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Making Life Insurance Personal

Personalization is a significant opportunity for life insurance carriers looking to revolutionize their relationships with customers. In this article, Montoux takes a closer look at some key themes, with examples carriers can aspire to.

Customer relationship

Customers have long been thought to begrudgingly purchase life insurance protection, either as a rite of passage or something an agent or other perceived authority has advised them to do. The nurturing of a customer relationship is not something that has been required of the carrier, as it has traditionally sat with agents working to earn their commission. This lack of an engaged relationship has led to a culture of disconnect, distrust and even resentment toward the carrier companies, and without an agent’s care can lead to lapses in premium payments and ultimately lack of coverage.

It is in customer relationship building that personalization is not merely an aspiration, but becoming a necessity. As younger generations are delaying or completely bypassing more traditional milestones of marriage, home ownership and starting families, the opportunities for agents’ messaging to resonate with them is lessening. The average age of a life insurance agent in the U.S. is 59 years old, and, as these aging agents focus their efforts on high-value policies among their peers, traditional carriers are at risk of losing touch with the new needs and perspectives of young generations if they don’t make significant changes now.

Modern consumers — and even more so, those of future generations — are moving away from traditional sales models and purchasing behavior in every other industry, with insurance following in this inevitable shift. Consumers are going online to not only research and attempt to understand policies but complete applications and make payments.

Even more significantly, the internet plays a key role in educating the modern consumer on the need for life insurance in the first place, as even the traditional triggers of life insurance purchase such as home ownership and financial advisers move to the digital space. It is essential to ensure younger generations realize the value of purchasing a life insurance policy in the first place, as Denise Garth outlines in this article.

Consumers of today are bombarded with constant opportunities to part with their money, with a 2015 study estimating the average attention span has dropped from 12 to eight seconds since 2000, to less than that of a goldfish.

Agents will continue to have a significant role to play for the foreseeable future as the Boomer generation enjoys long lifespans, and value the human connection. Tech-savvy agents will take advantage of digital distribution channels for acquiring new customers, and continue their roles indefinitely.

But the ultimate transformation for life insurance could be turning it from a grudge purchase customers don’t perceive any immediate benefit from, to something that can improve their own lives and wellbeing in addition to ensuring their loved ones are financially secure in the event of their own death, or they receive a substantial payout from permanent policy in later life. And this potential shift lies in the carriers’ hands.

See also: Thought Experiment on Life Insurance  

Personalizing power

An example of a grudge purchase becoming one of enjoyment in a different industry is shown by Flick Electric. Flick is an electricity company based in New Zealand that was established in 2014. It has built a steady following of loyal customers who are so enthusiastic about their relationship with the company that they often become ambassadors, referring friends and family to join.

Flick has achieved this relationship by not only bringing a different payment model, which reflects the market rate of electricity and passes these ebbs and flows onto the end customer’s bill, but has also very tactically framed their marketing and social media presence to attract the key millennial and Gen-Z markets as they become new bill payers of households – and also well-prepared for Generation Alpha and beyond.

While the purchase of electricity is obviously a more essential expense for people than life insurance, the customer relationship Flick has managed to build is a great example of what insurers can strive for in making customers perceive value in each and every premium payment they make.

Life and death should feel personal

Insurers can look to optimize their digital spending with highly targeted social media campaigns, as part of their wider marketing strategy. With social media now an integral part of 81% of U.S. Americans’ lives, insurers that work to very specifically target campaigns in response to personal milestones shared online could reap the rewards of more conversions by ensuring their marketing efforts are in exactly the right place, at the right time. Envisage the way in which a millennial couple sharing their excitement over their new firstborn child’s birth on Twitter could be automatically approached with a very specific offer of life insurance, which outlines the benefits of such a policy for the future of that baby.

Fabric demonstrates the kind of messaging that could resonate with this hypothetical pair of new parents. Fabric’s own social media content emphasizes “parenting made easy, starting with life insurance,” conveying an easy, low-effort, high-reward investment, which appeals to new parents wanting to secure the financial future of their family. This kind of personal and emotional connection to a life insurance purchase is key for new generations of digital natives who are bombarded with constant offers online and limitless places to spend their money — especially as, in this example, when starting a family. Breaking through the noise to demonstrate the immediate value of peace of mind is key for life insurers to earn that place in a young family’s budget.

