Long Tail - Insurance

“The Long tail” is undoubtedly path-breaking theory coined and is making waves in entertainment and media industries. The concept of “sell less of more” has challenged Pareto theory. To summarize, models like Barnes & Noble, Blockbuster, Wal-Mart etc . where products offered are effected by the scarcity of space, are challenged to the extent of extinction by new models of abundance Example: Amazon, Netflix, Rhapsody. The motto of “The Long tail” is "Make almost everything available through Internet for the market place to choose", which is leveraged to reap benefits. Scarcity models compelled providers to pre-filter products that could be made available to consumers, this in turn restricted consumer to choose among available. Abundance models have no pre-filters and made every thing available for the consumers to choose. Thus 20% of the products make 80% of the market (Pareto), now providing rest 80% products through new abundance models have steadily increased their market share beyond 20%. Example Documentaries, which could never make racks of Blockbusters, are market in itself through NetFlix. . This is fueled by the reduced costs of CPU, Storage and memory that enabled flurry of collaboration tools like blogs, social networking, mashups, and RSS.

The tail is set to grow with leaps and bounds in the years to come, thanks to the generation ahead. Forrester analysis has shown seniors use Internet for personal use like email and news. Gen X(born between early 60's to late 70's) uses it for reading about products and online shopping. Gen Y(born between early 80's to early 90's) is doing everything, esp. collaboration. Advent of WEB 2.0 technologies (rather say ideologies ?) where Internet has moved from “read-only” to “read-write” by features enabling users to contribute. This has helped producers provide what "market place" is asking for. Though there are sporadic instances to showcase these (Example: Dell providing Laptops with XP as operating systems after looking at their consumers' chat room) with right tools Internet is all set for the next phase Web 3.0 “read-write-execute” and empower tail wag everything away.

The thought of long tail in Insurance industry is still in a nascent stage. It is due to the fact “sell less of more” is not the business model insurance works on. Premium to risk determination is critically dependant on the number of insured, hence selling “less” is to be determined with at most care and skill is required by Actuarial department on how much less is feasible. Recent recession has emphasized the fact that Insurance industry has moved its concentration away from its core areas Actuarial, Underwriting and need is evident for them to concentrate back on these. Before building long tail with the restrictions around “selling less” it is important to know what is in scarcity in current models and what is market place asking for. Scarcity is
1) Varied number of risks that could be provided,
2) Premium cost against each risk
3) Agents/prospects time.
Agents should be provided web 2.0 portals where they could collaborate (Queries wiki, chat etc) with ease to serve customers better. In turn build knowledge repository which would not only increase their productivity over time but also contribute in community discussions to gauge the needs or trends of industry. Agency self service with web 2.0 features is the key step for Insurers to take as it has ROI through agent satisfaction, more business, build knowledge repository and build systems to analyze the market place. Key to start building web 2.0 portal is to identify communities and provide tools to collaborate and make users visualize the advantages for them. Experience and technology could also be reused to expose same to prospects via direct business. Example: Progressive's service to prospects to share their pets pictures with friends, everyone would guess what they are up to by now. Billing and Claims are also the areas where collaboration could be provided to insured to build communities and ascertain their needs.

The journey of building portals to capture thoughts in market place and actuarial or underwriting capabilities to be able to sell less of more risks is time taking. This is the direction to take, viewing positive signs of “long tail” to grow and its impact over traditional models in other industries. The pioneer in this direction would be to have critical advantage over followers as loyalty and attachment towards community once formed is tough to capture unlike market.