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Vacation Rental Insurance Is Changing

As AirBnB and VRBO have opened up the vacation home rental market to millions of property owners, t The ease with which owners can use technology to list either their primary or secondary homes has transformed the way we take our holidays. 

The pandemic has, interestingly, fueled more growth in the secondary or vacation home markets as people choose to take their holidays closer to home or look for second spaces to continue remote working. According to the National Association of Realtors, vacation home sales rose 16% in 2020 over the previous year. That’s nearly triple the 5.6% growth in existing-home sales. The surge is continuing this year, with sales up 33% to April over last year.

Just as the vacation home rental market has embraced technology, so, too, has the insurance industry. Insurtech is reducing costs for owners and insurers as well as improving the customer experience. Providers are using advanced technologies such as AI and machine learning to develop insurance offerings that allow for more customizable coverage and pricing that can account for complex insurance requirements. 

This is an important step forward specifically when it comes to insuring vacation properties. With the help of platforms such as AirBnB, VRBO and others, owners are able to rent out their primary or secondary properties, or part thereof, for longer, shorter or intermittent periods. Which brings with it a much more complex insurance landscape for agents to navigate with their clients.

What should agents consider when looking to insure rental homes for their clients?

Different types of property owners need different types of coverage

Knowing what kind of property owner your customer is will make sure you start the discovery process in the right place. This can be as simple as knowing if they are a private owner or, for the purposes of the property in question, they are a commercial owner. A commercial owner can mean a company that owns numerous properties or an individual who is running a bed and breakfast. 

The ownership structure of the property can also affect the type of coverage required. If it is owned by an LLC or other type of legal entity and there are different users and owners of the home, it’s important to be clear who the actual parties to the insurance contract are. It can be easy to get this wrong. For example, a party who is classified as an additional resident as opposed to an additional insured might affect the validity of the coverage.

Understand the type of coverage needed

A more commercial type of vacation property will likely be better-suited to commercial insurance as opposed to a more traditional homeowners policy. It will typically offer more in the way of liability insurance and be applicable across a portfolio of properties, making it more efficient than writing individual policies for each home.

However, a policy can be more nuanced for the smaller owner who is renting out their own vacation home or their primary residence from time to time. Traditional insurance policies can be vague when it comes to cover for use of the residence for rental purposes. The contract may allow for occasional short-term rentals, but it will be important to understand what the owner’s intention is when it comes to how much of the year they want to rent out the property, to ensure they have the right kind of coverage.

In some cases, landlord’s insurance might be applicable if the property is to be rented out most of the time. In other cases, where the rental periods are briefer, a landlord’s endorsement to their primary policy can be activated for those times the property is available to rent. 

Think about the different liabilities

Offering a property for rent will crystalize liabilities for the owner they would not otherwise be exposed to. This is particularly the case if the owner intends to offer bed and breakfast services beyond simple accommodation. Cooking for guests, serving alcohol or providing a shuttle service, for example, all come with their own inherent risks and liabilities. In these cases, liability coverage in traditional home owners contracts are unlikely to be sufficient. 

A homeowner’s existing injury liability may also not apply if the accident occurs when only a  part of a property is rented — for example, when just a room or an apartment above the garage is rented but is part of a primary residence.

This is just the tip of the iceberg when it comes to understanding the kind of liability protection a homeowner may require when looking to rent out one of their properties to holidaymakers.

See also: Market Boundaries Are Blurring

Be diligent

In summary, agents need to make sure they thoroughly consider three things: how long the owners will rent out the property; if the owners ever intend to use it; and whether they want to offer services beyond accommodation. Every property owner can have different answers to each of these questions, but all will affect the blend of coverage and types of liability they will be exposed to. 

Insurtechs are able to offer updates and more customizations than traditional forms of homeowners insurance, so it’s worth understanding the owner’s intentions well and hunting around for specific policies that will cover their particular situation.

