This article is the fifth in a series on key forces shaping the insurance industry. Parts One, Two, Three and Four/Five can be found here, here, here
Trend #6: Delivering on the customer promise is the key
The ability to dynamically innovate (new risk pools, new segments, new channels) and deliver on the customer promise will become the most important competitive advantage as known risks continue to get commoditized and move to the direct channels.
One of the key forces driving the growth of insurtech is the current lack of engagement and, in some instances, the lack of trust between consumers and the industry. In our view, the ability to combine innovation with a model that improves the way individuals perceive and interact with insurance is critical in driving value creation.
Claims is at the heart of the customer promise
At the heart of the customer promise is the claims process. In many ways, it’s surprising that innovation in this area has been relatively modest given its economic importance (representing 60% to 70% of the overall cost base) and its importance in driving customer satisfaction. Our analysis has shown that the impact on renewals rates between a poor or positive claims experience is as high as 50%.
See also: Can Insurance Innovate?
In most cases, claims acceptance rates are very high (often more than 90%). Despite this, individuals are skeptical. This is driven, in part, by the approach taken by the industry. As a minor example, often while you wait for your call to a claims center to be answered, you are reminded of the consequences of making a fraudulent claim. The insurance company seems to imply the most likely scenario is a fraudulent one. The interaction is off to a bad start before it’s even properly begun.
We have positioned claims innovation as one of our four key pillars with a solution built around a customer-managed claims platform called RightIndem
. RightIndem allows an inefficient analog process to be converted into a digital one, resulting in significant cost savings for the insurer — both in claims handling costs and cost of claim. More importantly, though, the platform significantly enhances customer satisfaction by placing him or her at the heart of the process and by being easy, mobile-enabled, transparent and quick. (As an example, total loss motor claims were settled in a matter of days rather than the 21-day average that exists in the U.K.).
New models, new channels, new risk pools
Customer engagement is another important area of innovation, with several new approaches being tested. It’s important that insurance becomes more relevant and tailored to individuals' needs and circumstances. As this happens, insurance moves from being a “sell” decision to a “buy” decision. Our earlier article on just-in-time insurance explored some of these trends in more detail.
Innovation is also allowing new ways to interact with customers, and we see potential in solutions that enable insurance at point of sale or point of demand.
In addition, new risk pools that allow niche or tailored solutions make insurance more relevant to individuals.
Finally, there are a number of models that are looking to change the nature of the customer promise. Insure A Thing (IAT)
, for example, has turned the traditional insurance process on its head. Rather than pay an upfront premium, customers are placed in affinity groups where cost of claims is shared among members, with a safety net provided by an insurance carrier. All parts of the value chain are aligned; IAT only earns fees when it pays claims.
Innovation, if insurers embrace it, will allow them to fundamentally change the customer dynamic and to create a new value proposition that is truly appreciated and valued by the customer.
See also: InsurTech: Golden Opportunity to Innovate
We hope you enjoy these insights, and we look forward to collaborating with you as we create a new insurance future.
Next article in the series: Trend #7: Internal innovation, incubation and maturing of capabilities will no longer be the optimal option; dynamic innovation will require aggressive external partnerships and acquisitions.