Insurance 2.0

Finding the Business Model that Fits the Customer of the Future

Working from the outside-in, the client is always the focus

by Denise Garth

Ms. Garth is senior vice-president of marketing for Majesco, industry consultants with over two decades of experience in providing technology solutions, products and services for the insurance industry across lines of business – Property & Casualty (General Insurance), Life, Annuity, Health, Pensions, and Group & Worksite Benefits insurance. Reprinted with permission. Visit here

Netflix was born in 1997 as a new old company. Even at its inception, Netflix founders realized that its mail order DVD business model would rapidly be obsolete. It would need to use its opening model to fund a new model if it was going to survive.[i]

Internet streaming was the future. As home internet connections grew faster, subscribers would hopefully shift away from DVDs and simply receive their content direct to their homes. In 2007, the streaming service launched. Netflix moved to a hybrid business model where viewers could choose to download movies or receive them in the mail. Netflix was then able to glean an unprecedented amount of data from viewers on how they like to watch television, often binge-watching through many episodes of a series. This helped them to define what kinds of content viewers might like, so in 2013, they further shifted their business model and they began producing their own original content.[ii]

By 2018, Netflix had 3 million DVD subscribers and 130 million streaming subscribers. Netflix now spends $13 billion yearly on content development for 80+ shows. And with that content they are now challenging traditional television including “the big 3” and cable, including HBO, for viewership, industry awards and more.

How customers consume

What Netflix did right from the start was to look at how customers of the future would want to consume content while keeping their eyes on what kinds of content their current customers would want to consume. Netflix started with the customer and used customer preferences and technology trends to determine their operation and business model changes…and began their path to the future.

There is logic to working from the outside-in, focused on the customer. If you create your processes to fit customer expectations and develop products that fit customer needs and expectations, you have then built a model that will be in demand. Savvy, innovative insurers are redefining insurance from an outside-in perspective, challenging the “DVD model” of insurance. They adapt to what customers want and expect … rather than requiring customers to adapt to the way insurance works. They are flipping the generations-long, inside-out practice of giving first priority to their own needs.

By understanding how customers make decisions that activate and drive their insurance behaviors, we can understand why Digital Insurance 2.0 entrants are transforming traditional insurance business models and capturing the next generation of insurance customers. With this knowledge, existing insurers can create their own unique strategies and capabilities using new technologies, processes, products and business models to facilitate behaviors that are beneficial to both their customers and their companies – ensuring future growth and success.

Do we really need to transform our business models?

When insurers look at their books of business, they may be tempted to think that now is not the right time for a business model change. Their “traditional” valuable current customers represent a vast portion of insurers’ revenue and profit. These customers are likely Boomers and Gen X who are in life stages that often require multiple policies across different lines of business to protect their homes, cars, possessions, businesses and family members. Most are reaching or at the peak of their earning power and asset ownership. Furthermore, many of them have remained loyal to their insurer for years even if they were not always 100% satisfied.

However, these “traditional” customers are increasingly digitally adept, especially Gen X, putting their satisfaction at a greater risk because they are beginning to walk a fragile line between their long-held loyalty and their increased expectation and demand to receive a better experience, product, and service. As they hear and learn about all that innovative insurers with increasingly digital offerings have to offer, their eyes and minds begin to open up to the thought that loyalty is a two-way street. Is their traditional company being loyal to them if they insist on maintaining status quo, or are they on track to consistently adapt and improve to meet new needs and expectations?

At the same time, Millennials and Gen Z insurance customers expect insurance to be much different – and are not satisfied with traditional insurance processes, products and business models. They have grown up (and are still growing up) in a digital world. They expect and demand digital capabilities. They want new products that will align to their activities and behaviors. And they want it their way … personalized to them.

Individually, they may not be as valuable as the Boomer or Gen X policyholder … today. But their value will rapidly grow as they advance through their life stages, they will want and need many of the same traditional protection products, plus a host of new ones that cover new risks. They will want to manage existing risks differently, with a focus on prevention versus indemnification, and also on enhancing their financial, physical and emotional well-being. More importantly, they will want to manage all of these products and services from their mobile device, with an option to speak with a knowledgeable human being at any time as well.

Insurers should not expect the next generation of insurance customers to adapt to insurance models and products of the past. The roles are now reversed. Insurers must now adapt to them...

Insurers should not expect the next generation of insurance customers to adapt to insurance models and products of the past. The roles are now reversed. Insurers must now adapt to them.

Last week, Majesco released its findings from its 2018 customer survey, entitled Building a Business Model for the Insurance Customer of the Future. In our report, we show how customer preferences and outside experiences are forcing model change within insurance. The research revealed some key insights about growth and innovation opportunities for companies providing risk management solutions. When we look at many of these customer trends, we see the possibilities of Netflix-like adaptation.