Changing Nature of Definition of Risk

As the foothold of innovation across industries grows stronger by the day, insurers are witnessing the advent of tech-based economies, and with them a fundamental shift in the very definition of risk. Every advancement stands to revolutionize how property, businesses and employees will be insured. Consider automated cars and workplace automation tools, such as Amazon warehouse robots, or the emergence of shared ownership business models, like Lyft and AirBnB. Traditional risk calculation models need to evolve to keep up with rapid change.

How shall insurers prepare for this shift? According to Valen Analytics’ 2019 Outlook Report, a key part of the answer lies in the need to weave data and predictive analytics into the fabric of their business strategies. The report, which employs third-party and proprietary data to identify key trends, revealed:

Insurers Are Heavily Relying on Advanced Use of Data and Analytics to Fuel Growth

Valen’s Underwriting Analytics study found that 77% of insurers are incorporating predictive analytics into their underwriting strategy. This marked an increase compared with the steady 60% of insurers during the past three years, demonstrating a clear emphasis by the industry on data-driven decisions.

While many factors have fueled the demand for sophisticated data and analytics solutions, one stands out. Insurers have a growing desire to reap a share of the underserved small commercial market, which represents over $100 billion of direct written premiums. Data analytics tools enable insurers to reduce the number of application questions, verify necessary information and ascertain risk much more quickly and accurately. This is particularly important in creating effective business models that align with the needs of small business owners.

The rise in insurers looking to employ advanced data analytics techniques has also resulted in the growth of data aggregation services and consortiums. With new primary customer data sources emerging, insurers have access to better insights on consumer risk and behavior. This has contributed to insurers’ appreciation of the predictive horsepower that large pools of data offer. In fact, Valen’s proprietary research found that the synthetic variables appended with consortium data are as much as 13 times more predictive than policy-only data. Synthetic variables are built from computations of more than one variable, made possible by leveraging large and diverse datasets.

See also: Understanding New Generations of Data  

Regulation and Innovation Must Go Hand-in-Hand

With a rise in advanced predictive analytics and robotic process automation in insurance, regulators are paying close attention to the industry. To ensure this oversight doesn’t stifle innovation, it is important that insurers build and document their analytics initiatives so they can be explained and understood by regulators. Being collaborative and responsive will help ensure that regulators can discern the small percentage of use cases that need to be reviewed for consumer fairness protection. In doing so, insurers have the opportunity to take the industry to Insurance 2.0 — the next phase in technology adoption and innovation.

Talent and Infrastructure Challenges

While insurers are looking to integrate data and predictive analytics into their business strategies, what will truly determine their success is their ability to hire and nurture the right talent. Unfortunately, the industry continues to suffer from a lack of the talent needed to support fast-paced innovation. Seventy-three percent of insurers surveyed indicate moderate to extreme difficulty in finding data and analytics talent, and the reasons haven’t changed over the years. While geographic location of the job is the primary reason cited by the survey respondents, more and more prospects are either looking for better compensation packages, are simply not interested in an insurance career or opt for opportunities in tech startups or data-driven companies in other fields.

Another roadblock for insurers is their dated IT infrastructures, which cause massive backlogs. While most insurers suffer backlogs of two years or more, others cannot identify how long their IT backlogs are.

See also: Insurance and Fourth Industrial Revolution  

Both of these problems go hand in hand. Clearly, there is a need to foster an innovation mindset, and, to do so, the industry needs a mix of new thinking and engaging work culture. Insurers should follow the footsteps of leading tech companies and cultivate a culture that appeals to high-level talent. By making small changes, such as embracing diversity and a remote workforce, insurers can make themselves attractive to the talent they need. This will build a workforce capable of overcoming IT infrastructural issues.

In short, to maintain a competitive advantage, insurers must not only put data and analytics at the forefront of their businesses, but also make strategic decisions on how best to employ them to enhance all aspects of their businesses, from customer service and information handling to risk calculations and claims processing.

