Innovation Engine Blog

Insurance companies are missing a huge opportunity

May 19, 2009 (11:13 AM) by Maddock Douglas
Bravo to Hyundai for introducing their Assurance Program. However, they might have missed the boat a bit by offering to take the car back if you lose your job. That’s just what people want when they lose their job is to “give back” (translated – “lose”) their car at the same time. So other car companies capitalized on Hyundai’s Assurance program (and Hyundai has since jumped on board, too) by offering to pay for car owners’ car payments for X number of months if they lose their job. Now we’re talking.  

The big insight in these new offerings is assurance. Consumers have plenty of INSURANCE but during tough times they NEED ASSURANCE. There is a huge population of soon-to-be retirees that just lost 40% of their savings. A broader set of consumers just had a big gut check on how safe their money really is in banks, stocks, bonds, etc. Why haven’t insurance companies developed an offering to ASSURE their consumers that their savings are safe? My car is safe because of insurance. My house is safe because of insurance. My death is safe because of insurance. But the lowest common denominator — money — is not safe (or should I say, as safe as the FDIC can insure). Seems like a pretty good time to develop an offering that keeps people’s savings safe.  

Think about it. Most people don’t have nearly as much money saved as their home’s present/future value, yet insurance companies are happy to insure homes but not money? Sure, it seems complicated to insure money. Here is what I say to that – FIGURE IT OUT!  

The first insurance company to come out with an assurance offering is going to be seen a completely new light. They will have disrupted the antiquated industry. Furthermore, they will have shown they care about their consumer. Fathom that!  Truth is, most insurance company executives do care. But two big issues will stand in their way; one, they will never get  “out of the jar” because they are too focused on the features and benefits of their current products; second, most see their companies as providers of insurance, not assurance.  

After writing this I think I just convinced myself to launch an Assurance Company.  Anybody want in?



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Comments


 cn May 26, 2009 12:00 AM
It's not clear to me what the product would be protecting. FDIC insures money in banks. Are you proposing that insurance companies insure investments in the stock market against falling prices made by novice investors? Money is insured. Various investment instruments are uninsured. The risk of loss in the market is what makes the returns much higher than CDs or savings accounts. Removing that risk, at a price (insurance premium), will likely negate any extra gains by making the risky investment. So in that case, why not just put the money in the bank?
 MW May 26, 2009 12:00 AM
Dear CN,

All very valid points. The intent of the post was really to focus on moving the mindset of insurance companies to assurance. How that happens is TBD.

As for the FDIC, they only insure a certain amount of money in banks. For those who have more than that, what should they do?

To your other point about on investments - you are correct, it is a calculated gamble which gives you a higher rate of return. But those liquid assets that don't have insurance (beyond what the FDIC covers) many still feel exposed.

at the end of the day, the world has enough insurance companies and they are all focusing on innovating within insurance where the larger opportunity is to think about the business model in a different way. how does a company develop assurance products?

MSW
 Randy Christian July 2, 2009 12:00 AM
GUARANTEED LIFETIME INCOME

GUARANTEED WITHDRAWL VALUE 5-7% PER YEAR UNTIL INCOME IS WITHDRAWN

ANNUAL RESET OF INCOME IF THE UNDERLYNG PRINCIPAL GROWS ABOVE THE STARTING VALUE

NO DOWNSIDE ADJUSTMENT ONLY LEVEL OR INCREASED INCOME FOR LIFE

As a veteran of the insurance industry -- There ARE products that -Guarantee(from the Insurance company) a withdrawal rate of from 5-8% FOR LIFE. These products don't require annuitization and allow access to the principal. Some provide the benefit of a growth rate of the withdrawal value by a minimum of 5-7% for up to 25 yrs. and will re-set if the investment returns on the principal exceed that rate and grow form there.

We have these products-- How can we get the word out? How do we effectivly communicate?
  

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