Insurance: Bundled Products for Everyone?

Many insurance companies offer their customers bundled products. This has advantages for both sides – however, insurers often find it difficult initially to break down their services for digital sales into individual modules. Sascha Langfus on customers, bundled products, and the pitfalls of technology.

Bundled products are in the interest of insurance customers

Liability insurance, household insurance, occupational disability insurance, life insurance, legal protection insurance, supplementary dental insurance, cyber insurance, … You can insure against – almost – any risk. But who wants to go through the process of taking out an insurance policy more than once? As intuitive, fast and convenient as it may be.

The idea behind bundled products is like “killing several birds with just one stone”, and when it comes to product sales, this is a fairly new idea for the industry. The concept behind it: Instead of having to go through the same process several times to buy a policy, customers can save time by bundling the desired protection services and buying them together. A good idea that saves the customer a lot of time and gives the insurance company the opportunity to recommend individual additional services during the closing process. But there is a pitfall: the technology.

Let’s look at the three different dimensions involved:

The customer and their wishes

Customers are the most important aspect. Their wishes become the business model, only what they ask for can be sold to them. But what do they ask for? Do the customers know the whole offer, and can they really decide what they need and want? Because what the customers particularly do not want is to become familiar with highly complex insurance topics.

But this is what is demanded of customers in traditional online sales: the traditional product overview on a website takes them deeper and deeper into the subject matter, they have to deal with each insurance product individually, and almost become “experts” themselves. On the other hand, the automation associated with the creation of bundles for online sales relieves customers of most of this work. In an “online needs check” they can find out quite easily what they want to buy – oriented to their individual situations and needs.

But who is “the customer” anyway, what distinguishes them?

• There is not “the one customer”, but a heterogeneous target group with very different characteristics regarding education, income, available time, etc.
• Nevertheless, most of these customers have a few things in common: they are demanding, mostly with an affinity for online services, and they are price-conscious.
• They want individual support, even in the digital world. Every second person has already taken out an insurance policy on the web at least once – but personal advice is also extremely important.
• All customers want their concerns to be clarified quickly. Regardless of whether it’s the process of buying or the reporting of a claim. There is usually a lack of understanding for bureaucracy.

In short, insurance customers today – like all of us – are spoiled by what large Internet companies such as Amazon, Google, Netflix, or Apple offer them. They expect the same from their insurance company: high speed, extensive transparency, flexible terms, modularity in the choice of benefits.

So what does that mean for the insurers?

The insurance company and what it offers

An insurer can lock itself into a quiet chamber and design new products. But if there is no demand for them, the work is all for naught (≠ free of charge!). Whereby… there is a niche insurance for almost everything, even against possible consequences of an abduction by aliens.

What should insurers consider when they venture into bundled products or other “insurance of tomorrow”?

The insurer should…

• offer tailored advice and flexible products
• be approachable at any time, maintain contact even after the sale
• choose an age-appropriate approach and target group-oriented communication
• offer more transparency and less bureaucracy to make processes more pleasant and faster
• have an app for EVERYTHING – but also be personally approachable
• also think of its brokers and agents: If simple services (with a low commission) are automatically combined to bundles, brokers will have more time again for the personal sale of products that require explanation (with a higher commission)

The insurance products should…

• be individual and flexible offers that include everything
• be designed as combination products, and include services of partners
• be automatically adapted to the customer’s life situation

If all this is taken into account, a bundled product could look like this, for example:

An example of the Customer Journey

John Doe has bought a new bicycle which he wants to insure against theft. He selects an insurer via an online comparison platform, and ends up on their sales website. Now the insurer already knows that the potential customer is a cyclist. With only a few additional data, they can calculate whether it makes sense to offer accident insurance, or even offer a household insurance that includes the bicycle.

But there is a catch that prevents many insurers from offering such individual services:

Technology and its pitfalls

Insurance companies have traditionally been pioneers in the digital transformation. At a very early stage, they set up actuarial IT systems that support premium calculation and risk assessment, for example. And it is no paradox that this is precisely what is a problem today: the old systems are not prepared for highly individualized bundled products. And certainly not for letting the customer take over the product configuration himself via a modern web frontend. The IT systems from the first era of digitization, of all things, are thus presenting suppliers with problems today: “The conversion of our old systems is more than difficult,” admitted the press spokesman of an unnamed insurer in 2017 to a German magazine.

IT modernization is a huge challenge, which can take many years. For fast results at the digital customer interface (web, app), a solution must therefore be found in which the old systems remain untouched, and no new interfaces to modern technologies have to be integrated. An intermediate “layer” between internal IT and customer applications is a good solution for this. Because this is a task that can be solved quickly. Large insurers such as HDI from Germany do this in order to be able to offer their clients modern frontends at all times, without turning the backend into a permanent construction site. HDI relies on technology from Avenga, which is now marketed as “couper.io”.

Such solutions enable insurers to make complex bundled products available for online sales much more quickly than before, and link them to their existing backends. This provides direct, long-term sales support and enables insurers to plan the modernisation of their legacy systems in longer cycles.

Learn more about the opportunities and challenges that the digital transformation offers established insurers. We have compiled the most important topics in a comprehensive overview on digital insurance for you, from customer proximity to new technology.