Future of Insurance Looks Very Different

A few years ago, the satire site, Cracked, launched a series of fake commercials called “Honest Ads” satirizing various industries. One of their fake commercials was an “honest ad” for a fake insurance company selling car insurance. The commercial features a familiar-looking, aging insurance agent in a suit (and a cape, cuz insurance sales people are also superheroes) explaining in a friendly voice what you really get when you buy car insurance. According to this guy, you’ll pay a lot of money every month for a product that:

  • you probably don’t actually want, but will buy anyway, because you have to -– or else you’ll be a criminal;
  • doesn’t offer you any actual protection (even though you could use protection), just a small portion of the money that you pay into it back, but only if something bad happens;
  • you may actually never use, even though you pay a lot of money for it;
  • if you need it, you’ll have to fight your insurance company to be able to use it, even though, again, you pay a lot of money for it; and
  • if you are able to use it, you’ll be punished, by either being charged a lot more money or being kicked off of your policy

Sign me up … ?

The effect is a poignant commentary on why people hate insurance and insurance companies and why, even as insurance products may be improving, at the end of the day no one really wants to buy insurance. That’s why we think that the insurance company of the future won’t be an insurance company at all (or at least not just an insurance company). Sure, people will still need insurance, and someone is going to sell it to them, but to win in the future,you’ll need to give them more than just insurance, or something else entirely.

With this in mind, here are a few ways insurance companies and startups can move beyond insurance to start offering true value to their customers and repair a relationship that has been tarnished by too many years of arcane business practices:

1. Protect your customer.

As the Cracked commercial made clear, a lot of insurance companies message themselves as protectors of the home, the family, the car etc., but most do little to protect their customers beyond offering them money when things go wrong – property is still damaged, cars are still stolen, loved ones are still lost. But what if instead of just compensation, insurance companies gave their customers actual protection?

The smart home security company Ring, recently acquired by Amazon, was founded with a mission to make people’s homes and neighborhoods safer. In a talk at last year’s InsureTech Connect, Ring CEO Jamie Siminoff explained that “our KPI is around how much crime we reduce, not how much revenue we produce.” Imagine an insurance company that tracked its success in this way. Because Ring invested and tracked against a KPI not just around revenue, but around customer safety, it has been able to prove that homes where Ring is installed are safer homes, which also make for safer neighborhoods — a fact that has resulted in more revenue and more business opportunities for Ring. Not only was it acquired by Amazon this past spring, but long before that it was able to form partnerships with insurance companies like American Family, which provides customers a discount on a Ring doorbell and a 5% discount on their homeowners or renters insurance.

See also: Smart Home = Smart Insurer!  

Like Ring, insurance companies should be thinking more about how to protect their customer and less about how to protect themselves from their customer. People don’t generally want to crash their cars, flood their basements, have their homes broken into. Helping customers better protect themselves from the risks that require insurance delivers value to the customer and to the company, and ultimately provides a way for insurance companies to develop trust with their customers.

2. Entertain your customer.

When Amazon first made waves as an online bookstore, few would have predicted that Amazon would one day become a major movie studio and video streaming platform. Amazon’s foray into the movie business, announced in 2010, was never about making money in box office sales or online streaming (although Amazon does both). It was about getting more people to sign up for Prime subscriptions and spend more time and money shopping on the site. And Amazon understood that investing in quality entertainment that could be included in a Prime membership was a promising approach.

Not that insurance companies need to become entertainment or media companies, too, but investing in high-quality content that people want (and like) to consume can also be a means of selling insurance. The U.K. insurance comparison website, Compare the Market understood that, while people may not like insurance, they definitely like meerkats. Hopping on the meerkat meme bandwagon, the company launched the website comparethemeerkat.com (a play on market, if you didn’t catch that), where consumers can go online and compare sets of meerkats in the way they might compare auto insurance policies or a credit cards. Beyond comparing meerkats on the website, you can also watch short videos (which are also commercials) about the lives of your favorite meerkat characters, like Sergei, head of IT, who joins the circus to escape the stress of his job at comparethemeerkat.com.

