Digital Engagement Matrix: High Complexity and Low Frequency: The BionicMen of ZhongAn and Lemonade - Part 2

Continuing from Part 1, in this post we’ll focus on ZhongAn's health products sold online; only in Part 3 shall we cover ZhongAn’s digital engagement.

But why health products?

Because health products tend to be complex and requires an agent to explain it, someone who’s hopefully well trained or savvy enough to explain the many medical nuances and product coverage as well as services. What's amazing about ZhongAn, is the ability to grow from zero to RMB 938.5 mil (FY2017, circa USD 148.4 mil at 2018-APR-25 exchange rates) in just 4 years purely from digital sales.

Those numbers rival traditional insurers that have been in the market for far longer and possessing more channels of distributions than ZhongAn has on health products.

The second reason for the "WHY", is the inability to separate products and services away from the digital experience when discussing digital engagement. The success of products in the digital realm centers on how easily its value can be understood by the customers online. Thus we have to begin by examining how ZhongAn positioned their products and the strategies surrounding features and pricing. 

To put it simply, to expect to sell insurance products in the digital realm exactly the same as it is via an insurance agent is highly na?ve. The reason why traditional insurers still struggle with this is the inability to detach from traditional thought processes when transacting in the digital medium. I also empathize with insurers that still maintain silos of marketing, product, actuarial, digital engagement and IT as 5 different organizations while attempting to compete with companies like ZhongAn.

You need to understand insurance to understand ZhongAn

Traditional insurers tend to struggle in explaining product features, that when you boil it down, consists of only the following simple dimensions. Instead of explaining it just like a normal person would, traditional insurers revert to insurance-speak and legalese. 

Depending on the 7 levers above, insurers determine the premium that customers need to pay for protection benefits that the customers ask for.

As an online consumer, husband and parent, this is a pet peeve of mine and I've voiced it prior when I was searching for insurance online for my son.

IMHO, ZhongAn benefited immensely from not having any such legacy baggage or silos; as it is born digital out of 2 massive digital champions in Ali and Tencent; and the 3rd parent being Ping An bearing the gift of insurance wisdom.

Using the Digital Engagement Matrix; we are able to highlight several ways in which ZhongAn managed to move the needle of a BionicMan Quadrant closer towards being a Perfect 10, as well as personifying what it means to be a BionicMan. As a recap, BionicMan is the top-left quadrant, where the engagement consists of high informational complexity and low engagement frequency; while Perfect 10s are simple use cases, easy to understand and transactions that are frequently used (daily), in the bottom right quadrant.

So how did ZhongAn manage to increase frequency of use purely from their products?

1) ZhongAn made all health products a short term product

Almost all their insurance products, including health are no more than 1 year in duration. This is beneficial from a digital engagement standpoint because at the very least, it forces both the insurer and the customer to reengage yearly, compared to 5 or 20 years before either party takes the initiative to seek out each other. Traditional insurers, who are used to selling longer term products lasting 5 to 20 years, struggle to pivot towards a short term insurance offering due to several reasons.

In IT, The policy admin back office system is too old and too rigid to allow dynamic configuration and cater for yearly feature improvements expected from short term products. The product team, actuary and marketing departments have also not made the transition to high stakes, high speed and high transparency customer engagement required in the digital realm coupled with the frequent effort to reengage the customer for renewal.

Traditional actuaries naturally balk at the extra effort of remodeling multiple products yearly with frequent feature enhancements. Marketing was never manned for constant engagement and re-engagement to remind customers of the offer as well as renewal and finally the product design team reluctantly arbitrates the weaknesses in IT with the demands of marketing, leading to a somewhat watered down offering.

How can we fix this without starting a newco like ZhongAn? Well, that's a post for another day...

2) Product Simplification

To become a Perfect 10, besides increasing engagement tempo, you need to reduce decision making complexity; ZhongAn created multiple products covering all aspects of demographics and features, but at the same time, used consistent and easy to understand terms to describe the features.

