The insurance industry has traditionally revolved around a
company-centered business model in which products and intermediaries had a bigger role. Though insurance is considered
an efficient mechanism for risk transfer, many customers have
approached it hesitantly due to perceived complexity. In spite of
the inherent inflexibility, over the past few years, commoditization of few insurance products has allowed customers to choose
products based on cost.
The changing expectations of customers and advancements in
digital technologies are triggering many fundamental changes in
businesses. As several direct-to-customer (D2C) options emerge,
products and services are being redesigned and repositioned to
provide memorable experiences to customers. For staging these
experiences, companies are experimenting with micro-fragment-ing or atomizing their business models, products, and services.
In this changing environment, the concept of insurance is
shifting from risk remediation to pre-emptive risk prevention
and even toward ensuring continued protection or well-being.
For achieving this objective, insurance companies must take more
responsibilities, playing the role of a service orchestrator in the
life journey of the customers.
This article discusses how the insurance industry is changing
to position experience as its offering, and how atomization is
being used to deliver it.
Commoditization and Insurance
Commoditization of products and services emerge when markets
mature from monopoly to pure competition. Commoditization
is a behavioral shift in the market, where products and services
are undifferentiated in the eyes of the consumers and selection is
supposedly made only on the price disparity. While it is relatively
easy to commoditize goods and products based on inherent attri-
butes such as tangibility, fungibility, tradability, separability, and
perishability, doing so for services is more challenging.
Insurance is defined as an abstract promise of compensation
against the risk of a contingent and uncertain loss. It is plotted
“An experience occurs when the company intentionally uses
services as the stage, goods as props to engage individual
customers in a way that creates a memorable event.”
—B. Joseph Pine II and James H. Gilmore
The Experience Economy
O Goods-Services Continuum
Tangible Intangible, Heterogeneous, Inseparable, Perishable
Ownership easily established Ownership difficult to establish
Easy to evaluate Difficult to evaluate
Tradable Not tradable
Exists independent of the owner Dependent on owner
Production-consumption time-gap No production-consumption time-gap
High in search qualities High in experience qualities High in credence qualities