Products

Life insurance products currently leave plenty of scope both for further personalization, and for wider improvements on messaging that will actually resonate with customers. Complex, wordy policies with grim mentions of “death benefits” that attempt to cover every eventuality can leave customers confused, frustrated and often either under- or over-insured.

Sherpa is an example of using a different model to ensure the cover offered to customers is extremely personalized. While traditionally insurers create products, and brokers work to find the best customers to buy these products, Sherpa charges a value-based annual fee to customers, and in turn meets all their specific insurance needs.

Distribution

It’s important that insurers work to accommodate customers by allowing them to use the communication channel they are most comfortable with, rather than trying to funnel them into the carrier’s preference. A report published by McKinsey indicates that more than 80% of shoppers encounter a digital channel at least once during their purchasing journey. Especially on social media, replying to a customer’s inquiry through that channel with advice to call a phone number could lose an opportunity completely, whereas being able to answer questions directly and then move to another online channel such as the carrier’s website is more likely to retain interest.

Behind the scenes, carriers need to ensure their staff are provided with the tools to communicate information and monitor customer engagement across channels to ensure every interaction a customer has with an insurance company as a whole is as seamless as possible, no matter which individual staff member at the insurance company might be behind the interaction. These digital communications with customers, along with the collection and analysis of data, allow insurers to build rich profiles of customer needs and preferences – and prevent the repeated ask for basic customer information, which should be acquired once only.

Data and analytics

Analyzing existing customer data is key to understanding patterns of premium lapses, and determining ways to help prevent them from happening with future customers. Using this data to ultimately identify the earliest signs and indicators of customer payment lapses means an insurer could preempt these, and ensure that reminders and offers of solutions keep the customer meeting premium payments, and are delivered effectively. Reminding a customer of the benefits and significance of the insurance policy at key points of doubt or uncertainty over the policies’ value relative to other payment requirements in their lives is a huge advantage for insurers.

See also: This Is Not Your Father’s Life Insurance  

Experience data and connected wellness

Finding ways to gain access to and use customers’ experience data is key in achieving true personalization of life insurance, with IoT and device data greatly improving the company’s data set, and ultimately benefiting individual customers with personalized messaging and rewards.

Improving the customer perception of carriers to build trust and good faith in insurance companies is crucial in obtaining this personal data, as customers will need to overcome fears of anti-selection in openly sharing, as well as their concerns around privacy. Being able to analyze this information provided by new customers can allow individual quotes to become even more accurate and eliminate the issues of non-disclosure or misinformation provided by customers — which can ultimately lead to their policy not being paid out. This device data can also be used in a continuing basis to explore patterns of behavior, health and death to more accurately model risk.

Insurers are already beginning to use data to help nudge customer behavior – the AIA Vitality app updates the insurer on activity levels by syncing from fitness wearables and rewards customers’ health improvements with lower premiums. According to Accenture, 77% of consumers would be willing to exchange behavior data for lower premiums, quicker claims settlements or coverage recommendations. Interestingly, this aspect of personalization may not be just for targeting the young, as Accenture also reports senior citizens are adopting wearable devices five times faster than the general population.

Insurtech Now Hits Corporate, Specialty

When insurtech sprang to prominence in 2015, most startups focused on personal lines disruption. Our August 2016 infographic showed that 75% of insurtechs were targeting personal lines and that 56% were focusing on distribution. Most corporate and specialty insurers concluded that insurtech presented no threat and only limited opportunity and continued with business as usual.

That was then, and now is now. Insurtech now matters for corporate and specialty insurers.

(Incidentally, we agree with the point Adrian Jones, head of strategy and development at SCOR, makes in this excellent article: it’s a myth that insurtech has been around only since 2015. We do, however, believe that there has been a new thrust since then, harnessing the pace and power of new technologies.)

2015-2017: The first wave of insurtech

It is not surprising that insurtech started as a personal lines disruption play. Entrepreneurs, buoyed by what was happening in fintech and other industries, saw huge opportunities to make insurance more customer-centric based on their own experiences. Entrepreneurs wanted to simplify insurance (e.g. Sherpa), offer more tailored propositions (e.g. Bought By Many) or change the whole insurance paradigm (e.g. Guevara).