Although meerkats may have nothing to do with markets, they definitely make the idea of comparing insurance policies and credit cards a lot more fun. And whether I’m in the market for insurance, I’m always in the market for another meerkat meme … and when it comes time to look for new insurance, I know where I’ll go looking.

3. Educate your customer.

Fiverr is a freelancer marketplace that provides a platform for freelancers to sell their services, connecting entrepreneurs and workers with the companies and individuals who want to hire them. Just last month, it launched Fiverr Elevate, a platform where Fiverr freelancers can go to take online courses to help them better run their businesses. As Fiverr Freelancers, they earn credits that they can put toward courses.

Educating freelancers and small business owners is not what Fiverr is all about, but education is something that benefits customers and would-be customers and allows the company to build a relationship that’s based on value-added, not necessity. Like entertainment, education is sticky and builds trust with customers outside of the core products and services sold, which in insurance is important, considering that the primary interaction a person has outside of binding or renewing a policy is filing a claim in a moment of crisis, after something bad has happened.

4. Solve problems for your customer.

While researching and observing workers in the gig economy for an insurance prototype we designed, we heard more than once from gig workers that they probably won’t buy additional insurance, even when exposed to additional risk through their work that their existing policies do not cover.. For example, one Uber driver we spoke with used to work at an insurance company and knew that if she got in an accident while driving for Uber she wouldn’t be covered. Yet because Uber didn’t make her buy additional coverage, she decided not to (a lot of people buy insurance because they have to, not because they want to). Another Uber driver we spoke with described the insurance our prototype was offering as “third tier,” meaning that it would be coverage if his personal insurance and Uber didn’t cover him. Like the other driver, he didn’t think he would buy this kind of insurance. He’d rather take the risk.

Offering more than just insurance is particularly pertinent for insurance that isn’t mandatory. Insurance needs to solve other problems for customers that aren’t being solved elsewhere. Our gig economy prototype, for example, allowed gig workers to connect all of their apps to our platform, and provided them with a dashboard that would allow them to track all their gig work in one place, analyzing hours and peak earning times, and offering insights that would allow gig workers to optimize their schedules and their earnings. While at the end of the day our prototype was selling insurance, the users we talked to ultimately wanted to buy it not because it was insurance, but because it was more than insurance – and it was solving an important problem they were experiencing as gig workers.

Jetty, the renters insurance startup, is doing something similar. Beyond selling renters insurance, it is also helping solve a critical problem for millennials living in cities. Jetty Passport helps people get into apartments more easily by paying security deposits and acting as guarantors. For a fraction of the price of the security deposit and for an additional 5-10% of the rent, customers don’t have to worry about either. For those using Jetty Passport, Jetty renters insurance, starting at $5 a month, is a no-brainer.

See also: Startups Take a Seat at the Table  

5. Follow your customer.

While it may be true that most people don’t like buying insurance, there are a lot of other things these same people do like buying. Airplane tickets, clothing and apparel, stuff for their house. Finding out what else your customers are doing and buying (and where), and selling them insurance through these channels can help insurance companies align themselves with companies their customers actually do like and trust, while also lowering the cost of customer acquisition so you can offer more competitive pricing.

In March, AIG Travel announced that it is partnering with Expedia to sell travel insurance on Expedia sites, including Expedia.com, CheapTickets, Orbitz, and Travelocity, giving Expedia customers booking flights, hotels and other travel arrangements the option to insure their bookings for a small fee. AIG also announced a partnership with United Airlines to do the same earlier in the year.

Slice insurance, the homeshare insurance startup, has done something similar, partnering with AirBnB to sell hosts on-demand insurance when renting out their homes.

These types of partnerships are a win-win for customers, insurance companies and the platform partners. Platforms get to expand their offering to their customer; insurance companies get to build a direct relationship with customers through a channel they like and trust’ and they get access to more customer data to better understand purchasing behaviors outside of insurance. Customers get easy access to insurance coverage that will benefit them without having to go out of their way to make an additional transaction.

