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4 Insurers’ Great Customer Experiences

McKinsey research has found that insurance companies with better customer experiences grow faster and more profitably. In 2016, 85% of insurers reported customer engagement and experience as a top strategic initiative for their companies. Yet the insurance industry continues to lag behind other industries when it comes to meeting customer expectations, inhibited by complicated regulatory requirements and deeply entrenched cultures of “business as usual.”

Some companies–many of them startups–are setting the gold standard when it comes to customer experience in insurance, and are paving the way for the industry’s biggest insurers to either fall in line, or risk losing out to smaller competitors with better experiences. Through a combination of new business models, clever uses of emerging technology and deep understanding of customer journeys, these four companies are leading the pack when it comes to delivering on fantastic experiences:

1. Slice – Creating insurance products for new realities.

Slice launched earlier this year and is currently operating in 13 states. The business model is based on the understanding that, in the new sharing economy, the needs of the insured have changed dramatically and that traditional homeowners’ or renters’ insurance policies don’t suffice for people using sites like AirBnB or HomeAway to rent out their homes.

According to Emily Kosick, Slice’s managing director of marketing, many home-share hosts don’t realize that, when renting out their homes, traditional insurance policies don’t cover them. When something happens, they are frustrated, angry and despondent when they realize they are not covered. Slice’s MO is to create awareness around this issue, then offer a simple solution. In doing so, Slice can establish trust with consumers while giving them something they want and need.

Slice provides home-share hosts the ability to easily purchase insurance for their property, as they need it. Policies run as little as $4 a night! The on-demand model allows hosts renting out their homes on AirBnB or elsewhere to automatically (or at the tap of a button) add an insurance policy to the rental that will cover the length of time–up to the minute–that their home is being rented. The policy is paid for once Slice receives payment from the renter, ensuring a frictionless transaction that requires very little effort on the part of the customer.

See also: Who Controls Your Customer Experience?  

Slice’s approach to insurance provides an excellent example of how insurers can strive to become more agile and develop capacities to launch unique products that rapidly respond to changes in the market and in customer behavior. Had large insurance companies that were already providing homeowners’ and renters’ insurance been more agile and customer-focused, paying attention to this need and responding rapidly with a new product, the need for companies like Slice to emerge would have never have arisen in the first place.

2. Lemonade – Practicing the golden rule.

In a recent interview, Lemonade’s Chief Behavior Officer Dan Ariely remarked that, “If you tried to create a system to bring about the worst in humans, it would look a lot like the insurance of today.”

Lemonade wants to fix the insurance industry, and in doing so has built a business model on a behavioral premise supported by scientific research: that if people feel as if they are trusted, they are more like to behave honestly. In an industry where 24% of people say it’s okay to pad an insurance claim, this premise is revolutionary.

So how does Lemonade get its customers to trust it? First, by offering low premiums–as little as $5 a month–and providing complete transparency around how those premiums are generated. Lemonade can also bind a policy for a customer in less than a minute. Furthermore, Lemonade has a policy of paying claims quickly–in as little as three seconds–a far cry from how most insurance companies operate today. When claims are not resolved immediately, they can typically be resolved easily via the company’s chatbot, Maya, or through a customer service representative. But perhaps the most significant way that Lemonade is generating trust with its customers is through its business model. Unlike other insurance companies, which keep the difference between premiums and claims for themselves, Lemonade takes any money that is not used for claims (after taking 20% of the premium for expenses and profit) is donated to a charity of the customer’s choosing. Lemonade just made its first donation of $53,174.

Lemonade’s approach to insurance is, unlike so many insurers out there, fundamentally customer-centric. But CEO Daniel Schreiber is also quick to point out that, although Lemonade donates a portion of its revenues to charities, its giveback is not about generosity, it is about business. If Lemonade has anything to teach the industry, it is this: that the golden rule of treating others as you want to be treated, holds true, even in business.

3. State Farm – Anticipating trends and investing in cutting-edge technology.

The auto insurance industry has been one of the fastest to adapt to the new customer experience landscape, being early adopters of IoT (internet of things), using telematics to pave the path toward usage-based insurance (UBI) models that we now see startups like Metromile taking advantage of. While Progressive was the first to launch a wireless telematics device, State Farm is now the leading auto insurer, its telematics device being tied to monetary rewards that give drivers financial incentives to drive more safely. The company also has a driver feedback app, which, as the name suggests, provides drivers feedback on their driving performance, with the intent of helping drivers become safer drivers, which for State  Farm, equals money.