But the truth is that insurance has not been disrupted over the last three years, and it’s hard to see that this is about to change. As Adrian illustrates in another article, even the most prominent disruptors in the U.S. (Lemonade, Metromile and Root) are finding the going tough and burning through a lot of capital, whether directly or via  reinsurance.

See also: Digital Playbooks for Insurers (Part 1)  

We argue in our insurtech Impact 25 paper (February 2018, page 7) that many distribution insurtechs are not scratching sufficiently major customer itches to be worth the switching cost for those consumers. As a result, the perceived potential is worrying incumbents far more than their actual performance to date.

2018: The second wave of insurtech

If we were to update our insurtech landscape infographic, supplier insurtechs would feature much more prominently. These companies are developing technology (or, as in the case of German insurtech Kasko, have repurposed consumer propositions) to help incumbent insurers, reinsurers and brokers operate more effectively. Supplier insurtechs have found getting traction in consumer markets tough and are developing technologies or techniques that they can sell to the established insurers.

Many of these companies are targeting corporate and speciality underwriters. This is perhaps not surprising – at least not from the U.K. perspective. U.K. personal lines insurers have been investing in pricing capabilities, efficiency and fraud analytics for years as competition has become cutthroat. They are mostly advanced in many areas.

This is in strong contrast to corporate and specialty classes, where much underwriting is still judgment-based, processes are manual and underwriters and risk managers are resigned to poor data quality. As such, we believe that many of the Impact 25 Members can be valuable for corporate and specialty underwriters in 2018. Some examples are below:

  • Insurdata was set up by ex-RMS executive Jason Futers and helps (re)insurers obtain more accurate building location information. This is helpful for underwriting (e.g. commercial property, reinsurance portfolios), risk management and portfolio reviews.(websiteImpact 25 two-pager)
  • Risk Genius uses AI to read policies and understand coverage. Founder Chris Cheatham noted recently. “[My trip to] London was amazing. It took two days for one very big learning to sink in: Underwriters in Europe are empowered to manuscript with little or no formal approval process.” His business allows corporate insurers to get a better understanding of their exposures.(websitetwo-pager)
  • Flock is an analytics platform currently used to price drone flights dynamically, for example taking into account hyper-local weather conditions and locale of flight. The technology’s ability to process big data quickly could be helpful for commercial IoT propositions, for example. (websitetwo-pager)
  • Cape Analytics and Geospatial Insight generate underwriting or claims insight from aerial imagery. This is useful, for example, in natcat losses when (re)insurers need to assess their exposures quickly. (Cape Analytics: website2-pager; Geospatial Insight: websitetwo-pager)

See also: Have Insurers Lost Track of Purpose?  

What it means for corporate and specialty insurers

Technology is not, of course, a new phenomenon in corporate and speciality insurance. However, the speed of proliferation of new vendors (of both technology solutions and data sources) is arguably unprecedented. It challenges the corporate clock speed of most incumbents and will present opportunities to successful adopters to tilt industry profits in their direction.

But identifying the correct response is challenging for incumbents and, as we argue in our Impact 25 paper, there is no single, correct course of action. Choices that need to be made broadly fit into three categories:

  • Strategy: Should we focus on customer experience/proposition or efficiency?
  • Technology: Do we build or partner or buy? If we partner, how do we create and protect differentiating IP?
  • Execution: Should we innovate within the business or in dedicated teams? What structures and processes do we need?

These questions – among others – need to be answered to ensure an effective corporate response.

10 Insurtech Trends at the Crossroads

The emergence of insurtech has reshaped the strategic insurance agenda. Here are the top 10 insurtech trends as we enter 2018.

Insurtech Trend #1 – Automation will replace human effort across the entire insurance value chain

This is a trend that is not unique to insurance. But it is a trend that will significantly affect the insurance sector. This is because much of the insurance industry still operates in pre-internet ways. It is also because many personal lines are being atomized. Small parcels of insurance protection cannot be packaged and sold with human input and remain cost-effective. It is also because customers demand it. They want a purely digital experience that does not require human contact when a machine will do nicely, thank you.

One to watch: ZhongAn

Insurtech trends article: Is the Rise of the Digital Advisor the new InsurTech Game Changer?

