All-in-one or a-la-carte? Providing more appealing insurance solutions

At the beginning of 2016, Mintel identified that the shifting tide in consumer sentiment meant that consumers were looking for either more temporary (a-la-carte) solutions or a more sophisticated bundle of products (all-in-one). As the year progresses, it seems plausible that the internet of things (IoT) could be the vehicle to help implement both options for consumers. Gone are the days where the promise of protection was enough to engage consumers, they are now looking for services that provide a benefit to them today.

The applications of how smart tech and the IoT could impact insurance lines of business seem obvious for Health and Property & Casualty products.  It is easy to see how wearable devices like Fitbit or Nike Fuel could positively impact the health insurance world in the same way telematics programs revolutionized discounts in the auto insurance space. But often left out of the complex web of connectivity is how technology has the potential to influence other lines of business such as life insurance.

What potential opportunities exist for IoT to revolutionize the life insurance industry?

Smart tech has attempted to move into the life insurance space, most notably when John Hancock released its vitality program in 2015. The program allows a Fitbit device to track a policyholder’s activity while providing rewards and discounts in exchange for the data. The concept garnered much interest from industry stakeholders, yet similar product initiatives did not follow in rapid succession as expected. John Hancock still stands by the success of the program, adding the program to additional product lines throughout 2015 and stating that “the positive trends in Vitality and Term sales [helped] offset the competitive pressures” faced by the company in the company’s most recent earnings call.

Still, the way technology is set to impact the life insurance space goes far beyond offering customers discounts through wearables. As consumers expect products and services to adapt to every decision they make in their lives, the IoT has a massive opportunity to apply the concept to insurance coverage.  How could wearables, smart homes, and travel apps all work together to provide a solution best suited for a person’s needs today? What would a product look like that increased life and travel insurance coverage but reduced auto and homeowners coverage when it knew the policy owner would be spending extended time abroad? And how could this dynamic approach to protection increase customer engagement with a product category such as insurance?

Instead of providing insurance in the traditional sense, this product concept allows customers to feel confident that their coverage is adequate for them in the moment, and adjustments can be made seamlessly without hassle. State Farm understands this changing customer mentality and recently filed a patent for the “aggregation and correlation of data.”  Their hope is that by tracking data “State Farm’s system might determine you are not sleeping well and correlate that with information that shows your home gets cold at night. The system would suggest that you raise the temperature to sleep more soundly.”

Going forward, this more integrated concept has the potential to engage consumers in ways that the insurance industry has not been able to master in the past, a concept that is particularly important for life insurance, a low engagement and abstract product line.  While 70% of consumers agree that it is important for everyone to have life insurance, 37% of consumers say they don’t know enough about life insurance products to purchase them, increasing to three in five when looking at those consumers 18-24, according to Mintel. Providing value to consumers in between the typical points of interaction (purchase, payment, and claim) could build a more loyal customer base and help customers understand the value in having protection today rather than off in the distant future.

Stephanie Roy is the Director of Insights, Insurance at Mintel, focusing on all insurance sectors for Mintel Comperemedia. She is responsible for providing internal and external stakeholders with insights and analysis on trends in the Life, Health and P&C insurance industries.