By Chris Ling, Vice President, Insurance for Capgemini’s Financial Services Strategic Business Unit
Generation Y has created an unprecedented issue for insurers. As the demographic begins to become a customer base for the industry, they are demanding a different approach – one that requires a significant shift away from the traditional manner insurers have gone about selling products to this generation’s parents and grandparents.
New technologies such as the Internet of Things (IoT) have long been predicted to cause significant change for the insurance industry. However, according to Capgemini’s World Insurance Report, traditional insurers are underestimating the demand from Gen Y customers for connected technologies. This opens the door for non-traditional competitors to walk in and lure away customers with sexy connected technologies and personalized service.
The latest example of this emerging challenge is UK telco giant O2’s recently launched car insurance offering, O2 drive. O2’s launch of a personalized car insurance offering harnesses the power of connected devices to offer competitive rates to their Gen Y customers. The launch of this service highlights the advantage those from outside the insurance industry can bring to the market. Those such as telcos and technology companies that have an existing relationship with the customer base insurers are targeting are leveraging their knowledge and technology to cause significant disruption.
Why has O2 entered the insurance market?
The industry has been talking about the potential of connected car data and more dynamic pricing models for years, but real progress has been slow. O2 launching an insurance offer shows they feel there is a gap in the market for a new insurance model for customers that traditional insurers simply aren’t prepared or able to give. As a result, O2 has leveraged its customer connectivity through digital platforms by dis-intermediating the insurance value chain to capture a profitable slice of the insurance market and a new customer segment.
O2 believes that mobility has become an essential part of everyday life, comparing its utility to that of your wallet or keys. The O2 Drive rollout benefits from the foundation and principles of the O2 brand, appealing to the modern consumer by offering additional features such as discounted car servicing and maintenance, tips on how to become a safer driver, an O2 Drive mobile app, and an optional ‘black box’ service which monitors your driving and personalises your rates based on how safely you drive.
O2 isn’t the first company to try and disrupt the industry and it won’t be the last, but a competitor of its size and with a totally different view of services entering the market can only be good for consumers and, ultimately, push the industry forward.
What impact will this have for insurers?
Like tech giants disrupting markets before it, O2 has entered an industry many considered beyond its expertise. But this has given it an edge. In essence, O2 has been able to start from scratch and ask itself a question centred on driving new and improved experiences for customers and agents. This objective is at the heart of all insurance carriers’ strategy; however they are having to contend with legacy systems and processes that can slow adoption of new technologies and models. These are challenges O2 simply doesn’t have to deal with.
Traditional insurers looking to Gen Y and beyond must look to O2 and the way technology companies approach digital customer experience for inspiration. They must put in place organizational and cultural changes that allow them to react in a more agile manner to consumer demands and innovative technologies.
O2 has brought a new approach and is showing the industry a model that puts the customer experience first. While only time will tell if its entry into the insurance market is a success, its fresh thinking will only benefit the industry and consumers.