Marketplace Trends and Their Impact on Business Models

Customers, led by Gen Z and Millennials, are actively participating in marketplace trends and using technologies that require new products, services and engagement strategies. But as we noted, Gen X and sometimes Boomers are increasingly open to digital options. The impact is that insurers must act on these now if they hope to capture the growth opportunities of the next generation, while keeping their current profitable customer base satisfied as well. Consider the following:

  • Gen Z and Millennials lead as consumers in the Sharing Economy. But Gen Z stands out with their use of rideshare services jumping sharply from 45% to over 60% and showing a strong 10% bump in the use of homeshare services. For P&C insurers, this means adding more than additional products. They will need to consider non-traditional service additions.
  • Fitness trackers and smart speakers are the most heavily used connected devices by all generations. Gen Z and Millennials lead in the use of connected home devices, with Millennials doubling their year-over-year use of connected security devices like Ring doorbell. These devices will be of tremendous benefit to insurers. Fitness trackers, however, will rely on real-time data. Smart speakers will require adaptation to a new pipeline of research, quoting and purchasing. (See our recent Four Consumer Trends blog for a discussion on smart speakers.)
  • Gen Z and Millennials use drones and 3D printing at two to nearly ten times the rate of GenX and Boomers. These are just two of the many technologies that the future customer is going to be touching that will have a dramatic impact on insurers.
  • Over 20% of all generations have purchased event or single-item insurance, and over 30% of Gen Z and Millennials have purchased cloud-based software on a pay-as-you-go subscription basis – highlighting the growing expectation of pay-as-you-need products, including insurance. Pay-as-you-need and event insurance may revolutionize the industry and create Netflix/Blockbuster comparisons in the insurance industry. Most insurers need to be thinking of pay-as-you-need as an opportunity to reach younger generations with relevant insurance relationships.
  • Growing percentages of all generations are completing their purchases of new insurance policies online. Almost 50% of Millennials have done so and Gen X showed an 11% increase over last year, highlighting the shift for existing customers. Even if an insurer has shifted some of its pipeline processes to online capabilities, it may not be using a business model that is optimized for maximum online engagement or effectiveness. The model that fits the customer is one where nearly any insurance process can be started and finished via online or mobile app.

Product, Service and Business Model Trends

Customers are open to using new products, services and business models. Some of these are already offered or used by innovative carriers, reinsurers, MGAs and solution providers, while others are still in the experimental phase. It is important to be a first-mover in these areas to win market share.

  • Gen Z and Millennials express the strongest interest in value-added service offerings, indicating they are less indoctrinated into the traditional insurance business model than their older counterparts, and they are more open to viewing insurers as partners in their overall well-being.
  • Gen Z and Millennials show strong interest in the Lemonade social good model of distributing post-claims money to charitable causes. They are most likely to consider other social or peer-to-peer business models for sharing costs/rebates or for networking.
  • Nearly 50% of Millennials (followed closely by Gen Z) would consider eight different insurance pricing models based on new data sources regarding their behaviors or characteristics, reflecting their desire for products based on their unique needs and behaviors.
  • AND … Gen Z and Millennials have the highest propensity to consider purchasing insurance from Amazon, Google and Apple.

These insights across all generations point to the disparity between the old and new worlds of insurance. As Majesco has advocated in the past, insurers have every reason to continue fostering their loyal customers while cultivating new models. But the window of opportunity is rapidly closing. In the 30 to 60 year-old life stage “sweet spot” where customers’ protection needs are at their peak, Millennials overtake Gen X and Boomers combined in 2021 and Gen Z joins them in 2025 – giving a SIX year window to shift to a new model that will keep your current customers and capture the next generation of dominant buyers – because both are important – they bring revenue and profit. Even Netflix, with 3 million DVD subscribers to its 130 million streaming subscribers, considers the DVD profit ($17.66 per subscriber, per year) as an important revenue stream.

To navigate successfully to the future of insurance and at the same time keep existing customers while attracting a new generation of them, insurers must follow three paths:

  • Modernize the Existing Business – Replace legacy systems in a private or public cloud to keep and grow today’s business.
  • Optimize the Business Today – Create new digital capabilities to protect and grow today’s customer base.
  • Create a New Business for Tomorrow – Build new business models for a new generation of customers and products.

In our next blog, we’ll consider the statistics behind our survey numbers. We’ll look specifically at Product and Service trends to see which customer trends are on the rise and which ones are on the wane. How are renting, sharing and gig jobs pushing insurance models into the future? To get a better glimpse into your customers’ futures, be sure to download Building a Business Model for the Insurance Customer of the Future today.



[i] Littleton, Cynthia, Roettgers, Janko, Ted Saranos on How Netflix Predicted the Future of TV,, August 21, 2018
[ii] Timeline of Netflix, Wikipedia, February 19, 2019