Business model innovation for a customer-centric future



Since the turn of the millennium, industry by industry has experienced disruptive change. This typically entails a shift from a product-centric to a customer-centric perspective. The outcome is exciting and transformative, as many former product offerings are now provided as services using subscription business models. This shift has now reached the Life and Pensions industry, where adoption of a customer-centric approach holds great promise for the customer experience.

An organization geared for product sales will first target potential customers for buying the product, then making them repeat customers who buy a later product version. Life insurance has long been a product- and process-centric business where excellence is defined at the core of insurance – managing risks. But change has come, as customer-centric approaches to life insurance are gaining traction. This trend presents a challenge to insurers who rely on traditional business processes and IT support.
For decades, insurers have had multiple offerings and processes optimized for each sales channel, including own sales forces, tied agents, bank branches and aggregators. They gather many customers and procure the offerings based on the lowest price with some riders. In 2009, Lumera first implemented support for an external underwriter, covering certain risks that the insurance provider did not want in the balance sheet.

Now more than a decade later, we have several customers using external underwriters to enhance their offerings in multiple channels, addressing multiple customer segments. This enables them to focus on where they can make a difference – in the customer relationship, regardless of the distribution channel.

Becoming genuinely customer-centric

Using the product-centric perspective, it was natural to let the external underwriter send a health declaration or an invoice to the customer for a particular cover. No wonder customers got confused as they believed they had signed up for an insurance policy with another provider. Lumera responded with a solution for managing health declarations and the billing and collection process. This includes forwarding the paid premiums to the external underwriter and communicating with customers as a single brand.

Today we see the next evolutionary step in making the Life and Pensions industry customer-centric, where insurers create marketplaces for their partners and subcontractors, enabling organizations to provide bundled offerings as if they were made in-house.

New requirements are some examples of what is required:

  • Insurance companies often use distribution partners who own the customer relationship. Using this business model, they act as wholesalers who must add value to resellers, e.g. by providing options for customizing and personalizing policy contracts.
  • Risk assessments based on digital health declarations must capture the risks relevant to the cover.
  • Processes for smooth “Know Your Customer”, including checking the date for the last health declaration and the available risk sum.
  • Enabling easy configuration of offerings for resellers, and an individual cover must be accessible as ABC to configure, price, and quote.
  • Pricing must be based on tariffs or formulas from each cover and service provider, easy to change over time.
  • The billing and collection process must be easy to understand for the customer, while automated for cost efficiency.
  • Underwriters and subcontractors should receive relevant information matching received premiums.
  • Claims must be admitted, processing initiated, and communicated smoothly. Digital customer interaction offering a “Netflix experience” will be required to meet customer expectations.

Looking forward to the next wave of industry transformation, we expect external underwriters to further expand their space, by contributing the above functionality and services. New and modified business models, including subscription-based offerings, may also emerge.

Lumera has built our Policy Administration Environment for enabling our customers to prosper when transitioning to a customer-centric approach and facilitate implementation of new business models. This is at the heart of the Prudent Revolution, where we help the Life and Pensions industry migrate from multiple legacy systems to a future-proof technology base

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