Tag Archives: digitizing

Insurance: On the Cusp of Disruption

The insurance industry, started in the 17th century at Lloyd’s of London, has made significant progress since then, but it is only now that it is truly at the cusp of disruption.

The traditional models of business development through intermediaries, pricing through actuarial models and underwriting on the basis of experience and data collected through physical inspection of risk and proposal forms are being challenged, as are the policy contract issuance and claims handling methods.

The digital revolution has led to all types of information and data not only available in public domain, but easy to access and share at lightning speed. People are connected to each other on social media, devices are connected to the internet, homes and cars are becoming smarter through IoT and robotics and AI are increasingly prevalent in our everyday lives.

Almost 150 years back, when the first self-propelled car came out and could drive at only 4mph, a person with a red flag would walk in front of the car to ensure road safety. Fast forward, and we are now looking at cars that can drive themselves.

While insurance was slower to adapt than other industries, there has been a recent boom of insurtechs. This creates meaningful opportunities and one of the most exciting times in the insurance space.

Today’s customer expects information to be available at her fingertips. Information is either a click away on search engines or through voice prompts on your smart phone or smart assistant.

We also face changing risk scenarios and heightened unpredictability. Cyber is at the top of the list – and headlines. Increase in terrorism or “lone wolf events” – at places one would never imagine to be faced with such risks. Changing global weather patterns – the recent floods in Houston, hurricanes in Florida, wildfires and mudslides in California and the extreme winter freezes in the Northeast. And changing geopolitical and socioeconomic environments.

See also: In Age of Disruption, What Is Insurance?  

How do we cope with this rapidly changing risk profile and environment? Will traditional insurance be able to provide relevant protection and, more importantly, will it be delivered, serviced and provided in a manner to match customer expectations in today’s digital age?

Insurers are responding to this challenge in two ways:

  1. Digitizing the front-end user experience and user interface but still continuing to follow the traditional model of underwriting, pricing, risk selection and claims.
  2. Disrupting the whole value chain from the front end of the business to the entire back end.

These responses are happening at both startups and established insurers. The winners will be companies that are willing to disrupt the entire value chain from front to back end.

What does that mean?

With the amount of internal and external data sources available today, we can get enough information on prospective customers and the risks they face so as to enable us to personalize their insurance and meet their specific needs.

How will we do it?

By harnessing big data, connected people and devices, smarter homes and cars and so on, and combining this with years of customer and claims data available with insurance companies. Insurers able to use this wealth of internal and external data in a manner to create distinct customer profiles will:

  • Know the customer
  • Anticipate the risks they are exposed to
  • Find the gaps and where they may need insurance
  • Give consumers a tailored solution to cover these gaps

As an example, and subject to compliance and other protected privacy considerations, let’s assume the IP address or phone number is linked as the unique identifier of a person. As soon as that person calls or logs in with her device, the insurer should be able to pull up all of her available information. Then, without the person answering all kinds of questions and forms, the insurer could automatically offer relevant insurance:

“Welcome, Joan, for your two cars and home in Ohio, here are the coverages and premiums. Please select one.”

As permissible, the same data can be used for underwriting, risk selection and pricing. Today, we as insurers have access to much more data and information on the risks and needs of our customers than ever before — provided we are able to use the data effectively, a big challenge most incumbents face today.

As with underwriting and risk selection, we can use data sources and technology such as sensors, AI and IoT at the time of claims. That includes the possible use of parametric insurance for natural catastrophes, and even smart contracts on a blockchain that self-execute the adjusting and settling of certain types of claims – the objective being to pay claims in a frictionless manner.

Before we get there, we will need to work with regulators on data privacy laws that are fit for purpose for this digital age.

See also: When Incumbents Downplay Disruption…  

The other very important aspect of the new age insurer is to offer a full suite of “personal risk management services.” What that means is that, using the insights gathered over years of claims data, coupled with the availability of external data and AI, we should be able to:

  • Predict – help insureds prevent a potential loss before it occurs. I believe people do not buy insurance to make a claim — the real purpose is protection. What better protection is there than someone helping continuously monitor and help prevent bad things from happening?
  • Assist – if even after efforts of prevention something unfortunate happens, insurers should be able to tap into their claims handling. Some companies have invested in risk management and loss mitigation units to actually assist the insureds through the time of need.
  • Restore – and finally help the insureds to restore the loss or damage. This is the actual claim settlement, which is what most insurers do as the only activity at the time of claims.

In what I propose, the insurance (restoration or loss indemnification) is only one-third of what a new age insurer should be doing. And all of this needs to be seamless and digital with the use of available and developing technology.

Time has come to disrupt the centuries-old insurance industry from what some would call a “necessary evil” to “a pleasant experience called insurance.”

Key to Digitizing Customer Experience

Every aspect of the way we interact with goods and service providers is becoming digitized, but it doesn’t work to go partway. As insurers, we have to ask ourselves, “What does a complete digital experience for our customers and policyholders look like?”

In my travels over the last year, I have run into experiences with very large companies and enterprises that have excelled in customer service in the past, but today are falling short in the new digital experience realm. I’ll share some examples, and, insurers, lend an ear. There are valuable lessons to be learned here!

Earlier this year, I took my family to Disneyland. Disney, of course, is a leader in customer experience as well as digital transformation. Disney has gone out of its way to improve a customer’s access to park information. The company has digitized the ride process with fast pass and even offer a suite of apps to improve the customer experience. What I experienced though, in my view, was a fundamental failure to plan a digitally transformed end-to-end experience.