Insurtech Trend #2 – Insurance premiums will become highly personalized based on greater tech-enabled insight on customers and their individual risk

When you add together the massive growth in new sources of data together with tech-enabled data science, it is inevitable that premiums will become highly personalized. This will be enabled by tech such as wearables, telematics, IoT and smartphone apps. Not to mention the ability to build insights through relationships that exists across data sets. Gone will be the days when people of the same age and gender, with identical cars or homes living on the same street, will pay the same premium. In the future, other factors will apply to reflect greater granularity in their individual risk profiles. Data science will become a key set for underwriters and actuaries.

One to watch: Sherpa

Insurtech trends article: Insurance distribution is about to get personal

Insurtech Trend #3 – The blockchain era has begun, and there will be a rapid shift from pilot to production of distributed ledger technology

It is hard to find a major insurer that is not involved one way or another with a blockchain initiative. This will only continue as this disruptive tech continues to prove its ability to provide a viable solution. Of course, there are still some big questions to answer in terms of scale, performance and security, but those answers will come. The big breakthrough in insurance for blockchain will be in the back office for the complex and global world of wholesale, commercial and reinsurance (which is desperately in need of moving into the internet age).

One to watch: ChainThat

Insurtech trends article: R3’s partnership with ChainThat is one giant leap for insurance

See also: Insurtech: The Year in Review  

Insurtech Trend #4 – The lines between the old and new will blur as insurtech becomes mainstream by 2020

The defining characteristic of the Fourth Industrial Revolution is speed of change. This certainly applies to insurtech and its impact on the world of insurance. The rate at which insurtech startups are popping up all over the world is not surprising. Everyone wants a piece of this $7 trillion cake. The incumbents have responded, too. By investing in, partnering with and acquiring insurtechs, the incumbent insurers have wholly embraced the movement. This will lead to the creation of whole new digital brands, designed to cannibalize traditional business. And because it is simply too expensive and takes too long to transform legacy operations, the incumbents will ring fence and run them down.

One to watch: Munich Re

Insurtech trends article: Digital transformation is the strategic imperative no insurer can ignore

Insurtech Trend #5 – Digital engagement through lifestyle apps will change the relationship dynamic between insurer and insured

Lifestyle apps are the norm. It is hard to find anywhere in the world where this is not the case, so lifestyle apps are the perfect vehicle to provide the peace of mind that customers want when they buy insurance. Instead of the annual chore of hunting for the lowest-priced insurance then having nothing more to do with it unless you suffer a loss, lifestyle apps offer value on a daily basis. This makes them sticky, which, for insurers, means less churn. They also give insurers greater insight into their customers’ behavior, which means better-informed risk assessments and personalized premiums. And they build brand loyalty, which, if you believe in behavioral economics, will result in lower levels of claim embellishment and fraud.

One to watch: Metromile

Insurtech trends article: Metromile, the pioneers of digital engagement

Insurtech Trend #6 – The all-in-one insurance policy is here to stay

It has taken longer than I predicted back in 2015, but the all-in-one insurance policy is here. From a customer’s perspective, the all-in-one policy makes perfect sense. Especially for the millennials and Gen Y’s. Why can’t they simply have one relationship with one insurer and have everything covered in one go? And it’s not just for younger generations. Imagine giving the insurer the details about your car, home, health, travel, pets and possessions. The insurer gives you one overarching policy, a fair price and the ability to flexibly adjust the cover as needed. Operating on a membership model, the platform can provide safeguards and advise the customer on good and bad decisions. This is AI territory and relatively straightforward to automate. IMHO, this is a winner; watch this space!

One to watch: Getsafe

Insurtech trends article: Getsafe take the Lemonade model one step further

Insurtech Trend #7 – New models will challenge the traditional insurance value chain 

In the digital economy, where insurance is embedded into lifestyle products or distributed through ecosystems, the traditional insurance model doesn’t work. The inherent inefficiency in a highly intermediated value chain, too dependent on human effort, makes insurance products expensive. When as much as 80% of premium is lost on distribution, leaving barely a fifth for the risk pool, you know something has to change. In the words of Jeff Bezos, “your fat margin is my opportunity.” These new models will see the carriers squeezed as the reinsurers provide risk capital directly to digital brands. Regulatory frameworks will be reworked to reflect these shorter value chains that don’t require the many layers they have today.

