Mass customization—the mass production of individually customized goods and services—offers the opportunity for a tremendous increase in variety without a corresponding increase in costs.
Mass customization—the mass production of individually customized goods and services—offers the opportunity for a tremendous increase in variety without a corresponding increase in costs.
Although the concept is not new, technological advances such as digital manufacturing, big data and social media, mass customization is now able to go mainstream, promising to impact marketing and product development while changing the nature of manufacturing and product and service delivery.
In an age of Uber and Airbnb, today’s consumer demands products and services that are tailored to their individual needs, and the insurance industry must adapt to this new reality. When one size no longer fits all, insurance products themselves must become customizable.
The focus on differentiating individual markets can result in usage-based products and pricing, allowing companies to price, package and sell in a variety of ways. Emerging InsurTech companies like Lemonade and Metromile are already capitalizing on this idea, offering usage-based products and flexible pricing.
At its core, mass customization creates tension—between technology and stability, between efficiency and creativity. This is a call to action for successful businesses.
Uses and Economic Impacts
- Lower search and overall costs for buyers
- Superior service.
- Replacement of some segments of the traditional supply chain, such as the wholesaler and retailer
Insurance Industry Implications
Mass customization efforts within the property-casualty insurance marketplace can be refined by utilizing new data sources and applying predictive analytics. This will improve accuracy in identifying and targeting the most appropriate potential stakeholders for specific types of policies, coverages and endorsements.
When it’s done right, customization drives loyalty. Mass customization will give agencies greater opportunity to specialize and set themselves apart from traditional sales and service agencies. In essence, each customer will become their own market, making them to more expressive about their needs and desires. The result will be greater demand for a company's products and services and less of a need to market on price.
How should you and your agency respond? First, review your current customer base for potential impacts. What new products, marketing and services can you offer around mass customization? What’s the most effective platform for doing so?
Second, educate your staff about the opportunity for marketing and offering additional services. The concepts behind mass customization will eventually enable agents to move into a more effective advisory role. By customizing products and services, we combat the idea that certain products are commodities.
Finally, understand that privacy issues may be one of the biggest challenges presented by mass customization. All participants must work to understand the impacts and ensure we coordinate cybersecurity education and preparations.
The social landscape is changing and evolving. Like most technology-based change, mass customization cannot be evaluated or judged based on current standards.
J. Ted Joyce is president of Nexsure User Group. Rick Morgan is co-chair of ACT’s Strategic Future Issues Work Group and senior vice president of marketing at WAHVE. Bradley Whitley-Williams is a manager in the financial services industry. Doug Johnston is vice president of partner relations at Applied Systems.
This article is adapted from the Agents Council for Technology’s risk advisory on mass customization. View the entire Changing Nature of Risk advisory series online.