By anticipating a trend, and understanding the importance of the connected car and IoT early on, State Farm has been able to keep pace with startups and has reserved a seat at the top–above popular auto insurers like Progressive and Geico–at least for now. If nothing else, unlike most traditional insurers, auto insurance companies like State Farm and Progressive have been paving the way for the startups when it comes to innovation, rather than the other way around. For now, this investment in customer experience is paying off. J.D Powers 2017 U.S Auto Insurance Study shows that, even as premiums increased for customers in 2017, overall customer satisfaction has skyrocketed.

4. Next Insurance – Automating for people, and for profit.

Next Insurance believes that a disconnect between the carrier and the customer is at the heart of the insurance industry’s digital transformation problem. In essence, it’s a communication problem, according to Sofya Pogreb, Next Insurance CEO. The people making decisions in insurance don’t have contact with the end customer. So while they are smart, experienced people, they are not necessarily making decisions based on the actual customer needs.

Next Insurance sells insurance policies to small-business owners, and the goal is to do something that Next believes no other insurer is doing–using AI and machine learning to create “nuanced” and “targeted” policies to meet specific needs.

An important aspect of what makes the approach unusual is that, instead of trying to replace agents altogether, Next is more interested in automating certain aspects of what agents do, to free their expertise to be put to better use:

“I would love to see agents leveraged for their expertise rather than as manual workers,” Pogreb told Insurance Business Magazine. “Today, in many cases, the agent is passing paperwork around. There are other ways to do that – let’s do that online, let’s do that in an automated way. And then where expertise is truly wanted by the customer, let’s make an agent available.”

See also: Smart Things and the Customer Experience  

While innovative business models and cutting-edge technology will both be important to the insurance industry of the future, creating fantastic customer experiences ultimately requires one thing: the ability for insurance companies–executives, agents and everyone in between–to put themselves in their customers’ shoes. It’s is a simple solution, but accomplishing it is easier said than done. For larger companies, to do so requires both cultural and structural change that can be difficult to implement on a large scale, but will be absolutely necessary to their success in the future. Paying attention to how innovative companies are already doing so is a first step; finding ways to bring about this kind of change from within is an ambitious next step but should be the aim of every insurance company looking to advance into the industry of the future.

This article first appeared on the Cake & Arrow website, here. To learn more about how you can bring about the kind of cultural and institutional change needed to deliver true value to your customers, download our recent white paper: A Step-by-Step Guide to Transforming Digital Culture and Making Your Organization Truly Customer Focused.

A Scalable Workforce for Natural Disasters

According to a recently published white paper, insurance carriers can best deal with natural disasters by leveraging an on-demand model that gives them immediate access to an affordable and scalable workforce. By using workers in the field only when they need them, carriers can control costs while quickly and effectively meeting the needs of policyholders.

Natural Disasters Are Getting Stronger and More Frequent

ClimateWise, a coalition of the world’s largest insurance carriers, has reported that since the 1950s the frequency of weather-related catastrophes has increased six-fold. Not only have more than 20 storms causing a billion dollars or more in damage taken place since 2010, seven have hit since 2016. All of these storms have kept carriers busy assessing damage and processing claims.

Days after Hurricane Irma made landfall in 2017, more than 335,000 claims had been submitted in Florida totaling $1.9 million. That’s according to Florida’s Office of Insurance Regulation. However, the storm is predicted to eventually cost close to $100 billion.

See also: Do Natural Disasters Matter To Me As An Insurance Buyer?  

Nearly 88% of these initial claims were made by residential property owners. And, more than 10,000 business owners have reported damages from the storm. If the predictions are accurate, the damage from the 2017 hurricane season would more than double the costliest season on record in 2005. That was when Katrina and three other storms caused more than $143 billion in damage.

And it’s not just hurricanes that are keeping carriers busy.

During the first half of 2017, 49 weather-related disasters hit a wide range of locations across the U.S., including ferocious tornadoes and damaging hailstorms. And, most recently, devastating wildfire outbreaks in Northern California destroyed thousands of structures and caused more than a billion dollars in damage to the world-famous wine region.

Carriers Face Workforce Challenges

One of the major challenges that carriers face during times of catastrophe is how to deploy enough workers to the field to assess damage associated with claims that arise. Traditionally, carriers have understood the value of inspecting assets in-person in the field. However, maintaining an infrastructure capable of quickly completing these inspections in any location across the country has become cost prohibitive for most carriers.

It’s not that carriers are understaffed. It’s just that carriers’ workforces are spread too thin in times of crisis. As we saw in Florida during and after Hurricane Irma, many of the state’s adjusters were on the front line still working on claims made after Hurricane Harvey hit Texas.

A Scalable Workforce is Accessible

Carriers are operating in a cost-sensitive and hyper-responsive market. Even the most sophisticated and progressive carriers often find themselves struggling to effectively deal with scalability issues relating to managing a local, regional, or national adjuster workforce.