One to watch: Amazon

Insurtech trends article: Redefining the insurance value chain

Insurtech Trend #8 – Lemonade has set the pace in Insurtech 2.0; copycats will follow

The first phase of insurtech was all about distribution and data. Then came Lemonade. In September 2016, they launched in New York, and a year later they cover around 50% of the U.S. population with their renters and home insurance products. For me, Lemonade have defined Insurtech 2.0. Many insurtech startups claim to redefine or reinvent insurance, but they simply don’t, whereas Lemonade has. It is inevitable that the copycats will appear. Some will be insurtech startups, although they will need to be as well-marshaled, experienced and funded as the Lemonade team to have any chance of success. And some will be the incumbents, which will have a go at creating a Lemonade model from within. These will almost certainly fail!

One to watch: Lemonade

Insurtech trends article: Lemonade really do have a big heart, killer prices and instant everything

See also: Top 10 Insurtech Trends for 2018  

Insurtech Trend #9 – Claims settlement will become an automated, self-service and quick-to-pay experience for customers

Insurers spend too much of a customer’s premium on handling the claims process. This is because the process is manual. And because the carrier wants to double-check the claim. And because customers don’t always tell the truth. And because there is too much time in the whole process. And and and and and. The insurtech solution is to put the claims process in the hands of the customer. This sounds counter-intuitive, but it isn’t. Taking a self-service approach, the customer provides video and images at FNOL and is in control of the claims process. Automated reviews of claims handle the vast majority of cases and award instant payouts. The money can be with the customer in a matter of hours. No long processing cycles, no time to embellish the claim and high levels of customer satisfaction. Those that fail the automated review are the exceptions handled by the carrier, which is what they’re looking for anyway! This will become the norm for claims management, once the fears and resistance of the lifelong claims directors can be overcome.

One to watch: Rightindem

Insurtech trends article: Democratizing insurance claims restores trust for customers

Insurtech Trend #10 – Tech-enabled loss prevention will become a key feature in the insurance product

Advances in everyday technology are increasing the ability to predict the likelihood of an event or outcome occurring. In home and motor, tech is being used to model behavior and identify exceptions. Sensors and phones and devices are all collecting data that define our individual norm (as opposed to a collective norm). As a result, any deviation can be instantly assessed, and action can be taken. To handle scale, this is 100%-automated, driven by AI and machine learning. Which means the opportunity for insurance is immense, because, instead of being a passive risk taker (which carriers are today), insurers will become active risk managers.

One to watch: Surely

Insurtech trends article: Digital implementation is the strategy insurers have been looking for

Insurtech prediction lists from previous years 

Looking forward with insurtech Insights – 10 predictions for 2017

Daily Fintech’s 2016 predictions for InsurTech

Sign up for more insurtech Insights here

Distribution: About To Get Personal

The buying of insurance is going to change. The “sold, not bought” view of insurance distribution has run its course for many lines of business. Customer expectations have changed, and the inside-out approach to building silo-ed, exclusion-filled,  fixed-term products just doesn’t cut it anymore.

For this month’s InsurTech Insightslet’s look at a new means of distribution that will fundamentally change the insurance supply chain, where insurance will be supplied through ecosystems as part of a wider proposition and not a solo purchase bought in isolation.

After all, people don’t set out to “buy” insurance per se. What they want is a safety net in case something untoward happens.

“Your fat margin is my opportunity”

The insurance supply chain is typically seen as a linear model. Insurance distribution starts with brokers, ARs and MGAs at the front end. Carriers underwrite risk and decide whether to pay a claim. And the buck stops with the reinsurers. Front to back, risk and premium move from one intermediary to another, each one taking its share. It’s a model that hasn’t really changed over the last century.

“Your fat margin is my opportunity” is the Jeff Bezos quote that defines the era of digital disruption. We now see tech-savvy entrepreneurs finding ways to “disrupt” established business models using digital and mobile to streamline out-of-date business models oozing with fat margin.

When you look at the world of insurance, it’s easy to imagine that Bezos was looking at the world’s largest industry when he made that quote. It’s no surprise that insurtech has become the new fintech.

The combination of many intermediaries in the supply chain, each one taking margin, together with the inefficient friction that goes with it has fueled the rise in insurtech. When you add in the shift in agency to the consumer (because of the likes of Bezos and how he built Amazon by putting the customer absolutely and unequivocally at the center), it is easy to see why insurance is a juicy target for digital disruptors.

See also: Taking the ‘I’ Out of Insurance Distribution  

Redefining the Insurance Supply Chain

As the insurance industry catches up and embraces the Fourth Industrial Revolution, we will see a redefining of the insurance supply chain. It’s started already.

