In their book "The discipline of market leaders" (1993) Michael Treacy and Fred Wiersema describe three generic competitive strategies: operational excellence, customer intimacy (1) and product leadership. They proclaim that, in order to be competitive, a company has to excel in one of the three disciplines.

While incumbent insurance providers struggle with operational excellence (cost of legacy IT systems and classic distribution structures) and try hard to become product leaders (yet another identical home insurance product), in my opinion, they seldom excel in the customer intimacy dimension. Specifically, in the ever growing Digital native segment insurance providers are increasingly attacked by start-ups that understand the importance of customer intimacy.

Let me give you a personal example - and please note that despite my 40 years I consider myself a (grey-haired) Digital native.

Recently during a summer holiday with my family we were lying at the swimming pool of our hotel when my wife tells me " I just read an article in a magazine which reminds us to include our little boy in our general liability insurance policy. Could you please check and do that asap, ok darling?"
Me, looking up from my ebook reader, scared to answer with a shy "I will check it once we are back", I switched my attention to the insurance broker app "Knip" (2) on my mobile phone. There I clicked on my general liability insurance policy, started the chat with another click and asked for inclusion of my little son asap. Literally 15 seconds later, the guy from Knip replied that my policy already was a family policy and there was no need to change it. I told my wife "ok, consider it done. I included him". She looked somewhat doubting but happy and we closed the topic.

Knip just increased customer intimacy with me by a great deal. How much closer can you get than being there with me on my sun bed at the pool in my family holiday.

Now imagine how this story could have ended with me not having a Digital broker app and having to deal directly with a classic insurance provider? Think of it and you understand why my customer service example represents a Digital gap in the insurance industry that is so challenging for incumbents to close.

Of course, Knip is a broker and therefore not directly competing with classic insurance providers in terms of products. However, Knip owns the customer relationship and knows the customer. At times when data is getting increasingly important, insurers must not give away customer knowledge and relationships and thus risk to end up as a simple lower margin product supplier.

In my life as a Digital transformation consultant, I have learned that customer intimacy is the key to loyal customers. I have experienced that creating higher customer intimacy through Digital channels can increase retention rates and customer lifetime value. And as switching between insurance providers is getting easier keeping retention rates high is an essential factor for profitability.

But what should incumbents do to increase customer intimacy levels with the help of Digital?

  • First of all, they have to recognize that increasing intimacy with their Digital native customers is all about serving their customer’s needs at customer’s highest possible convenience, anywhere, and quickly

  • In addition, customer intimacy is all about authenticity and trust. Please don't sell me a Digital experience that you cannot deliver. For example, some incumbents create fancy Digital façades but once I start interacting they are not able to connect me with the right person/expert let alone show me all of my personal insurance data. In order to increase intimacy, incumbents have to invest substantially into modern IT systems and Digital architectures. Sorry to say, but I think incumbents have (soon) reached their limits of what is possible with old and heavy IT architectures and lack of data governance

  • Last but not least, insurers have to empower their employees and embrace a Digital culture of making things happen - outside of meeting marathons. This is the biggest step but it will help attracting the right Digital talent to close the customer intimacy gap

At Acrea we love to play around with new Digital business ideas and startups. At the same time, we advise our more traditional clients in their Digital endeavors.
We have learned how to make Digital work and are happy to share our experiences.


Definition of "customer intimacy" strategy:
(1) "The customer intimacy strategy focuses on offering a unique range of customer services that allows for the personalization of service and the customization of products to meet differing customer needs." (source)

(2) Knip is just one example but there are other apps that are very similar, e.g. Finance Fox in Switzerland. I did not do an evaluation which one is better.