Changing the way insurers think: The risk concierge concept
Leading insurers are using technology to offer personalized service and a more streamlined customer experience.
The risk concierge at your service
In the past, betting on change in the insurance industry never was a particularly winning play. Whether it was deregulation, the advent of the World Wide Web, or the proliferation of insurtechs, the total disruption often predicted somehow never quite came to pass.
For years, many insurers simply equated digital transformation with ‘paperless’. In 2018, two years before the Covid pandemic, only 12% of insurance executives reported prioritizing true digital transformation. Four years later, this number jumped to 64%. So many insurers have recognized that simply digitizing existing processes is not enough. Digital transformation powers entirely new classes of risk products, broader, across more lines and with more advice and service.
In a recently published study titled Becoming a risk concierge – From insurance provider to customer companion, the IBM Institute for Business Value (IBV) surveyed 1,000 insurance executives and 9,000 consumers globally. We found that leading insurers are investing more than half their IT spend in customer-facing technologies and capabilities. The insurers are on the path to become what we call risk concierges: helpful resources, knowledgeable across a wide range of risks, who not only can make recommendations but can provide hard-to-duplicate personal risk advice and services.
Risk concierges are looking to offer more than just paying for claims after the fact. They are also moving beyond simply running their existing processes more efficiently. As one executive told us, “We are no longer focused on products. For us, it is all about risk experiences.” It’s about finding out what customers want, providing what they need, and explaining that in terms that resonate with them – ensuring an excellent overall experience.
Offering a broad range of products and services beyond the staple insurance coverages like auto and term life is becoming table stakes. Most of our insurer respondents have been at least dabbling in nontraditional products, from behavior-based insurance to micro-risk and risk-adjacent products. And insurance customers seem very open to meeting insurers on this new playing field. Almost half of the insurance customers surveyed say they would be willing to try new insurance products and services. Customers are also increasingly open to sharing data in exchange for nontraditional products. While a year ago about 45% of respondents agreed that ‘the less data insurers kept about them, the better’, this number shrank to 35% in our latest research.
Customer-focused leaders
“If I had asked people what they wanted, they would have said faster horses.” This quote, famously attributed to Henry Ford, is often cited when executives’ views do not match data on customers’ wishes.
But context matters: Ford was forging technologies that customers didn’t yet understand and innovating products customers didn’t yet know they needed. Insurers who prioritize traditional channels are holding on to their horses, while their customers are moving on to new modes of transportation that offer greater convenience and features.
The risk concierge concept moves insurers to a new, more defensible position as holistic risk partners. This approach can blend old products and new. A risk concierge does not just create a piecemeal list of appetizing insurance point products, but integrates them with advice, digital channels, marketing, sales, and even ecosystem partners in other industries to provide a unified risk experience.
In our data, we identified a group of leading insurers – 14% of our sample – that significantly out-invested their peers, as a percentage of total revenue, in technology overall and in customer-focused capabilities. These are capabilities that involve personalizing relationships, individualizing products, and interacting at the point of risk consideration, such as Allianz’s automatic offer of trip insurance to American Airlines customers. In fact, that group, which we call the ‘emerging concierges’, invested on average 18 times as much as their more traditional peers.
The result: measurable dollar advantages. The high-investing emerging concierge group’s 4% higher retention rate, compared to low-investing traditional insurers, translates to about $220 million more in retained premiums per year. Add to that the $240 million higher revenue growth, plus higher customer satisfaction as measured by NPS, and it equals almost half a billion dollars more in annual revenue.
The trend to the emerging risk concierge could become the oft-predicted disruption that finally creates a larger gap between the insurers. Why? Because besides being more successful, emerging concierges also show better awareness of the challenges they face. They cite more barriers to implementing nontraditional products and services than traditional insurers. And even though they spend much more than others on technology and capabilities, they believe they aren’t spending enough.
This can create a virtuous cycle: Removing the barriers – increasing stakeholder buy-in, cleaning up technical debt, and improving data access and quality – could generate even more investment in capabilities, gaining even more benefits.
What can insurers do to get there? In our study, we highlight three paths to follow: digital connectivity, hybrid cloud, and ecosystems built through partnerships. Digital connectivity creates the connection, hybrid cloud the scalability, and business ecosystems enable the ‘concierge’ aspect of the risk concierge, allowing insurers to be much more than simply damage payers after the fact, but real risk partners.
Read the full study Becoming a risk concierge, and please reach out for further questions.
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