Data-driven technologies such as Artificial Intelligence, the Internet of Things, and Big Data Analytics are deeply transforming the financial services industry. Tondi´s master’s thesis The Reconfiguration of Customer Value Proposition in the Insurance Industry explores the impact of these technologies on the insurance sector, with a dual focus on the reconfiguration of the customer value proposition and their potential effects on the creation of value for society or shared value.
Customer Value Proposition (CVP) is a strategic tool used by a company to communicate how it aims to provide value to customers. In the thesis, three key components of CVP are identified: strategic and communicative function, competitive advantage as well as resources.
The study utilized two distinct datasets, corresponding to two different empirical contexts. The first set is composed of secondary data about fifteen major global insurance companies, and it has been analyzed through a hybrid thematic analysis which involved three levels of perspective, namely operation/service, strategy, and industry level.
The second data set has been collected via semi-structured interviews with ten respondents working in the Finnish insurance company Pohjola and one working for the Insurtech Cachet operating in the Baltics.
Two trends impact the customer value proposition
As per the first empirical context, thematic analysis was used to analyse the data. The findings of the this first empirical context highlight two trends impacting the customer value proposition, namely a (digital) servitization of the industry and strategic customer centricity.
The implications for customer value proposition are:
– In terms of competitiveness, embracing the integration of digital technologies gives a distinct advantage by offering a set of services that resonate with the evolving needs of customers, streamlining the processes, and enhancing the overall customer experience.
– In terms of resources such as data and related capabilities, digital servitization redefines the dynamics of value creation as value is co-created in broader ecosystems where resources are not “unidirectional” but shared among different actors including customers.
– In terms of strategic and communicative functions, they are both enhanced due to the shift from product-centric to customer-centric.
Data-driven technologies reshape significantly the customer value proposition
The insights generated through the second thematic analysis indicate the fact that data-driven technologies reshape significantly the customer value proposition. The insights also reinforce the findings of the first thematic analysis notably drawing attention to the following:
– The customer value proposition is increasingly evolving as embedded, thus competitiveness stems from integrating insurance products with value-added services, often outsourced or provided by partners, that prioritize risk prevention, efficiency, timesaving, customer support, and an overall seamless customer experience.
– The focus on risk prevention fosters a profound sense of trust and protection in customers, which goes beyond mere transactional relationships. Insurers are given the opportunity to be reliable and trustworthy partners.
– Data-driven technologies enable insurers to deliver superior value and gain a competitive edge through a self-reinforcing mechanism, ultimately benefiting both the insurance industry and the customer segments.
Characteristic of the Finnish market
Some perceived challenges in the Finnish market related to the application of these data-driven technologies, emphasize the need to address potential barriers, such as data protection and privacy-related issues, and pitfalls in communication and modeling performed by AI-based tools. The meaning of these barriers supports the idea that consumer behaviour is the actual driver for change and not the technology itself.
Effects of data-driven technologies on societal value and shared value creation
The study’s second focus on societal value creation revealed that data-driven technologies, specifically Artificial Intelligence and Big Data Analytics, potentially impact both positively and negatively, calling for responsible and ethical use of those in the future.
The analysis of the interview data disclosed that data-driven technologies are acknowledged as functional in creating societal value, especially as they incentivize healthier and safer behaviors in terms of driving, physical health, etc.
Shared value has been perceived as relevant, especially since for insurers social impact is integral to economic success. Reducing accidents, improving health, and helping organizations better prepare for economic risks all improve the profitability of insurers. The social role of insurers is increasingly growing especially in light of the latest events impacting customers globally such as COVID-19 pandemic, climate change, etc.
Text and photo (AI generated) by Katariina Saarela.