(This is the first in a two-part series from David Sussman)
Similar Industries
For decades, both the insurance and utility sectors have been cornerstones in the lives of homeowners. As heavily regulated, well-established industries, they’ve long been viewed as essential, non-negotiable services. People need electricity just as they need protection from unforeseen events.
The landscape of utilities is rapidly evolving. With emerging technologies (think EVs) and increased demand for renewable energy sources, utilities grapple with new distribution and generation challenges within heavily regulated rate structures. Similarly, the insurance sector confronts significant challenges to loss ratios stemming from changes in weather patterns, environmental risks, and inflation. And again, the regulator keeps a careful eye on premiums – even to the point of forcing insurers to operate at the edge of viability – something utilities are all too familiar with.
Utility Responses: Bringing Along the Customer
While these challenges are becoming much more severe of late, they are not new to utilities, and a core of their response has been what they call Demand Side Management (DSM), which involves efforts to influence customer behavior and balance energy supply and demand. Usually DSM is focused on decreasing overall demand, or demand at particular times of day, but it can also include encouraging customers to use MORE electricity, most notably in the case of fuel switching. DSM has been a cornerstone of utility price-management efforts in one form or another since at least the 1980s, but it has been picking up pace on the residential side over the last 15 years with increased electrification and greater demand on the grid.
DSM programs tend to be a focused and well funded effort in most utilities, and can range from direct device integrations, especially in industry but more and more in residential settings – all the way to taking efforts to appeal to customer attitudes and sensibilities, usually around environmental stewardship. In the former case, the alignment is economic: sign up for our ‘peak savers’ program that will tie in your industrial boiler or residential thermostat to our system and see a reduced energy bill (advanced pricing models like Time of Use play in here too). In the latter case, it’s often about helping the customer understand that using electricity wisely is a key part of being ‘green’ and bringing them onside to effectively act in the utility’s interests.
In all cases, utilities take a multi-pronged approach to aligning interests through DSM, and they typically involve a combination of channel engagement, marketing and advertising. Even when they hinge on rate changes or plans, the key often becomes helping customers understand what plan is right for them and why they should care (or bother).
The Parallels and Learning
Parallels to insurance could not be clearer. Device programs to keep homes safe(er) are a direct and immediate means to mitigate claim frequency and severity, and we are starting to see successful widespread pilots that prove out this use case. Aligning attitudes is also similar, and should potentially be easier for insurers – avoiding claims means less expense and trouble for everyone involved, and is a direct and personal benefit, as opposed to an admittedly more general issue like the environment.
It comes down to carriers genuinely connecting with policyholders, and positioning themselves as more than just transactional entities, but as partners and advisors. Utilities have learned a lot about what works. The next installment will drive into some of those details, with a specific focus on best practices in regular touchpoints, communication channels, being proactive, and embracing transparency.
About David Sussman
David Sussman is CEO of The Alana platform by Plasmatic Technologies Inc. His mission is to help insurers reduce claims and increase retention by engaging policyholders with the right information at the right time, turning homeowners into onsite property managers. David is an engaged homeowner and father who believes in the power of technology to make lives better and bring people together.
David Sussman is CEO of The Alana platform by Plasmatic Technologies Inc. His mission is to help insurers reduce claims and increase retention by engaging policyholders with the right information at the right time, turning homeowners into onsite property managers.
David is an engaged homeowner and father who believes in the power of technology to make lives better and bring people together.
