Where are the most inventive, market reactive and just plain fun insurance products coming from? The answer may be China. Even though China’s soccer team did not make the World Cup they still have World Cup fever, and some China-based insurers have launched a several micro-insurance products that cover possible effects from what is now being called, “The Beautiful Game”. Here’s a look at three interesting ones:
An Cheng is selling a product that is good for one World Cup round – it can be renewed for subsequent rounds, and if your team loses, you can submit a claim for the heartbreak your team has caused you. To show that actuarial due diligence and underwriting analysis has been applied to the product development process, England’s team has been excluded as one of the teams covered under this policy. Pity the poor English fans, slammed by actuaries. Of the three policies, this coverage smacks of blatantly of gambling, but really it’s more marketing hutzpah than insurance. The policy costs 8 Yuan ($1.28) and only pays out 18 Yuan ($2.89) which is NOT paid out in cash but as a credit to Taobao – a shopping site owned by Alibaba.
Sold by Zhong An, this policy will cover medical expenses if the insured is beaten up by soccer hooligans from another country. But only if the insured is not the aggressor –one policy condition mandates that the insured cannot be the one who started the fight. The premium is 3 Yuan ($ 0.48) and provides 10,000 Yuan ($1,604) of coverage. While this is also a sensational type of policy with the level of hooliganism that occurs within the European soccer market, Hooliganism insurance could actually have legs. Could this create a new market for those risk sensitive soccer fans who feel hooliganism is out of control?
Zhong An also comes in with a product titled “Acute Gastroenteritis Insurance Health Insurance World Cup Soccer” (courtesy Google Translate) which covers 2,000 Yuan ($321) for hospitalization costs, 200 Yuan ($32) of emergency expenses and 10,000 Yuan ($1,604) of death benefits from acute gastroenteritis (stomach flu) from eating the wrong things at the World Cup, all for only 3 Yuan ($ 0.48).
While these products aren’t going to have a serious impact on the bottom lines of Zhong An or An Chen, they are great marketing ploys that put their names out in front of a lot of potential clients, especially younger ones who might not normally think of their insurance needs. This falls into the league of “Great Marketing Gimmicks” similar to the one that Berkshire Hathaway’s Warren Buffett leveraged during the NCAA finals (for more on that, please see an earlier blog)
What do insurers need to have in place to successfully launch micro products like this in the first place? How do they make this a profitable venture and how do they capitalize on any success from it? There are several things that insurers would need to focus on:
- Automated Processing - While the overall volume of these products are small, limits tiny and payments even tinier, an insurer would not want to employ any sort of manual processing to support the sales and administration of the policies. Fully automated processing would be required with rules and workflows to handle the application process, pricing and disposition of the entire new business process. Additionally, if an insurer would want to continue to leverage this sort of micro-insurance often – either as marketing gimmick or full fledged business model – an insurer would need a robust system that could easily be updated with relevant new product features, underwriting and pricing rules.
- Fully integrated marketing - These are all short duration products with a limited shelf life (the length of the World Cup, about 30 days), getting them to market quickly and effectively is paramount. Insurers would need to be able to update sales channels, link to advertisers and outlets and be able to position products effectively. How can this be leveraged with existing clients to spur new positive interactions? This includes being able to cross sell and upsell products where appropriate and in the right context. The World Cup products appear to have a high “fun” content while other micro products may be positioned completely differently with different target markets.
- Follow-on activity - After the World Cup is over, how will the insurers leverage the relationship with their World Cup insureds? Having a fully integrated CRM and sales engine attached to the micro-insurance products to capitalize on what was hopefully a positive and fun experience. This includes being able to extend results and findings to other sales channels, such as independent agents and brokers, that may be the benefactors of follow on sales. Ideally, insurers should be using predictive and adaptive analytics to parse out clients and personalize offers that would meet the individual insureds needs instead of just pelting the client with generic offers that may or may not provide value.
- Re-use – anyone who came up with these brilliant marketing ploys will probably want to try and repeat the process (especially if they have shown that micro-products like these can either generate an underwriting profit or creates additional sales of traditional products). Launching insurance products in most insurers is a very labor intensive process that takes a significant amount of time and is not cheap. An insurer looking to repeat micro-insurance product launches (or is looking to improve their ability to launch standard products effectively for that matter), will want to leverage product engines and process models that can quickly adapt to change and can re-use processes and intellectual property from other insurance products. This need for agility and re-use is critical in this specific market and the insurance market in general.
Hats off to An Chen and Zhong An for creating an enjoyable insurance World Cup moment. With the growth of micro insurance in third world countries, these products are a great example of how micro insurance can be leveraged in other scenarios in more mature insurance markets.