See also: Today’s Digital Customer: It’s Me  

Most people buy their Disney passes on-line. That’s great! That’s fast and easy. But the park entry process is still highly manual. Season pass holders are mixed in with day pass holders; check-in agents manually process the passes, check IDs and passports and take photos for multi-day pass holders. Meanwhile, day pass holders wait in a line of thousands of people all corralled into 20 lines, 100 people deep. This results in confusion, frustration and many children having meltdowns in the hot California sun. It took our family 45 minutes just to walk into the park.

The point is, digitization is great, but you have to think of the holistic experience – everything from buying a pass to getting customers into the park with an easy check in to getting them out again, and everything in between. Disney is one of the best, but even Disney can fall short. The reason is because digitization changes not only the front-end buying experience but the back-end processes, as well. Disney has access to immense amounts of data, including online ticket sales, and has the power to predict wait times and improve service at check in. The lesson here? When creating a digital experience, use all the tools available to you and don’t forget about the nuances of the experience. #disneyland

Of course, I have had some great and pleasantly surprising digital experiences over the last year, too. I took a ski trip and got to experience the Vail Resorts Epic Day Pass. Ski lift tickets have been replaced with RFID-enabled cards that are read without having to wait in line to be scanned. These Epic Day passes also synch to the Epic Mix app, which tracks your runs and your day on the mountain from a number of scanners placed on the lifts and throughout the mountain. The Epic Day pass also can load your credit card for use all over the mountain, so no need to carry a wallet. This is a great example of innovation and digitization with pure customer experience in mind from start to finish.

Just as surprising is what my daughter recently told me about the new online application to sign up my grandkids for swim lessons in her tiny New Hampshire town. Gone are the days of phone calls and paper applications. She says that, because of the online application, registrations are the highest ever!

Now, back to insurance. Did I mention that we recently renewed our professional liability policy? Every year, we are required to make a formal submission. Our agent was on top of it this year, we renewed early, and we actually received our quote and policy – all electronically! And then this happened: I just received a paper letter informing me that the expiring policy is not being renewed! Old, irrelevant and confusing. This automated paper form letter is disconnected with the renewal process and status. Unfortunately, there are still many cases like this happening in insurance.

See also: Customers’ Digital Expectations

These are just some thoughts from my travels about getting digitization right or missing the mark when it comes to the end-to-end customer experience. But insurers, take note: It is important to look at what outside companies are doing to see how they are digitizing their customer experience. If a tiny New Hampshire town can do it for preschool swim lessons, there is no reason insurers can’t make some significant steps to go digital.

5 Challenges Facing Startups (Part 2)

The insurance industry is a $4.6 trillion market worldwide, but it lags when it comes to digitization and providing consumers with great experience and service.

We are looking in some depth at the five main challenges that startups are facing. Today, we look at Challenge No. 2. Find Challenge No. 1 here.

Challenge No. 2: Providing real innovation that gives a competitive advantage and that provides real value in the long term will be the only way to prosper.

Innovation can come by improving the consumer experience in buying and using insurance or offering more relevant insurance at affordable and lower prices. In insurance jargon, this involves optimizing risk protection.

Startups can and are focusing mostly on digitizing distribution, especially through a mobile consumer approach. This improves consumer engagement and may quickly generate interest and traffic but ultimately needs to be converted into sales and new customers.

See also: Where Will Real Innovation Start?

Product innovation involves better and personalized dynamic pricing, which means savings for the consumers and providing targeted and relevant risk protection (coverages). Getting new product into the market with limited data and pricing experience will bring risks. This will, of course, be initially mitigated by low volumes.

There is also greater scope for risk prevention. Technology can support consumers by automated monitoring and response, as well as giving real time feedback. In addition, technology provides the opportunity to reduce the claims costs (frequency) impact.

Insurance, at the end of the day, is about service – a payment today for a future promise. Having access to the relevant services during an accident or adverse event is crucial for insured consumers. This includes making it easy to report and pay a claim.

Having a seamless service will be important for the startups’ reputation and operational and innovation capabilities. Startups will need to collaborate and have outsourced arrangements with a range of partners with different mindsets and systems.


Building a robust, full-stack technology platform and end-to-end processes will be critical.

Many startups have started, understandably, with the distribution, and few appear to have fully operating platforms that stretch back into the full value chain of insurance operations from selling, distribution, product manufacturing, policy management toward customer servicing and claims management.

A full-stack technology platform supports a seamless process for the insured consumers, not only in the buying process but also for policy changes and claims handling.

A full-stack technology platform with enhanced data management and analytics at its core will be required in the case of making differentiating, relevant and attractive insurance products and services.

The explosion of data must be translated into improving insurance.

Data needs to be converted into insurance pricing, more accurate prediction of future claims risk and enhanced and innovative risk prevention services.

See also: Innovation — or Just Innovative Thinking?  

Excellent service and product differentiation requires full control.

Startups will need to be in control of not only marketing, distribution and customer experience but also dynamic data analytics, pricing, product development, policy administration and claims servicing. Even if startups do not provide these activities directly and hand them over to outsourced service providers including traditional insurers, they will need interfaces into other systems that may not be as robust as a new platform. In addition, they will need in-house staff to manage these processes. This will take expertise and time to build out.

We are curious about your perspective.