It’s no secret that insurance companies have an image problem, one that has been created over more than a century of legacy business practices that make transforming, innovating and developing more customer-centric products easier said than done. But as insurance companies do the heavy lifting to make their businesses more agile and responsive to the market, finding ways to go beyond insurance –through education, entertainment, creative problem solving and thoughtful partnerships– will help them build more trusting relationships with customers and not only maintain current customers but expand into new markets.

You can find the article originally published here on Cake & Arrow.

How Tech Is Eating the Insurance World

Amazons and Apples and Googles. Oh my…

What do these companies have in common? Devout brand loyalty from the modern consumer coupled with world-leading technology. This poses a massive threat to insurance companies that value ownership of the customer above all else and are seriously lagging on tech. In a post-financial crisis world where financial brands are reflexively distrusted by modern consumers that have incredibly high digital UX standards, technology brands and emerging insurtech startups have a considerable advantage in winning future insurance business.

Amazon, Apple, Google and other tech giants don’t do anything small. It would be foolish for insurers to think that these disruptors will enter the industry to play nice and simply serve as their brokers or lead generators. They have capital in spades, massive captive audiences, piles of valuable data and are perfectly comfortable navigating complicated regulatory landscapes. Insurers like to hide behind this regulatory complexity as a reason to dismiss new market entrants, but this is simply a speed bump for those who want to make insurance a point of focus – not an insurmountable barrier to entry.

The Google Experience

Google dipped its toe in the industry in 2015 with Google Compare and then quickly withdrew in 2016. Insurers like to point to this as the shining example of how technology companies “don’t understand insurance” or how they “underestimate the complexity of the industry.” What they forget (or simply don’t mention) is Google’s core business model – advertising. What is the sixth most expensive word on Google AdWords? Insurance ($48.41 per CLICK!). Who buys that word and drives significant revenue to Google? Insurers. Google’s exit was not the result of execution failure or naivete; it was a consequence of rocking the boat with some of their highest-value advertising customers. The rest of the companies listed above, among countless other tech giants and well-funded startups, do not have that same conflict. Insurers are not immune to disruption from them.

Shifting Consumer Behavior

The modern consumer is a digital native and does not want to speak to people on the phone or fill out piles of paperwork. Consumers want to be offered insurance when it’s top of mind – how they want it, when they want it, from brands they trust, instantly.

One of the biggest problems we see with tech-insurance partnerships is insurers’ insistence on controlling the underwriting and sales process, which creates massive friction with technology companies that offer far superior digital experiences. Consumers don’t want to leave Amazon to start a separate purchasing process on an insurer’s website, and Amazon doesn’t want them to leave its site, either. This is something that is easily solved through API-driven technology systems and programmatic underwriting – words that often give insurers heart palpitations.

See also: What if Amazon Entered Insurance?  

Consumers don’t want to shop around for insurance on quote comparison sites. They don’t want to engage with insurance companies more than necessary or share troves of personal data through an insurance app. They want to purchase insurance when they need it, pay for what they use and never think about it again. Insurance incumbents have responded by building their own apps, offering discounts for more shared data and doubling down on advertisement spending.

Insurance in the Background

Insurance is an important feature, but not always the star product. It’s sold well to the modern consumer either purely digitally or as part of a broader offering – typically at the point of purchase for a non-insurance product or service. That’s an unpleasant thought for insurers that take a tremendous amount of pride in their history, processes and brands. However, letting pride and status quo dictate your business strategy is a good way to get your business killed.

Why not offer homeowners insurance in 15 seconds (not minutes) through fully digital workflow like Kin does? Why not combine cyber protection software and cyber insurance like Paladin Cyber does, so risk is reduced even further in the event of a cyber incident? Why not offer white-labeled SMB insurance to the millions of third-party retailers currently selling on Amazon? Or episodic renter’s coverage directly through Airbnb at the point of booking?

