What are the most important stages in the evolution of the insurance industry – and other industries – as the third decade of the 21st Century continues to unfold?
Taking inspiration from the concepts of the Experience Economy and Transformation Economy (Joseph Pine and James Gilmore), we can see three distinct phases in the evolution of insurance.
First: the “Product Economy.” Companies sold products and people bought products. Even what we think of as services or experiences today, were bought and sold as products.
A great example is music festivals. The 1969 music festival Woodstock – arguably the most famous ever held – was all about product: the artists. Jimi Hendrix, Santana, Janis Joplin all established their careers on that stage.
Almost unthinkably, there were no services. For the 400,000 festival-goers, there was no pre-booked accommodation, no food trucks, no toilets and no medical team.
Fast-forward a few decades and music festivals have evolved dramatically. While the product is still important, only 8% of festival-goers claim ‘headline acts or artists’ are the reason for buying tickets, with over 50% citing the overall experience (the Economist | Why are music festivals so expensive?).
It’s not about the product anymore, it’s about the experience. This has become known as the Experience Economy.
Pick an industry, and you can see the trend. Kids’ birthday parties have gone from DIY affairs held at home and costing almost no money at all, to fully-catered events at specialised party venues, costing thousands of rands.
Retail has gone from people behind counters dispensing product at the lowest price, to “retail as theatre,” where hardware stores essentially have in-store exhibitions to sell a vision for your new bathroom or kitchen, and where grocery retailers map out the customer journey around their store. Wherever you look it’s about the experience.
The same has happened with the insurance industry. We have gone from selling the best policy at the best premium and rule-set (a product-focused approach) to creating apps and digital presentation tools to help create an experience for the customer and financial advisor.
We see a third phase starting to take hold in the insurance industry – the Age of Outcomes.
Instead of customers buying an experience, they are buying the outcome. Accenture’s most recent Technology Vision for the Insurance Industry is titled Leaders Wanted.
The research underlines our thesis that insurers are at the forefront in the Age of Outcomes.
While product and experience are obviously still important, insurance leaders are helping people change their behaviours to prevent loss in the first place and improve quality of life.
Insurers have an opportunity to be at the front of the Outcomes race, helping people achieve their desired life outcomes of living longer, being healthier, achieving greater wealth, even behaving more sustainably and potentially saving the planet.
Over the course of the next few weeks, we will explore five technology trends we see as being critical for insurers to bring to life the Age of Outcomes. We will start by exploring how best to set up an IT architecture which will support the strategic objective of delivering personalised services to customers at speed. We call it Stack Strategically. In Mirrored World, we explore the possibilities that data presents to create solutions that evolve along with customers, and the ability of technology to augment the capabilities of advisors and service agents. Next is Anywhere, Everywhere, in which we discuss the imperative to remotely enable distribution and operations workforces to advise, process and collaborate at speed. In I, Technologist, we argue that everyone in the insurance organisation needs to be technology-fluent. Lastly, in From Me to We, we explore the role of the platform economy in driving behavioural change for individuals and communities.