A Financial Home provides advisory and comparison options so customers can manage and optimize individual financial products in their product portfolios. Furthermore, the Financial Home uses algorithms and data analytics to help customers identify (and close) gaps and deficits in their financial portfolios, relative to their needs and wants. The ability to manage all financial needs in one place is especially appealing for digitally affine customer segments that expect the same seamless user experience from their financial providers that they are used to from their e-commerce and streaming services.
How can insurers play a role in the Financial Home, considering that banks, thanks to their online banking platforms, are clearly in a pole position to provide the service? A growing number of banks have partnered with startup players from the insurance sector, so-called InsurTechs, to offer their customers digital-insurance management solutions alongside banking products. InsurTechs that are already very active in building or contributing to financial-home solutions include Clark and Friendsurance in Germany, Fluo in France, and Wiquot.com in Spain
Insurers need to make a conscious decision on how to position themselves in the evolving Financial Home market.
Three Strategies for Insurers
From our point of view, insurers need to make a conscious decision on how to position themselves in the evolving Financial Home market. There are three possible strategies:
1. Build your own Financial Home
Insurers might opt for the development of their own Financial Home solution, potentially leveraging an external technology partner to increase speed to market. For this strategy to work, the insurer needs to possess a well-known and trusted brand, a large enough client base to reach sufficient scale, and the agility and speed to capitalize on the first-mover advantage.
Succeeding with this strategy, which enables the insurer to secure its own client interface, requires significant commitment and investment.
2. Provide insurance for the Financial Home of a bank partner
For insurers that already possess a strong (exclusive) distribution partnership with a bank, positioning oneself as the cooperation partner for insurance within the Financial Home of the bank might be the option of choice.
Following this strategy enables the insurer to gain access to the cooperation partner’s entire client base, but requires the insurer to work closely with its partner to design processes and products that make the customer experience as seamless as possible.
3. Provide insurance for multiple Financial Homes
Insurers that focus on their products rather than the client interface can pursue a strategy that positions them as the best product provider for multiple Financial Homes and digital brokers of various providers.
Following this strategy enables the insurer to remain independent from one (exclusive) cooperation partner but requires strong relationship-management skills, and the agility to address the needs and wishes of different Financial Home partners.
We believe that Financial Home solutions will cover a significant share of the entire consumer insurance market in the near future. We expect up to 30 percent of all insured customers to make use of a Financial Home in markets like Germany or France—either as a primary solution or in addition to traditional sales channels like tied agents, brokers, and direct business. Thus, insurers need to decide now which position they want to play in this market and act fast, or risk losing their client interface, sales, and market share.
Choosing a Financial Home strategy depends on an insurer’s current strengths and weaknesses, as well as its overall strategy. Success requires a commitment to execute quickly and to the full extent. Once clients are lost to a different provider, they are likely lost forever.