Metromile was ahead of its time when it comes to digital engagement. This is the world of insurance protection where customers buy insurance cover because of the continuing value it provides, not just because of the price it is offered at.
In recent times, the buying of insurance has become associated with searching for the cheapest price. Online buying guides advise customers to always shop around for the best price and never auto-renew. Even the regulators force statements on renewal notices to advise customers to shop around. This is commoditization in all its glory!
Which is good for consumers, right? Maybe at the point of sale, but, when insurance is sold below premium, it means someone else is paying for it. Until renewal time, when premiums are increased significantly.
All this does is irritate the customer, further diminish trust in insurance and cause the customer to start all over again looking for a new insurer! What a waste of time and effort for everyone!
The case for digital engagement in insurance
The big problem in any price-driven market is that cost of sales is a killer. Price points only ever go down, sales and marketing costs don’t (not at the same pace anyway), and this continually squeezes the whole supply chain. In the intermediated world of personal lines insurance, the addition of friction and inefficiency simply compound the cost (and margin) issue for insurers.
No matter how hard the insurer tries to build and promote a trusted brand, the uncertainty of premium pricing always undermines it.
The building of brand loyalty takes time, and insurers don’t hang on to customers long enough to do so. For traditional insurers, their only opportunity to show value is through the claims experience. However, all too often, the insurer fails to seize the day and ends up disappointing the customer. (Read “Democratizing insurance claims restores trust for customers
” and the RightIndem solution
And yet customer feedback clearly shows they want more in the way of value. And are willing to pay for it!
See also: How Sharing Economy Can Fuel Growth
Earlier this month, at the Digital Insurer conference in Singapore, James Eardley
from SAP Hybris
presented the findings of a current report from Ovum, “Driving Engagement through Value Creation.”
The report found that customers would pay higher premiums for value engagement.
Interestingly, when you look at the demographics, the Under-35s showed the highest willingness to pay more.
Turning the Insurance Product Into a Lifestyle Product
The advances in digital technology in the last decade have given insurers the means by which they can create “sticky” insurance products. Once they’ve “won” a customer, they can now hang on to that customer. They use enabling tech such as telematics, mobile apps, wearables and IoT devices to create ways of connecting and engaging with customers continuously.
As a result, we’ve seen the introduction of digital engagement products based on new sources of data, personalized to the specific risk conditions of the customer. These new technologies enable insurers to radically shift from being the provider of an enforced product to a provider of a value-added service. The adoption of this enabling technology gives insurers the ability to dynamically improve risk ratings, to personalize premiums and adjust policy conditions on a continuing basis. The traditional approach of a single, point in time questionnaire can be replaced by a continuing assessment and review approach enabled by these new technologies.
As Maria Ferrante-Schepis
writes in Flirting With the Uninterested
, “Insurance companies, when you really think about it, are not just in the protection business. They are in the ‘lifestyle continuity business
Digital engagement insurance in action
Great examples in life and health are Vitality and Oscar along with insurtech platforms such as Fitsense
. Here, wearable devices combined with mobile apps enable digital engagement with the insurance brand to promote a healthy lifestyle. In so doing, the app becomes a lifestyle product, part of the customer’s daily routine. This makes it a lot harder to churn come renewal time.
I covered this previously here about wearables and digital engagement in life and health.
In home, the adoption of IoT devices has done more than (just) create a means for digital engagement. The IoT-enabled smart home moves the insurer into the loss-prevention space. Now, insurers can build insurance products that are focused on preventing the loss altogether. (Read about IoT and loss prevention in this article about digital engagement in home insurance
The latest example to catch my eye comes from the innovation team at Halifax, the U.K.’s third largest general insurer with 3.2 million customers.
Bringing together a number of insurtechs, the Halifax home insurance app is built on Surely’s insurance platform as a service.
Surely provides the core insurance functions and integrates with third-party data sources to provide loss prevention and mitigation. These data services include Fing to connect all smart devices together, HomeServe Labs, which uses its Leakbot for water leak detection, and Fibaro for fire detection. The platform also connects to presence and entry-detection sensors, such as Samsung SmartThings, and all sensors are integrated into the app and provide the Halifax customer with up-to-date information about his house and home contents.
The Halifax app even takes a weather feed to warn of extreme weather conditions that can affect the home.
Prevention is always better than cure, right!?
Metromile is the pioneer of digital engagement
When it comes to auto, the combination of in-car telematics and mobile phone tech has seen the launch of pay-as-you-go and pay-how-you-drive insurance products. It’s a subject I’ve covered before, including articles like this featuring U.K. on-demand auto insurer Cuvva
The real expert on this subject at the Digital Insurer is Andrew Dart, who writes our Connected Insurer page.
Which brings me to the main subject of this month’s article – Metromile.
It represents everything that defines #InsurTech as we know it today, and yet it pre-dates the social media tag by half a decade! Metromile is a seven-year-old U.S. auto insurer I first wrote about back in 2015.
The business model is based on a pay-per-mile insurance product, which is wrapped with other services to enhance the car ownership experience for customers.
To enable continuous customer engagement, Metromile uses tech in the form of the Metromile Pulse (a device that plugs into the car’s on-board diagnostic port) and a smart driving app on the customer’s mobile. The company recently announced Series C and D investment rounds that took the total money raised to $205 million
. It’s an impressive sum that puts the company in the insurtech fundraising upper quartile.
You can watch the firm’s CEO Dan Preston explain the Metromile insurance product in this short YouTube video
The thing that struck me about Metromile is that it doesn't say anything about “insurance” when they describe what they do. Here’s what they say “About Us” on their website:
At Metromile, our mission is to empower drivers by creating a more connected and informed car ownership experience.
