Tag Archives: evolution

5 Hurdles to Insurtech Success

We like to joke that we started an insurtech because we wanted to make money as slowly as possible. It’s an exceedingly painful joke.

We were asked recently to discuss issues that insurtech companies face. We came up with five things that stand between insurtechs and success. Here they are, but, please note, your mileage may differ.

1) The math – All insurtechs have one super-challenging math equation to overcome –

Risk = Bad

Insurtech = Risk

Therefore, Insurtech = Bad

Insurtechs are busy trying to make themselves more inventive. Which only makes them riskier. As this equation shows us, that’s a bad thing. Much more attention needs to be paid to how insurtechs can de-risk themselves and make it easier for insurance professionals to rely on them.

2) Insurtechs are talking revolution to an industry that makes evolution look fast. Most insurtechs believe that they are going to revolutionize the insurance industry. Unfortunately for the revolutionizing insurtech, insurance has been around for 300 years without them and can probably be around for another 300 years without them. Insurance is an incremental improvement industry. It’s evolution over revolution.

3) Insurtechs don’t understand who they’re selling to. If you’ve never been to an insurtech pitch-fest, it’s filled with T-shirt and torn jeans entrepreneurs pitching to suit-and-tie-wearing insurance executives. We’re not saying that the insurtechs should be wearing suits, but a nice pair of pants and a coat wouldn’t hurt you. And we’re not even broaching the subject of industry knowledge here.

See also: Insurtechs Are Specializing  

4) Insurance companies are slow. When an insurance company talks about doing something this year, the earth will revolve three times around the sun before that something happens. They’re called insurance-years. They’re like dog-years but in reverse. Insurtechs have to plan for their first real sale being three years away, not three months. Blaming carriers for their slow sales cycles means you haven’t prepared properly.

5) Even the best mousetrap will not cause insurers to beat a path to your door. Insurance companies and the law of large numbers work together very well to make money. It’s very hard to break through the status quo, even with the latest and greatest whatever-it-is. Insurance employees aren’t normally rewarded for taking chances on something unproven. This lack of urgency to do something different can kill your insurtech.

Success IS possible in insurtech! Between new data, new processes and interesting technologies, insurtechs ARE winning. By understanding some of the hurdles you’ll face before achieving success, you might be able to shave some time off one of the most daunting sales challenges ever invented – selling to the insurance industry. Good luck, and we’ll see you in the marketplace!

This article was originally published on HazardHub.

Focus on Evolution, Not a Revolution

Of all the shiny new tools piquing insurers’ interest, blockchain is among the shiniest: 46 percent of insurers plan to use blockchain within two years, and 84 percent say it’s reinventing the way they engage with new partners, according to research by Accenture.

But while blockchain presents enormous potential to revamp claims and contract management, detect fraud in real time and more, most insurers aren’t ready to adopt blockchain. Why? Because they struggle to leverage less shiny digital technologies to create a more seamless claim processing experience, a fundamental aspect of policyholder satisfaction.

Focusing on a technical evolution rather than holding out for a complete revolution, with claim processing at the center, will position insurers to make deep gains in performance now that can continue seamlessly into the future. It’s an approach that offers strong potential to increase not only policyholder satisfaction, but also profit.

How can insurance companies make the right technology plays for an elevated claim processing experience? Here are three strategies to consider.

Expand self-service options via a mobile app—and ensure staff support an all-digital experience.

Mobile apps are an easy and fairly inexpensive digital innovation with high return: 42 percent of auto insurance policyholders use mobile apps to upload photos or videos of vehicle damage directly to their insurers, a J.D. Power survey found. And when insurers use these images, policyholder satisfaction surges. The problem is, insurers only use these images about half the time they are received. When this happens, the delight policyholders gained from self-directing the claim experience diminishes, and satisfaction plummets, the survey found.

See also: 3 Techs to Personalize Claims Processing  

Bringing customer service representatives and claim adjusters on board with an all-digital claim processing experience ensures policyholders get the seamless experience they crave. Make sure staff understand the importance of using the information policyholders provide—including images of damage incurred to their vehicle or property. Seek to limit duplicative inquiries, and continually look for ways to raise the bar around the digital experience. One survey points to five factors that distinguish outstanding mobile apps for insurance from those that are just so-so:

  • Ease of navigation
  • Appearance
  • Availability of key information
  • Range of services
  • Clarity of information

Also critical: digital tools that offer timely, highly personalized guidance and support real-time customer interactions.

Leverage data intelligence to speed claim processing.

A McKinsey study found insurers could reduce claims expenses by 25 to 30 percent by automating claim processing—an approach that also boosts accuracy. Three opportunities for insurers to explore include:

  • Intelligent case management. Machine learning automatically determines the next step in the policyholder’s claim processing journey, such as the need to schedule a repair appointment. Then, data-driven tools enable policyholders to perform these tasks digitally.
  • Digitizing complex tasks. Using data analytics can simplify and standardize tasks such as estimating the value of a loss. When these tasks are performed annually, amounts can vary by claim adjustor—a major dissatisfier for policyholders.
  • Automating front-end and back-office processes. Digital frontrunners use automated tools to send estimates for damage, verify repair invoices, and reimburse policyholders or service providers according to their preferred method of payment.

Make the move to electronic claim payment.

Claim payment is the final step in claim processing and adjudication, and it’s the single aspect of the claim experience policyholders remember most. But insurers overwhelmingly default to paper-based payment, even as check-based payments in other industries continue to decline. The positive impressions gained from digital touchpoints at other points in the claim journey are erased when policyholders must:

  • Wait days for a paper check to arrive in the mail
  • Physically transport paper checks to a service provider or bank for payment or reimbursement

Making the move toward electronic payment—which is 10 times cheaper than paper checks—speeds processing time and payment receipt

How can insurers build the right digital claim payment strategy—one tailored to the needs of individual policyholders and service providers? The right solution should include more than one payment option for policyholders, such as ACH, push-to-debit or check. For service providers, payment options may include ACH, virtual card payments, or checks.

