The traditional value propositions of life and health insurance companies weren’t product innovations. Instead, it has always been the clients’ retirement funds and financial risk protection in the events of illness, disability, or death.
However, the major recent macroeconomic, demographic, and regulatory trends are forcing insurers to streamline their value propositions, refine their operations, and innovate their products. Here are the emerging product innovation trends in the broader life and health space.
There are two inevitable changes in the business world nowadays. The first change is the fundamental need for responsiveness and agility in the supply chain to respond to the COVID-19 crisis. The second is the fast-paced irreversible shift to e-commerce.
Ecosystem integration is found to be the up-to-date business-process-driven approach to these two. By definition, the word “ecosystem” here is everything that revolves around a company’s products’ manufacturing and delivery. For instance, it includes the customers, data providers, financial institutions, suppliers, and logistics providers.
Companies are now jumping on the bandwagon in finding value in the processes connecting all their stakeholders. They’re quickly uncovering ways to unlock this value through the software technology called ecosystem integration. It connects and integrates the core revenue-producing processes between one business and its ecosystem partners.
Insurance companies have also opted for integrated service offerings or ecosystems. They’re now expanding vertically through the value chain. They’ve done so by doing partnerships and joint ventures.
This vertical integration enables health and life insurers to impart integrated services. One example is Veterans Health Care in the United States (US). Having it with medicare allows US military veterans 65 and up to get medicare and VA benefits even in a non-VA health clinic. Another example is improved digital capabilities, which didn’t only improve customer experience and outcomes but also made insurance more affordable.
Another way to enhance customer experience is through bundling products in a package, combo, or mix that’s based on customers’ needs and preferences. For example, companies usually combine top-selling items with low-selling ones and sell them as a unit for one price. Doing so doesn’t only help consumers to try new products at low risk but also saves money.
Product bundling comes with a lot of perks for companies. For example, since grouping items together can be sold more than one item during a single purchase, it can steadily increase the average order value. Additionally, selling more means decreasing marketing and distribution costs and inventory waste.
Many insurers are now offering policyholders flexibility across various health and life coverages. They’re now bundling health, protection, retirement, and wealth management benefits. For instance, the insured may now flexibly adjust their premium to be even more secure against various risks as they age. The insured may also expand their protection coverage against disability, severe health risks, or even death.
Mutualization is changing a firm’s structure from a joint stock to a mutual company, where customers own most shares. A lot of insurance companies are structured this way. Mutual insurance companies give policyholders the right to get a portion of their profits and even elect the management.
The new trend is acquiring upside potential (or the amount by which analysts expect a security’s price may increase) through mutualization. Several insurance companies are now utilizing this concept for retirement savings. Doing so grants policyholders the potential increase in value from investments, especially in riskier asset classes, instead of the conventional low-risk, fixed-income ones.
Essentially, mutualization allows policyholders to build a fund reserve. They’re usually done through excess capital with insurance companies. It’s generally helpful for policyholders, especially on maturing contracts’ bad year results. While these contracts have stringent cancellation rules and long duration, they generate excellent upside potential.
Improved Coverages for Pre-existing Conditions
In the past, insurers tended to reject people with pre-existing conditions. These are health problems a person had before the start date of health insurance coverage. Examples of these are asthma, diabetes, cancer, and even pregnancy.
The good news is that life and health coverages have started offering protection coverage to them nowadays. For example, in the United States, under the Affordable Care Act 2014, insurance companies can no longer reject people with pre-existing conditions.
Additionally, they can neither charge more money for coverage nor subject a person with a pre-existing condition to a waiting period. These changes prompted many American health and life insurance companies to restructure their protection coverages.
Improved life and health coverages for pre-existing conditions are generally possible due to enhanced pricing abilities. They’re finalized after considering fine-grained risk parameters. Further, for good control, they’re usually equipped with rewards systems that are digitally supported.
Innovating their products hasn’t always been the front and centre of health and life insurance companies. However, due to significant changes, real product innovation has become the core lever that insurers need to come up with. Otherwise, their traditional value propositions will continue to erode.