It will evolve from the traditional linear model where risk and premium move front to back in a bi-directional flow. In its place, we see new supply chain models for insurance distribution at the front end with efficient management of risk capital at the back.

Of course, as a highly regulated industry, insurance faces a drag on change from the legislature. But just as regulators and lawmakers made adjustments to accommodate the fintech models for alternative finance, they will follow suit in insurtech. And why wouldn’t they?

In the new model for insurance distribution, the supply chain will co-exist with brands and within ecosystems unconnected to insurance.

Customers will be rated as individuals and not members of a risk pool. A greater share of premiums collected will be set aside to pay claims. Instead of sales commissions, there will be platform fees. Time to pay claims will become the KPI of choice for customers to rate their insurance experience.  And as convenience replaces price as the key buying criterion, the way that insurance is distributed will change.

Automation is key for insurance distribution

In the new insurance supply chain, there will be fewer handoffs, less friction, less premium erosion. Just like with Amazon, the customer will be absolutely and unequivocally at the center of the ecosystem.

Trusted brands will own the customer relationship. These brands know the meaning of loyalty and will value these relationships highly. They also understand how expensive it is to build them in the first place, and how easily that can be lost.

Amazon-like levels of service will become the norm for both insurance distribution and paying out claims. Automation is the key to making it very, very easy to do business.

Of course, someone will need to manage risk capital. This will be the domain of the reinsurers, with the role of the carrier becoming superfluous.

The reinsurers know better than anyone how to manage large pools of risk capital. They’ve been carrying the insurance industry for long enough. In the new insurance supply-chain, firms like Sherpa will own and manage the customer experience.

The Sherpa model is to charge a value-based annual fee to a customer in return for meeting all insurance needs. This removes sales commission from the equation.

The founder and CEO of Sherpa, Chris Kaye, explained to me, “Today, insurers pay sales commission for selling the insurance products that the insurers have created.

“We are turning that on its head and creating a membership organization that is unequivocally on the consumer’s side. No more commissions for products you don’t need, instead a flat fee to assure the risks that matter most are protected.”

How does this work in the Sherpa model?

On behalf of customers, Sherpa goes straight to Gen Re and buys insurance wholesale. Sherpa can distribute personalized insurance products to customers while packaging up parcels of risk at the back end.

This innovative approach is one example of how customer brands will be able to fine tune, personalise and price based on a whole set of new and different risk criteria.

So what? Well today, insurers create the products that they want to sell. Brokers do their best to find the best match of their customer’s needs to the fixed insurance products on offer. But customers end up paying for cover they don’t need. And they don’t always get the specific cover that they do want.

The new approach allows the brand, in this case Sherpa, to personalize the cover specific to the individual while packaging up modules of risk for the expert managers of risk capital.

Go west to see the future of insurance distribution

China’s ZhongAn epitomizes everything that is insurtech.

It is a 100% digital tech business with around 1,500 employees. More than half of them are developers, and none are in sales. The company also happen to provide insurance, and a lot of it!

In the first three years of trading, ZhongAn wrote more than 5 billion policies. It sold 200 million policies in one day alone last November during China’s annual online shopping fest!

The thing that makes ZhongAn the darling of insurtech is that 99% of all operations are automated. Quote, policy, premium collection and claims are all automated, which is why the company can process 18,000 policies a second.

But it’s ZhongAn’s approach to premium pricing and insurance distribution that really set it apart. First, the insurance business is built around retail ecosystems. The products are embedded in the customer buying process through retail sites. The company makes it super easy to buy insurance, simply by checking a box.

Next, the insurance is micro-priced, based on a personalized premium, unique to the individual customer.

ZhongAn does not use the law of large numbers to price risk premium. Instead, ZhongAn uses big data for dynamic and personalized pricing. There is no single price list for insurance products. Customers are risk-assessed individually and priced accordingly.

For ZhongAn, it is more important to build customer loyalty (aka stickiness) through speed and convenience.

See also: Distribution Debunked (Part 1)  

ZhongAn use ecosystems to distribute insurance

A question I get asked a lot is: “Are these insurtechs an insurance firm or a tech firm?” It’s a great question, just like asking if AirBnB is a hotel chain or if Uber is a taxi firm.