Here are a few reasons why insurers aren’t being more innovative:

  • insurers’ technology simply can’t support seamless distribution through digital platforms
  • insurers/agents/brokers insist on owning the customer
  • insurers don’t want to alienate their traditional distribution network of brokers and agents
  • insurers want full underwriting control through traditional, and often analog, methods
  • insurers don’t want to share data with tech companies but expect tech companies to open their proprietary analytics models to insurers.

This simply will not work.

The Everything Store

Apple already disrupted the warranty space by owning the whole AppleCare stack for themselves. Google has the conflicts discussed earlier. Facebook has the same. As a result, I believe Amazon is the most likely tech giant to make a big splash in the insurance industry as they continue to build their “Everything Store.”

We already see what they’re doing in healthcare, their investment in Acko in India, and rumors about an imminent play in banking. They recently acquired Ring, which has obvious insurance applications, for a reported $1 billion. The writing is on the wall. While I’m not entirely convinced that consumers will search Amazon.com for auto or home insurance, having millions of third-party seller merchants, adding 300,000 in the U.S. in 2017 alone, is a good starting point as far as addressable commercial insurance markets are concerned.

See also: 11 Ways Amazon Could Transform Care  

I am a huge admirer of what Jeff Bezos has built at Amazon, and I’m modeling Boost after what they did in the data storage and hosting space with AWS. It would be foolish for anyone to underestimate the impact a company like Amazon can have on any industry – no matter how old, established or huge the insurance incumbents’ businesses may be. Just ask Barnes & Noble, Walmart, media companies or any grocery store right now.

How Digital Platform Smooths Operations

In a 2009 interview with Insurance Journal, Juan Andrade of The Hartford ranked “improving operational efficiency” third on a list of essential priorities for P&C insurers, below both customer retention and a systematic sales approach.

This ranking made sense 10 years ago. At that time, Andrade’s top two priorities were customer connections and insurance sales, but digital means of providing either one had not fully developed.

Today, however, all three of these top priorities can be addressed through a digital platform — and placing operational efficiency first on the list has the power to boost the other two.

Digital operations management “is not only about technology,” says Eddy Lek at Schneider Electric. “It requires a holistic approach to transform operations; implementing changes to the existing business and operations models and training employees to effectively operate with new tools – [e]mpowering the workforce to leverage technology for greater efficiency.”

Here, we look at how a digital platform improves operational efficiencies for P&C insurers. We also discuss how insurers can identify the top challenges they face and ask the right questions to ensure they implement digital tools that address those challenges effectively.

The Digital Future and Its Challenges for Insurers

Property and casualty insurers have seen stormy weather in the past few years, literally and figuratively. The need to respond to claims from the 2017 hurricane season, decreasing auto coverage purchases combined with rising claim costs and other factors have resulted in losses across the board, according to a Deloitte report.

Customer needs and demands are changing, as well, as Insurance Journal’s Michael Kasdin notes. For instance, younger adults drive less, reducing demand for auto insurance policies and increasing interest in newer, more adaptable tools like pay-per-mile auto insurance. Gig economy work like driving for Uber or Lyft or listing rentals with AirBnB has changed needs in auto and home insurance, as well.

See also: Digital Playbooks for Insurers (Part 4)

According to Kasdin, insurtech is poised to address many of these problems. Yet concerns about cybersecurity and anticipating the “right” place to invest in digital platforms and similar tools continue to stall many insurers, as Nate Anderson, Pascal Roth and Pierre-Henri Boutot described in a Bain & Co. brief.

To address sinking premiums, rising claims and the retention of a customer base shifting rapidly away from old standards of expectation in insurance, insurtech stands out. Improving operational efficiency via digital platforms can improve P&C insurers’ ability to address all three threats simultaneously.

