Most insurance businesses realize that there are benefits offered by upgrading legacy systems and becoming more “tech-forward.” However, not all insurance businesses are prepared to make the leap.
Here are four qualities your insurance business needs if you want to succeed in leveraging what insurtech has to offer.
Customers are at the center of every business, and insurance is no exception. Being consumed with your customers to the point that you fully understand and anticipate their expectations will make leveraging insurtech a much more seamless process.
Many insurtech solutions are designed to assist with customer interactions and bilateral communications. Some are even leveraging artificial intelligence to enable more personalized, more scalable coverage solutions.
Despite the allure of insurtech, it doesn’t deliver a set-it-and-forget-it solution. It can’t. If your insurance business is not in touch with your customer base to begin with, you’ll have trouble discerning where the use of automation and insight technologies makes sense and where it doesn’t.
Moving to a customer-centric approach
begins with realizing that there is no “average” customer. Customers have different behaviors and preferences, and, by truly understanding them, you’ll be able to overcome the false appeal of a one-size-fits-all approach and successfully, that is intelligently, implement insurtech within your business.
It’s critical that you have a firm grasp of your customers' transactional preferences. In what situations do they expect and prefer to have frictionless, humanless interactions? In what situations do they expect and prefer to have someone to work with? The answers to those questions will differ considerably depending on the customer. Without the answers, even the best AI or automation tools will have a limited or even negative effect on your overall business.
A profound knowledge of your customers and their preferences is fundamental to knowing where and when to intelligently apply and effectively leverage insurtech. At the end of the day,
“insurtech” is a portmanteau of “insurance” and “technology.” It's about adding new technology to the world of insurance, not about replacing the insurance world with the technology world. As such, it’s important that you use technology in a way that complements your operations.
When it comes to insurtech, for best results you should be using it while drawing on the wealth of insurance world knowledge and experience you’ve acquired. That’s especially true when it comes to insurtech applications that interface with or pertain to your customers.
See also: How to Collaborate With Insurtechs
2. Holistic Analytical Approach to Data
Being adept at critical or analytical thinking goes a long way when leveraging insurtech. Many insurtech solutions revolve around the same basic idea: Improve data capture, automate the information collection process and apply it everywhere. That means that if you’re investing in insurtech, you’re probably already drowning in data or will be soon.
Data is great, make no mistake. But data without context or — worse — data that’s analyzed and interpreted without discipline or scientific understanding can be harmful. Misinterpreting your data, looking in the wrong places for insights or letting the data collect dust because of uncertainty as to how it should be tackled are common problems. Acting confidently on bad data interpretations can be particularly destructive. It’s imperative, therefore, that you’re able to intelligently interpret and action your data
It’s important that you approach the data generated from insurtech solutions holistically. A holistic approach to data is one that avoids reverse-causal conclusions
, understands and satisfies the demands of statistical significance, accounts for sampling errors and examines patterns with a broad perspective. Key to this is employing properly trained professionals where necessary, assuming a longitudinal point of view and being hypervigilant about duly contextualizing all data sets.
For example, consider a new insurance agent who brings in five new applications worth a total of $50,000. Is this agent suddenly a top producer? Perhaps, but it’s important to look at data over time to see how renewals and persistency pan out. If the agent cannot retain business, then new applications and new business do not necessarily mean increased long-term (and in some cases even short-term) profit.
Another example might be a client who has recently purchased several insurance policies following a marketing campaign. Did the client buy because of the campaign, or was he already in the market for insurance and would have purchased anyway?
In both cases, it’s easy to confuse correlation with causation.
3. Swift Action
The insurance business is notoriously slow to change existing processes and procedures. For example, the prevalent agency model for insurance policy sales and management in the U.S. hasn’t changed much since the 1970s. In fact, it has been criticized since that time
in academic literature for being outmoded and a costly way to sell insurance to the general public.
Today’s insurance businesses need to act quicker. Acting swiftly and intelligently will drive down costs, improve profitability and better set you up to leverage insurtech. Many insurtech applications rapidly collect and deliver data; however, your insurance business needs to be able to act swiftly on that data to capitalize on it before it goes stale.
For example, a client who just opened a business needs liability insurance now, not a month from now. Having that data at your fingertips is wonderful… so long as you act on it. Having a quick-twitch motor and a matching mentality is crucial to fully leveraging insurtech. You need to be always on and always ready to act if you expect to succeed in this age of disruption.
Aside from hiring the right people — fit for sudden and decisive action — and properly training them how to act and with what triggers, one way to ensure swift action is by automating clerical activities. Time-consuming tasks such as manually filling out forms, document drafting, scanning, faxing and playing signature tag with customers are all examples of activities that needlessly take up too much precious time in insurance businesses.
Turning to intelligent management systems that automate these tedious processes will cut out a lot of the red tape and remove some of the most common barriers to acting more swiftly. This should free your time and that of your employees to focus on bigger picture activities, such as leveraging insurtech to its fullest potential and making your business thrive.
One of the hardest things for insurance businesses to do is break out of the mold they’re cast in. They suffer from a frame of reference fallacy, wherein they cannot see beyond the strictures of their immediate environment and their own experiences. Not looking (or thinking) “outside the box” makes the industry vulnerable to disruptive business models.
, for example, disrupted the insurance industry by offering homeowners and renters insurance coverage powered by artificial intelligence and behavioral economics. By doing away with brokers and unnecessarily long and bureaucratic procedures, they’re able to offer an instant digital alternative to traditional insurance purchasing.
They were only able to do this, of course, because so many in their industry failed to see how new technology, new consumer expectations, and a new business normal pertained to insurance. Most companies lack the vision to connect even obvious dots if they’ve never before been connected. Don’t be most companies!
See also: Is the Insurtech Movement Maturing?
Being open-minded and willing to try alternative methods is a must for leveraging insurtech. When you don’t acknowledge your limited frame of reference as a vision block and make a concerted effort to overcome it, you can be unnecessarily boxing yourself in and handcuffing your growth potential.
If you're afraid of jeopardizing what's already working, you won’t be able to successfully leverage new insurtech tools and techniques. The question of course is whether “working” is a relative or absolute term. If your current approach is producing 2% growth, that’s great, but how do you know that an augmented approach wouldn’t produce 20% growth?
What’s more, the insurance industry is increasingly moving toward a digital model. So much so that soon just keeping up with the times will require you to remain open-minded to radical change. According to a report from Accenture, for example, 47% of surveyed respondents
would rather have more online interactions with their insurance companies and 49% have already purchased a policy online with 41% of respondents purchased on a mobile device. The business is changing, and if you don’t change right along with it you’ll likely go the way of the dodo bird.
The digital trend is so strong that one major American insurance company estimated that roughly 40% of future business will come from the web
, with much of that business coming from mobile.
Now, more than ever, the insurance industry needs to leverage insurtech. Disruptive startups will continue to set the pace in the insurance industry until older companies manage to learn new tricks as they look to more intelligently leverage digital technologies.
Being open-minded, acting swiftly, taking a holistic approach to data and gaining an in-depth understanding of your customers is critical to being able to leverage insurtech successfully. Make it a point to adopt these four qualities and give your insurance business the best chance to grow.