Of course, there are many old diehards of the insurance industry who rail against that question and revert back the old mantra of “an insurance company is an insurance company.”

But the reality is that, in this rapidly changing digital world, the fundamental nature of providing a financial safety net is changing, too.

The old “insurance product,” designed by insurance companies to suit their own needs and aimed at customer segments that never claim, is on its way out.

In ZhongAn’s case, it is a tech company first, which is why it can take a fresh approach to insurance, unhampered by old ways of thinking.

When it comes to insurance distribution, ZhongAn’s business model is based on supplying insurance cover through an ecosystem partnership model. The company doesn’t pay broker fees or have to support a huge cost of sale. Instead, it has partnered with leading players that already have a customer base across many different market sectors.

This allows ZhongAn to directly embed insurance products into an online experience, making it really easy for the customer. Customers simply check a box to include the insurance cover. The premium is dynamically, real-time, micro-priced, unique to the customer at that moment. This is all about improving customer experience.

Insurance distribution is going to change, it’s just a matter of time

For many, it is hard to imagine a world where insurance could be any different than how it has been for the past 100 years. To them I say, cast your mind back to 1995.

It was only 20 odd years ago that people were talking about this thing called the World Wide Web and about how everything could change. A lot of it sounded science fiction and the stuff of fantasists at the time. Even so, nobody could have possibly imagined the full extent to which the world would change. And, over such a short span. All because of this thing called the internet.

Just as the supply chains of many industries have changed in the internet era, so will that of the insurance industry. It’s no long a question of “if,” but “when.”

The New Insurance Is No Insurance

Insurers are aware that technology will help to reduce claims drastically and therefore finally run premiums down to unsustainable levels.

Time to move on

“Insurance is a cornerstone of modern life. Without insurance, many aspects of today’s society and economy could not function. The insurance industry provides the cover for economic, climatic, technological, political and demographic risks that enables individuals to go about their daily life and companies to operate, innovate and develop.” Source: Insurance Europe

I fully support this, but the way this cornerstone fits into modern life needs attention. It’s time to move on.

See also: Insurance Coverage Porn  

The Third Wave

Twenty years ago, I set up the first digital insurance. Ten years ago, I set up (again the first) mobile insurance Now we’re heading for the third wave: connected insurance.

Real connected insurance with the new opportunities that technology brings is what I (with a few former colleagues) believe in and have been working on for some time now.

Of course: “IoT,” “data science,” “AI,” “customer-centric” and “on-demand” are the buzzwords. But let me add two: “holistic” and “transversal.”

“Holistic” refers to the complete modern household with a connected lifestyle and “transversal” to the consumer who is completely not interested in our industry verticals.

Insurance has to stay but with an overall and fresh approach. Hundreds of insurtech initiatives are currently taking pieces and add sometimes compelling features. See the Sherpa-Neos-Interpolis-Trov-CBien-Metromile-Vitality-Clark-Knip-PolicyGenius-Lemonade-Inshared-like initiatives.

The real challenge is to bring it all together to a compelling, simple, transparent and engaging full service offer to the customer.

Focus on prevention

The new insurance is no insurance — meaning the focus should not be on pushing insurance products but on offering prevention services.

For this we developed an international concept for smart protection called InConnect, with the household as hub connecting all smart devices, vehicles and wearables and with technology and data used to improve prevention.

Safety and Peace of Mind

Unbiased personal risk management tools (Primes) help reduce insurance to what is really needed in one universal personalized policy without redundancies and gaps, dynamically adjusted to the actual situation and needs with:

  • On-demand add-ons
  • Built-in loyalty and reward system
  • Ready connections for sharing cars, rides and homes
  • Easy combining or splitting households
  • Privacy and cyber risk recognized

and backed with a one of a kind insurance and claims IT platform.

Startup

The overall concept is quite ambitious. Although we’ve successfully done ambitious businesses before and have qualified people and technology on our side, we’ll start on a controllable scale. A startup will kick off in three European countries with home, motor and travel.

As soon as we’ve completed our search for the right partners, we’ll start proving the concept, do the learning and keep you posted. Of course we’re always looking for enthusiastic and good individuals. Feel free to give me a buzz.

See also: The Insurance Model in 2035?  

Finally

Insurers are experts in risk and capital management, and that is what they should keep doing, but in a different perspective. Deploy that expertise in the new environment of connected lifestyles.