beyond the traditional models.
While consumers expect a lot from their experiences with insurance companies, two things often come to the forefront: an easy purchase process and customized product options. New technology in the insurance industry can enable both. Providers just need to think differently about what affinity means and how to best incorporate new and innovative insurance solutions and technologies into existing models. Millennials and Gen Zers are rapidly emerging as the dominant buyers across many insurance products, so insurers can no longer rely on traditional approaches alone.
Affinity business models can adapt and expand partnerships into other arenas to capture either one of these demographics over the next few years. Consider Aetna, for example. The company distributed the benefits app ALEX — which was developed by Jellyvision — to make the benefits selection process easier. Employees are able to use the app to have a conversation about their insurance options.
Capturing Institutional Knowledge About the Insurance Sector Before It’s Gone
As the industry continues to innovate and evolve, with new technologies and players entering the affinity insurance market constantly, capturing and maintaining institutional knowledge of the fundamentals will be crucial. This effort yields many benefits, including:
- Reducing the time, resources, and money spent on onboarding efforts.
- Preventing mistakes due to a lack of knowledge or experience.
- Minimizing disruptions to business as a result of absences or departures.
- Providing insights into potential changes in customer preferences or behaviors.
- Increasing the chances of replicating past successes.
While those benefits are all critical, there’s another reason capturing and maintaining an affinity insurance knowledge base is so important: age. An estimated 4 million Baby Boomers retire each year, which accounts for roughly 31% of the total workforce. On top of that, 56% of retiring Baby Boomers hold leadership roles — that’s a lot of lost institutional knowledge.
The problem? A recent survey found that few employers take the time to ask retirees to share their institutional knowledge and insights with others prior to their last day of work. With so much time spent on developing these individuals, companies are not leveraging their expertise to the fullest potential.
Retirees themselves are not opposed to passing on the torch. According to the same survey mentioned, 81% of Baby Boomers would be more than willing to mentor younger team members. On top of that, the next generation of workers favors this practice, with 79% of workers between the ages of 18 and 29 saying that older colleagues can help them learn new skills.
How to Pass the Insurance Knowledge Base on to Next-Gen Workers
Finding ways for soon-to-be retirees to share their institutional knowledge and insights on the fundamental principles of insurance with others does not have to be complicated. Insurance companies can employ these tried-and-true tactics to set newer team members up for success and retain institutional knowledge:
- Create mentorship programs. A formal mentorship program allows younger workers to participate in one-on-one skills, career, and leadership development from people who have helped shape the affinity insurance market.
- Institute skills training courses. While onboarding and training new hires, it’s beneficial to enlist the help of more seasoned workers to handle certain areas and topics. Just one day spent shadowing an experienced colleague can minimize skills gaps.
- Leverage generational cross-training. Generational cross-training enables Millennials, Gen Zers, and Gen Yers to learn non-job-specific skills from older generations in various departments within insurance organizations.
- Join an association. As part of an association such as PIMA, new employees can form mentorships with seasoned leaders in the insurance industry. PIMA members can learn from peers through interest groups, advisory forums, conferences, and events like conferences and webinars.
Insurance companies are successful when they take full advantage of valuable resources while they are available, and workers nearing retirement fall into this camp. This allows organizations to leverage both innovative insurance solutions and the fundamental principles of the insurance industry to help their businesses succeed.
Here are some key steps for insurance succession planning to ensure fundamental knowledge about the insurance sector from seasoned employees stays within your organization:
- Develop a succession plan.
You might not know exactly when tenured employees will leave your organization. Don’t let yourself be surprised by a sudden departure. Start the insurance succession planning process today to ensure that your knowledge base does not leave with any one employee. Review all critical roles and determine the impact of their departure to your organization. Then, identify all need-to-know information.
- Identify succession candidates.
With any role in an organization, it’s beneficial to know which team members would be best suited to step in should important people leave. Get a lay of the land and decide whether you have anyone on staff who could fill each role. Would these team members need training, and what type of training would be most beneficial? It is not always necessary to rely on the organizational chart alone to arrive at the potential candidate(s). Look for talent that has the skills — both hard and soft — to succeed in the position.
- Invest in professional development.
You’ve undoubtedly invested in professional development as an organization, but it might be time to assess whether you have invested enough in the professional development of future leaders. Do everything you can to position your insurance succession planning efforts for success by instituting a mentorship program, job rotation opportunities, and soft skills development training. Joining a professional association such as PIMA also allows your employees to gain critical insights from others in the insurance industry to boost their leadership skills and knowledge of the industry’s latest trends.
- Conduct a trial run.
As with anything in business, it is important to test a solution before putting anything in place. Consider having potential successors assume some of the responsibilities of key roles before they actually need to. Monitor the people to determine where they might need additional training should more experienced team members leave the organization permanently.
Succession planning is critical in any industry. But for insurance, this process ensures that vital information remains in your organization and can be acted upon while creating new innovative insurance solutions. Ultimately, it ensures that you maintain the proper balance between innovative and fundamental products, channels, marketing, and more.
How PIMA Helps Organizations Embrace Innovation While Focusing on the Fundamental Principles of Insurance
It’s necessary for the insurance industry to be innovative and responsive to change while also prioritizing fundamentals such as trust. Embracing new technologies that provide the best customer experience is certainly a step in the right direction — as is making the most of the fundamental knowledge already within your organization.
If you are unsure how to respond to industry changes and blend innovation with experience, PIMA can provide you with information to make more informed decisions and connect you with other professionals who have faced similar challenges. Contact us today to learn more about the benefits of a PIMA membership, including peer-to-peer learning, networking, and education opportunities.
Published on August 18, 2021.
PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the group-sponsored benefits market.