See also: Transformation of Roof Claim Processing  

Some insurers have the expertise to build an electronic payment approach internally. Others purchase digital payment technologies or partner with banks and/or fintechs to provide this service. Determining the right approach involves careful consideration of cost, time to market (speed is critical), options for expanding services as new payment modalities are introduced, and the ability to protect sensitive policyholder data and comply with financial regulations.

A Tried-and-True Model for Innovation

As policyholders demand a standout digital experience, there is a temptation among insurers to build out their blockchain strategy. Blockchain generates a lot of hype for its potential to unlock significant value by simplifying complex, highly manual processes. However, there are challenges to blockchain adoption, including around scalability and deployment. Instead of waiting on blockchain, putting claim processing at the forefront of a company’s innovation agenda now empowers insurers to transform key capabilities today, setting the stage for more advanced technology adoption in the future.

Insurance Disruption? Evolution Is Better

A significant part of the insurance industry and consumers have forgotten, for the most part, about why the industry exists. The policy holder pays into a pool through the insurance company and, if a certain event occurs, expects a claim to be paid. Very simple, right? So how has the insurance industry strayed so far from this simplest of concepts? And how have so many consumers purchased insurance products that have added so many complex layers to basic risk protection?

Yes, it is time for change in the insurance industry. Change is a part of life. And change is coming. The insurance industry needs to adapt to the current technological environment. At the same time, insurance consumers need to take advantage of all of the information available to them and increase their insurance literacy. Almost every single person in the U.S. has some form of insurance, but very few people have more than a general idea of what each of their insurance policies is and what it covers.

See also: Which to Choose: Innovation, Disruption?  

There is a constant buzz in the insurance industry about “disruption.” Why disruption? Is it because the term is trendy and has happened in other industries, or is it because disruption is actually needed in the insurance industry?

Is it more appropriate to say that the insurance industry needs to evolve, similar to how the investment world has already started to evolve?

Let’s look at the words themselves for the necessary direction, which will show why so many high-tech firms have failed in the insurance space and will continue to fail:

Disrupt: to cause disorder or turmoil in; to break apart; to radically change (an industry, business strategy, etc.), as by introducing a new product or service that creates a new market.

Evolve: to develop gradually or to gradually change one’s opinions or beliefs.

(Definitions are from dictionary.com.)

High-tech firms are focused on changing insurance like they have other industries, and it’s not going to work the same because they are focused on disruption rather than evolution. The insurance industry is one of the oldest industries in the world, with the concept tracing back centuries. Insurance is also a highly regulated industry. So just as it’s really difficult for a huge oil tanker to change course, it is equally challenging for an industry with the size and history of the insurance industry to change course or be subject to disruption. A slow evolution is what makes sense for the insurance industry.

The investment industry has evolved in many ways, and the technology firms that are entering the investment world are not focused primarily on disrupting the industry; rather, they are focused on more effective ways to provide advice, manage investments and gain greater efficiency.

The investment world is already further along than the insurance industry because there is already a fiduciary standard, with a greater expectation that the investment industry act in the best interest of their clients. Partially, this is because most investment advisers are compensated through some sort of fee arrangement rather than a commission.

The insurance industry has not changed in many ways and is just starting to adapt to our mobile society, new technologies, “big data” analytics and blockchain technology, among other factors. Currently, changes have been mostly limited to basic tasks like claims processing and some distribution activities. But really, most of the high-tech firms are still just selling insurance, rather than changing insurance. What is really needed is a change in the overall thought-process, including underwriting, policy servicing and home office operations.

Consumers expect and deserve more transparency, more efficient processes and more accurate results. When the insurance industry can deliver these, everyone will benefit. Insurance consumers also deserve advice that will help them best meet their insurance needs. Which is why The Insurance Bill of Rights was created.
What is really needed is to find a way to deliver insurance to the consumer in a way that makes the process more seamless, with optimized pricing for insurance products. Helping consumers become more insurance-literate and manage their insurance portfolio is where technology can help.
Compensation is a part of this and why I’ve written in the past regarding how the Department of Labor fiduciary rule will have a major impact long term on all insurance products, in addition to the ones it addresses inside qualified retirement plans. Major financial service firms such as Merrill Lynch are no longer offering commission-based products inside their retirement plans. While commissions in and of themselves are not necessarily bad, they can lead to market conduct issues and can increase unnecessary replacement of insurance products (and lead to churning of investment products).
Optimized insurance products and pricing are what will ultimately be of benefit to all. Consumers will be able to access insurance products that fit their needs and are priced more closely to their risk profile. Insurance companies will benefit from being able to have better data, which will help with their ability to price insurance products more efficiently. Insurance companies have had issues in pricing different types of insurance products, including long-term care insurance and life insurance. Technology and better use of data will help.
And where does that leave insurance agents? Insurance agents will still be necessary, as are investment advisers. Perhaps someday artificial intelligence will be able to replace a human, but that day is still not near. Consumers can benefit from the experience of a professional, dedicated insurance agent just as they can from the experience of other trained professionals. If Turbo Tax has not eliminated every tax preparer, then why would it be expected that insurance agents will be replaced by an automated process?

As Bob Dylan once sang, “The Time’s They Are A’Changin,'” and the next few years will bring a long-needed evolution rather than a disruption to the insurance industry.

If you would like to be a part of this positive change, please support the Insurance Bill of Rights and sign the petition at Change.org (here). If you are a member of the insurance industry, take The Insurance Bill of Rights Pledge. Let me know your thoughts.