By taking our deep understanding of data and transforming it into information and services that make having a car less expensive, more convenient and smarter, we aim to make the urban car experience as simple as it can be. And for some, we hope to make car ownership a possibility where it wasn’t before.
They’ve literally taken an insurance product and turned it into a lifestyle product!
Leveling the playing field for low-mileage drivers
When it comes to auto insurance, the main risk factor is how often drivers are on the road. If you’re not on the road, then factors such as claims history, driving behavior or condition of car are insignificant. In the case of auto, those who don’t drive very much subsidize the higher-mileage drivers. This is because traditional auto insurance products take a blunt-instrument approach to assessing driving time.
See also: Cyber Insurance Needs Automated Security
Metromile says that customers can save on average $500/year on auto insurance (which is roughly 40% to 50% of the typical cost of insurance). You will see something similar in the U.K. from Cuvva. The company claims its pay-as-you-drive insurance can save drivers as much as 70% of traditional insurance premiums.
Creating value that EVERY insurance customer gets
In a recent call I had with CEO Dan Preston, I asked him about digital engagement and the Metromile model. He told me, “There are typically three interactions the insurer has with their customers. When they sell a policy, when they renew and when they receive a claim. There’s nothing in those interactions that adds value. Even the claims process is so full of friction that it becomes an unpleasant experience for the customer. It’s the place where NPS [Net Promoter Score] goes to die!
“When we started Metromile we quickly learned that customers want more than just a good claims experience. They want value through digital engagement.”
[caption id="attachment_29305" align="alignnone" width="570"]
Metromile provides a frictionless claims experience with their new AI claims assistant, AVA. (PRNewsfoto/Metromile)[/caption]
Here’s the thing that Metromile figured out early. By creating value over and above the insurance product, the company creates value that EVERY Metromile customer benefits from, not just those who might go through a successful claims experience.
Dan explained, “We set out to build Metromile into more than just an insurance business. We wanted to help our customers manage the cost of running a car. This includes everything from maintenance and regular servicing, to parking and speeding tickets.
“One of the early features on the app was a feature to help drivers avoid parking tickets by informing them of street sweeping schedules. We took publicly available data in the San Francisco area and laid that over our customers’ movements. Using the app, we were able to direct customers to parking areas that would not risk parking tickets. Some customers reported that the savings in parking fees more than paid for the cost of our insurance!”
Dan explained, “Ultimately it became a data collection exercise for us to collect data unique to the car and the driver as we went into new areas. In many places, the data we needed was in PDF format. We found ways to extract the data and still provide the features in the app.”
As Metromile moved into new jurisdictions, the company found that the data it wanted and needed to support the value-added services in the app were not always universally available.
Metromile’s win-win through value and loyalty
This is the real point of digital engagement – creating a win-win.
The customer gets value from the digital engagement with a lifestyle product (and tangible benefits such as lower parking fines!). And insurers see less churn, better (risk) data about customers and a greater sense of loyalty/connection/trust.
This is where behavioral economics kick in. It is this sense of trust and loyalty that directly links to lower levels of claims fraud and embellishment. (See Lemonade
None of this would be possible in a traditional auto insurance product. Metromile has exploited technology to enable this digital engagement. The key is the Metromile Pulse: a dongle that customers plug into their car to read the on-board telematics data and that connects to the mobile phone and the Metromile app.
This allows Metromile to know when the car is being driven and when it is not. In turn, this allows Metromile to price on a per-mile basis for insurance, turning it off and on accordingly.
Metromile’s AVA delivers an automated claims experience
Metromile’s latest tech addition enables an automated claims experience. At the time of an incident, data captured by the app and the dongle is used by Metromile to settle a large number of claims. Many of them automatically and instantly.
See also: Effective Strategies for Buying Auto Insurance
The company can do this because it is not waiting on a claims adjuster to collect information to support a claim. Instead, through the customer’s Pulse device, Metromile is able in many cases to verify and validate a claim without human intervention. In these scenarios, there is no reason to not pay a claim instantly.
The turning point for Metromile came about a year ago when it became a fully licensed carrier. Dan told me, “We’ve been handling claims in-house for about year now. In that time we’ve launched AVA, our AI claims assistant and the most exciting product launch to date at Metromile! We wanted to create a different experience for customers, one that was different to the traditional experience, with much less friction for customers.
“For the customer, all they want is to get back on the road. But for the traditional carrier, they won’t settle until they’ve got all the evidence that they need to justify the claim. In the traditional claims experience, often the problem is that the carrier only has the word of the customer to go on. Trust isn’t very strong in this relationship, and the result is that it takes time.
“With Metromile, the Pulse can verify what the customer is telling us. Our tech can verify facts such as speed and location and time. The customer doesn’t need to provide this data because we already have it. This leads to instant payout or for the Metromile app to organize the repair and servicing of the vehicle.
“It’s another win-win because the instant and automated approach delivers a better customer experience by reducing cycle time and making it easy to claim. For Metromile, it lowers the cost of handling claims, which benefits customers in the long run by lowering premiums.”
(See here for more on chatbots, AI and customer engagement)
The lesson for insurers: Give more to Get back more
So there you have it! Everyone’s a winner when the insurance product is built around a digital engagement model. Customers get value from the money they’ve paid for their insurance purchase (not just a safety net if they suffer a loss). Insurers get value from lower customer acquisition costs, less churn, lower operating costs and reduced fraud.
They also get one step closer to one of the biggest innovations from insurtech – personalization (and that’s a story for another day!).