Digital Tools for Operational Efficiency

A recent Audit and Risk Committee Forum survey by PwC found that 44% of insurance leaders surveyed believe that “most existing insurers will not survive, at least in their current form.” And one of the biggest causes of their demise will be operational inefficiency.

Currently, operational inefficiencies in P&C insurance are commonly found in “repetitive, business rule-driven work,” according to February 2018 PwC white paper. While other inefficiencies exist, the sheer volume of repetitive, rule-driven work sets insurers apart from many other industries.

For decades, such work has demanded human intervention because no machinery existed to ensure that the rules were followed and that the task was done correctly each time. Today, however, machine learning, AI and similar tools make it possible for insurance companies to automate much of this work for increased efficiency.

“It’s always important to realize that 55% to 60% of all the cost within any given agency is going to be personnel cost,” Andrade told Insurance Journal in 2009. “The key here is making sure that your people, your employees are being as productive as they can.”

Digital platforms offer new ways to ensure employee productivity. In an automated world, insurance companies can reevaluate the contributions each agent and employee makes based on the value added to the process, providing a powerful new way to determine and eliminate inefficiencies.

How Efficiency and Customer Retention Meet on a Digital Platform

The February 2018 PwC report noted that when it comes to insurtech, most P&C insurers are still thinking in an “outward”-facing mode. They’re embracing digital platforms primarily for the platforms’ ability to connect them with customers who increasingly demand easy digital communication, online purchasing and consistent points of contact.

Meanwhile, Ben Kerschberg at Forbes identifies three “pillars of change” for digital platforms: customer service, operational processes and business processes. In other words, digital platforms do have the power to improve operational efficiencies in customer service — but customer service is only one of three pillars of opportunity. Insurers who focus here miss the two opportunities to greatly improve operational and business efficiency, as well.

Five years ago, big data was big news. Today, it’s a given in most businesses. The ability to analyze vast amounts of data to spot meaningful trends and changes can revolutionize risk analysis and operational efficiency in insurance, but insurers must first have the digital platform necessary to capture and analyze data.

Customers are willing to provide more data to get seamless digital service. They’re also willing to pay more for service on a strong, integrated digital platform — up to 21% more to get, it, according to Ameyo’s Shaista Haque.

A digital platform also makes it easier for insurers to streamline service, not only to customers but also within the organization itself. For instance, when products are developed in a streamlined digital environment, much of the inefficiency caused by in-person meetings, incompatible or un-editable digital documents, checking details or numbers by hand and other prolongations of the product development cycle can be minimized or defeated. This increased internal efficiency improves the ability to provide customers with products that meet their changing needs on a timetable that encourages customers to adopt them.

See also: Digital Insurance 2.0: Benefits  

Questions to Ask When Seeking the Right Digital Tools

Insurtech developments appear almost daily, which can leave insurance leadership feeling overwhelmed. What are the best tools for the particular challenges you face? How can you identify top inefficiencies, and how will you know you’re choosing the right digital platform capabilities to optimize them?

Deb Miller, director of market development for business process solutions at OpenText, identifies four operational efficiency optimization strategies that are being employed by an increasing number of insurance companies:

  • Improving operational efficiency by driving for leverage across silos
  • Scaling to address demand for specific products and across a broader geographical range
  • Expanding distribution channels while improving or maintaining excellent customer service
  • Automating case management tasks to reduce time to resolve in claims, as well as reducing paper and other resource waste

Knowing which strategies to prioritize, however, means knowing where your particular organization’s inefficiency pain points lie. A McKinsey & Co. white paper recommends that managers seeking to improve operational efficiency ask questions like:

  • How are we delivering value to the customer? How do we do so efficiently?
  • How do we work? What are some better ways to perform that work?
  • How do we connect goals, strategy and meaningful purpose? How do we communicate these to our teams and to our customers?
  • How are we enabling people to lead at their fullest potential?

Questions like these can help insurers find inefficiencies. The answers can also help digital platform providers identify which tools will be most effective for a particular insurer.