Analysts at GlobalData Financial Services provide expert commentary, insight and data on the global insurance industry that is engaging, actionable and informative
Holistic lifestyle products are the future of financial services
Financial services customers are currently served on a product-by-product basis. However, the market needs to move towards targeting specific consumer groups or needs and holistically servicing them, according to GlobalData Financial Services.
This can be achieved by incorporating elements from multiple areas (such as savings, investments, and protection) into a single lifestyle product.
In Malaysia, CIMB Bank and its bancassurance partner Sun Life have launched a new retirement planning scheme that has evolved beyond traditional financial services product boundaries by providing protection insurance, investment, and a guaranteed yearly income in a single plan.
Under the Sun Income Secure scheme, customers can benefit from a guaranteed yearly income for up to 20 years.
They can choose their desired annual income amount based on what age they wish to retire, which can range from 50 to 65 years. Clients can choose to invest in professionally managed investment-linked funds for potential returns.
The product also provides an element of protection insurance, with a lump sum payment made in the event of death or total and permanent disability.
This product has been designed with consumers in mind. It has focused on what they require from financial services in retirement and incorporated elements from savings, investments, and protection to fully service these needs.
Future of financial services
The scheme represents a glimpse of the future of financial services products. Going forward it will no longer be sufficient to satisfy a single need. Instead the market will shift towards customer- and lifestyle-focused products that holistically tackle a specific issue or life event, such as retirement.
Another example is the property space. Home buyers need financial services providers to help with a range of steps, such as saving towards a house, getting a mortgage, buying protection insurance, and purchasing home insurance.
In the UK, where many institutions offer all of these services, there is an opportunity to bundle these offerings into a single product.
This approach would be highly convenient for consumers. If would also help improve uptake of products such as protection insurance if it was incorporated into more commonly demanded products such as savings.
This in turn would help improve the financial resilience of customers, which should be one of the primary aims of the financial services industry. Providers must consider how they can move beyond traditional product boundaries to better service their customers.
Protection personalization – from wearables to nutrition
Personalisation for protection policies could move from wearables to nutrition by insurers partnering with grocery brands to analyze health and risk based on customers’ shopping trolleys, according to GlobalData Financial Services.
In the general insurance space, UK grocers such as Tesco and Sainsbury’s have been using their loyalty cards to offer insurance discounts and rewards to policy holders.
The retailers recently announced that they have taken their segmentation one step further by analyzing customer behaviour to assess risk.
For example, regular shoppers are deemed to be safer drivers than impulse buyers, which can be used to personalize and provide motor insurance discounts.
Many grocers also offer life and protection insurance. It brings into question why their consumer shopping data is not being used within these products in the same way.
At present the personalization of protection insurance is only based on wearables.
Although wearables are starting to move away from purely monitoring steps, (also focusing on factors such as mental health and sleep), nutrition and diet also form a large element of assessing health and wellness.
Grocers are in a unique position in that they possess large data sets regarding consumers’ dietary choices. This could be used to greater assess customer risk when it comes to selling protection products.
Protection insurers that have affinity partnerships with large grocer brands could use this to their advantage. Legal & General is in a prime position to bring this proposition to market, considering it underwrites life insurance for Sainsbury’s, and life insurance, critical illness insurance, and income protection benefit for The Co-operative Bank. Meanwhile Tesco no longer offers protection insurance for new customers.
Assessing risk based on consumers’ dietary habits would be an innovative move within the protection insurance market.
It would benefit insurers by giving them access to data that allows them to better understand their customers and allow them to offer customer discounts. It would also be beneficial for grocers by encouraging customer loyalty through discounts.
The collaboration of wearables and protection insurance has been encouraging individuals to get moving through exercise. But the potential to encourage individuals to eat healthier by partnering with grocer brands is the next market opportunity.
Blockchain + cryptocurrency + insurance = Insurepal
The past six months have seen blockchain and cryptocurrencies become hot topics, not only within the financial ecosystem but the wider economy, with potential applications for both being continually explored, according to GlobalData Financial Services
Insurepal has launched a proposition leveraging these platforms to offer a fresh approach to the UK car insurance market.
In order to combat the high cost of car insurance, Insurepal seeks to utilize the concept of “social proof.” Policy holders can reduce premiums by being endorsed by friends who act as guarantors, and who will pay a pre-specified charge should the policy holder have an at-fault accident.
In return for the risk, the endorser receives a reward in the form of IPL tokens, a form of cryptocurrency issued by Insurepal. The endorser can then sell these tokens on an exchange, or hold on to them as an investment.
The car insurance market is renowned for high premiums which have been increasing over recent years.
Given this, social proof has the potential to be an instant hit with consumers, particularly as more than one endorser can be used per policy, allowing for further reductions in the premium. Of course, the benefit from the model for the insurer is an expected reduction in fraud, given both the introduction of personal trust scores and that the victims are friends or individuals rather than faceless corporations.
The success of Insurepal will largely be driven by endorsers’ interest in owning IPL tokens. After having launched a successful initial coin offering which sold out in 80 seconds and raised the target of $18m, demand appears to be high. However, as with other cryptocurrencies, the value is subject to fluctuations and could prove to be too high-risk for some endorsers once the Insurepal platform is launched.
Given the failure of insurance innovator Guevara in late 2017 – which was at least in part due to its inability to secure underwriting – the other key question for Insurepal is whether both the industry and a critical mass of consumers are ready for P2P insurance.