Life insurers need to apply "design thinking" to reinvent how customers interact with their business, according to research from McKinsey & Company.
According to a McKinsey research report, Transforming life insurance with design thinking, design thinking is about viewing the customer experience as a source of competitive advantage.
The research stated that applying design thinking requires a shift along four dimensions: instilling customer empathy, applying an iterative approach to customer feedback, creating cross-functional teams and a closer partnership between business and IT.
"Life insurers can adopt design thinking with an agile, sprint-based approach that allows for a full experience redesign in eight to 12 weeks for one product proposition," the research said.
"Since today's consumers expect frequent updates and new features in nearly every product and service, the insurer's innovation work is never done."
The research noted that of the larger challenges facing the global life insurance industry was low engagement (see chart).
"Distribution is often intermediated through brokers, independent financial advisers, or banks, putting distance between insurers and their customers," the research said.
"This is a major barrier to reducing attrition and enabling cross- and upselling."
McKinsey also said another major challenge was the industry’s limited ability to meet the preferences of Generation Y.
"Generation Y will comprise close to half of the insurance customer pool within the next 10 years," the research said.
"They expect highly interactive digital experiences, complete price transparency as well as fast and even instant delivery."