Thankfully, natural disasters don’t occur every day.

So, how do carriers manage their workforce to handle the surging need for workers after a disaster strikes as well as the lulls that follow? If they hire more full-time or part-time workers, carriers are in the position of laying them off when the disaster is over. This hiring and layoff cycle represents a huge challenge to HR departments. That’s because there is a significant administrative cost associated with recruiting, hiring, and onboarding new employees.

See also: Harvey: First Big Test for Insurtech  

What carriers need is a geographically-scalable workforce that is adaptable to regional nuances. This scalable workforce is made up of gig workers, also called on-demand workers.

Final Thoughts

A variety of breakthrough technologies and workforce alternatives are inspiring a fundamental transformation of the insurance industry. How well carriers interact with policyholders and gather information in the field will depend on how effectively the industry begins to take full advantage of the on-demand workforce to increase efficiency while lowering costs.

The key to responding to natural disasters – and keeping policyholders happy – is to rely upon an on-demand model. This model is capable of supplying an affordable workforce that can be scaled up or scaled down at a moment’s notice.

Disruptive Trends in Claims Cycle (Part 2)

A few weeks ago, in part one of this two part series, we discussed three trends that are disrupting the insurance claims cycle: the use of sensors, catastrophe support, and decreasing claims volumes. Indeed, these trends are drastically affecting the insurance industry, but there’s more. Investment in insurance technology has reached $3.4 billion since 2010. Most insurers, however, are falling behind in this trend toward digital innovation. In a survey by Willis Towers Watson, 74% of insurance professionals believe that the industry has failed to show leadership in digital innovation. Let’s take a closer look at a few more of the trends insurance professionals should consider.

Trend #4 – Digital Disruption

Insurance customers now want omnichannel access to products and services. This means the ability to file claims in person, on the phone, or, most importantly, through an app or website. The trend toward digital also means more personalized accounts and experiences for policyholders. As many as 76 percent of insurance policyholders report that they would change insurance providers to get personalized service and product offerings that are more tailored to their needs.

See also: Disruptive Trends in Claims Cycle (Part 1)  

Trend #5 – Improving Risk Management

Increased access to data enables insurers to better manage and mitigate risk. With advanced data gathering and innovative technology, insurers can better know the risks involved in any number of situations. For example, wearable technologies such as Fitbits and Apple Watches are revolutionizing health and life insurance by providing data that was never accessible in the past. According to Accenture, 33 percent of insurers now offer services that depend on wearable technology.

This trend toward improved risk management through technology can help insurers become more efficient in the risks they choose to take on. Insurers are now using “predictive modeling” to assess risk. According to Exastax, predictive modeling is allowing insurers to “identify whether drivers are likely to be involved in an accident, or have their car stolen, by combining their behavioral data with the exogenous factors such as road conditions or safe neighborhoods.”

Trend #6 – Innovative Technology

Technologies such as drones and artificial intelligence (AI) are also rapidly changing the insurance claims cycle. Both are being used to assist in claims processing. For example, drones can be used conduct insurance inspections on property damage claims, particularly following catastrophic events where conditions are too dangerous for physical adjustors. It is projected that 7 million drones will be owned by Americans in the year 2020. As a result, it is likely that the number of freelance drone operators working in the insurance industry will go up, radically changing the insurance claims cycle.

AI makes it possible for many insurance-related processes to be completed without any human interaction. Consider that a chatbot called Jim, from insurer Lemonade, can settle a claim in less than 3 seconds. Insurance professionals know that this type of speed is critical and game-changing, particularly in times of increased demand.

See also: How to Be Disruptive in Emerging Markets

Final Thoughts

Like many other industries, the insurance sector is undergoing unprecedented changes as a result of technological advancements. We know that the use of drones, AI, wearables and app-based products will continue to disrupt the insurance industry. It is becoming increasingly important for the insurance industry to respond to such inevitable disruptions and decide how to harness these powerful trends.

Disruptive Trends in Claims Cycle (Part 1)

As technology advances, the insurance business is witnessing an important and unprecedented disruption. Policyholders expect carriers to handle claims faster, better and more efficiently than ever before. Because of this, nearly all (89%) of insurance companies expect to compete on customer experience, versus only 36% four years ago. These changes are spurring unprecedented levels of innovation in the insurtech space.

Let’s explore three insurance claims cycle trends that will change the way our industry operates:

Trend #1 – Decreasing Claims Volumes

Technology is making things safer – from driving automobiles to building houses. In automobiles, collision avoidance systems are projected to reduce auto claims by 8%. Plus, innovations such as rear-view cameras, safer designs and better brakes are reducing claims overall.