The naming of the products is also functionally descriptive with a strong bias to NOT use fanciful sounding or legal terms which traditional insurers still gravitate towards; and instead of version numbers, used the year to represent the latest offering e.g. Doctor Pass 2017.

To a customer, the simplification made product selection easier with rapid identification of benefits that best suit their need just from a glance sans unnecessary click-through to examine the features further.

Compared with traditional insurers who still maintain the old copyrighting paradigm or lack thereof and exhibit two poor extremes of digitization effort:-

• Highly jargon rich and strictly by the regulatory submission description of the product; which I've also covered prior
• Airy fairy perfume advertisement like description of the product sans any functional details

To be digital one has to be highly transparent and allow customers to rapidly make purchase decisions and ultimately create trust.

3) Immediate, Competitive and "Impulse Buy" Pricing

Pricing is an internal debate of cost versus benefit as well as being externally influenced by perception and feedback that can create bias on either side of that equation. Secondly, pricing to a customer is also a factor of affordability; and when priced sufficiently low, could lead to impulse buy decision.

The 3 takeaways above are obvious strategies to play with pricing.

Interestingly for ZhongAn, to manage cost versus benefit arguments, consistently priced their premiums pivoted to benefits in a way that is quick to assess and compare. I find this to be rather brilliant of the actuarial, product, digital marketing and User Experience team as it is a highly customer centric decision.

ZhongAn also hints at being an ardent student of behavioral economics; in the example below and throughout the ZhongAn site, the prices are never rounded, and almost always ends with a 9 for pricing that are above the hundreds. Also; there’s a false planting of options such as the example below by anchoring the customer first on a large deductible of RMB10,000 compared to just paying an extra RMB140 to avoid it. Naturally if you need a simple old age cancer product, there's a higher likelihood for customers to pick the second option. Where ZhongAn makes more money, but to the customer feels like a steal.

To folks who are not familiar with insurance, a deductible is the amount that you have to pay first before the insurer pays for the rest.

Finally, by removing or limiting features, lowering covers, and also by including deductibles such as above, ZhongAn is able to substantially reduce the required premium to a paltry RMB20 for some products, where customers are enticed to click on the product. The example below on the left is for a Children's major illness product and the right is for Female diseases.

Here's another cheap product at RMB 25 for malignant diseases.

While honestly at first glance I felt somewhat cheated cause RMB25 had two features removed; namely the cost of attaining a second opinion, as well as coverage for detection and treatment of early stage malignant tumors. Examining the available options further, by just adding slightly more than double the premium; which is still cheap by the way at RMB61 (~USD9.60); one would be able attain not only those coverage but also double the cover in Plan 2.

Very quickly you could also see that the cover and premiums for Plan 3 and 4 are just linearly extended. As the ratio of total cover divided by premium is always a multiple of ~2142 (100,000 + 20,000 + 10,000 divided by 61 for Plan 2; and so forth for Plan 3 and 4).

Therefore, this pricing strategy begun with an impulse pricing punt, with further offers that suit different levels of affordability.

The prices are also always displayed, always at the lowest price point; with an initial configuration befitting the product’s intended demographics. Besides enticing the customers, it also has an added benefit of being used for marketing across different channels, and more importantly consistently showing the same price when traversing from an online ad to the actual site.

4) Consistency of Aids and Documentation

Besides being able to directly chat in real-time with an online assistant over the browser, over WeChat or AliPay; the phone number is also clearly visible if the customer wish to speak to an actual person.

Finally, insurance conditions and product detail are also consistently linked, and not hidden from the customer.

Isn't this all common sense?

I can only hope so... like seriously folks, it's 2018...

Disclaimer: This post has nothing to do with MetLife; all charts and diagrams are from personal research as a customer and NONE of them are from MetLife. All website screen shots are from www.zhongan.com. My desire is for insurers all over the world to digitally up their game and be more like ZhongAn such that it's far more easier for us to buy insurance online. Similarly the ambition for the Digital Engagement Matrix is for traditional brick and mortar companies to transition into digital faster and better. There's so many awesome product and services out there that hasn't seen the light of day online!