See also: How to Respond to Industry Disruption  

Trend #2 – Catastrophe Support

Catastrophes and natural disasters create difficult times both for insurers and policyholders. Hurricanes Irma and Harvey remind us of this somber reality. Recognizing the difficulty that catastrophes create, many insurers have created catastrophe response teams to resolve claims quickly. These teams can now leverage insurtech innovations such as electronic claims filing to deal with catastrophe claims more quickly and help put people’s lives back in order. The use of drone technology in the insurance supply chain has also improved our ability to know what’s true after natural disasters strike.

Trend #3 – Increasing Use of Sensors

Through the Internet of Things (IoT), smart sensors are becoming more prominent across all insurance channels. Sensors monitor data and inform insurers and policyholders if certain risks are increasing. For example, Progressive’s Snapshot sensor monitors driving behavior.

Home sensors can detect risks such as heat, moisture and sound. Consider NoiseAware, which allows short-term rental hosts to monitor decibel levels in their homes to deter large, noisy gatherings that can be distracting to neighbors and also lead to damage.

Because sensors can reduce claims, they can also reduce premiums. This is favorable to insurance customers. In fact, according to one source, 78% of insurance customers are open to using sensors if they decrease premiums.

See also: Preparing for Future Disruption…  

Final Thoughts

It is clear that technology is reshaping the insurance supply chain. This poses many challenges, but also offers many opportunities. Reduced claim volumes, improved catastrophe response and increased sensor usage will all change the way carriers underwrite, sell and settle. It’s critical for insurers to monitor and respond to these trends as technology continues to evolve.

Stay tuned for part two of our series, where we’ll explore three additional disruptive trends.

Sharing Economy: Playing Out in Canada

According to a new study from the Insurance Institute of Canada (IIC), the sharing economy presents both an opportunity and a threat to the insurance industry. In the U.S., the sharing economy has already created 17 companies valued at $1 billion or more, including Uber and Airbnb. Some 27% of the U.S. population participate in this type of consumption. Now, with millions of Canadians who use the sharing economy seeking unconventional coverage as a result, innovative startups are threatening Canadian insurers.

See also: Opportunities in the Sharing Economy  

Opportunity – Widespread Use

Forty-five percent of Canadians report being interested in sharing underutilized assets to generate income. In Montreal alone, Uber provides roughly 300,000 rides per month. This means that new types of insurance policies are needed to support the emerging car-sharing and home-sharing industries. For example, because the sharing economy often includes short-term asset sharing, there is an opportunity for insurance companies to provide unconventional coverage options.

Some insurers are already creating products to satisfy this demand. For instance, Aviva Canada has a policy for ride-sharing drivers, and Square One Insurance developed a product specifically for Airbnb hosts.

Threat – New Competition

All of this new opportunity is fueling the creation of nimble and mobile-friendly insurtech startups such as Prvni Klubova, Lemonade, and Metromile. These companies provide insurance in innovative ways using mobile and AI-driven technology. Companies like these three are potential threats to traditional insurers in Canada. In fact, Lemonade has already gained more than $59 million in funding and is quickly becoming a major player in the industry.

According to a recent study, nearly half of traditional insurance companies are concerned that as much as 20% of their businesses could be lost to new insurtech players. If insurers fail to adapt to new competition, these fears could become reality. And insurance carriers are not the only companies experiencing disruption. Insurance brokers also face competition from new platforms such as Friendsurance.

The Solution

There are two options for traditional insurers to consider when it comes to dealing with swift insurtech startups — compete or partner. Competition has been attempted by a number of traditional insurers, such as Economical Insurance, who launched Sonnet Insurance, an online-only insurance provider. However, due to the rapid pace of emerging technologies, head-on competition presents many challenges. Launching an insurtech solution from the ground up is resource-intensive, especially for companies who are not as familiar with a technological terrain.

See also: Sharing Economy: The Concept of Trust  

Partnering can be a more productive endeavor. Many traditional insurers have recognized this and have already formed key partnerships. For example, Intact and Aviva Canada have partnered with Uber. Intact is also a partner with Turo and an investor in Metromile. Additionally, Northbridge has partnered with RideCo, a Waterloo-based ride-sharing startup. Through this partnership, ride-share drivers can receive as much as $1 million in third-party liability coverage.

Final thoughts

Sharing economy valuation is projected to top $335 billion by 2025. Its impact on the Canadian insurance market will only continue to grow. While many Canadians will benefit from the expansion of the sharing economy, traditional insurance companies will need to adapt in order to keep up with new competition from insurtech newcomers. As a result, we are likely to see more partnerships between traditional insurers and insurtech companies in the years to come.