Tag Archives: the digital insurer

A P&C Guide for Digital Distribution

Property and casualty insurers aren’t shying away from digital distribution. “[F]our out of five insurers either have, or are planning to set up, wholly digital sales processes in which humans are involved only when customers need advice,” Accenture global insurance industry Senior Managing Director John Cusano reports.

But taking digital distribution from concept to reality still poses major challenges for many P&C insurers.

Here, we look at some of the biggest challenges of implementing a digital distribution strategy and how to overcome them.

Everyone’s Going Mobile

In a 2013 article for Wired, Christina Bonnington predicted that the world would contain 24 billion connected devices by 2020 and that the Internet of Things would result in people doing ever more tasks from their smartphones.

We got there early: Statista estimates that the world of 2018 already contains 23.14 billion connected devices and that the number will be more like 31 billion in 2020. And more of these devices than ever are mobile devices.

It seems as if the insurance industry only just began to embrace the opportunities afforded by digital technology when customers’ attention switched to this highly connected, primarily mobile world.

Today, customers “expect the same intuitive experience from their insurance carriers as they do from their favorite mobile app,” says Rahim Kaba at OneSpan. And they’re not the only ones. “Even insurance agents are demanding better digital capabilities from insurers to increase their ease of doing business,” Kaba says.

See also: Is P&C Distribution Actually Digitizing?  

Putting Numbers to the Scope of Mobile’s Impact

Mobile is an essential consideration for insurance companies, according to Andrew Sheridan at DialogTech, who cites several statistics that illuminate the opportunity available:

  • 40% of customers’ time researching insurance was spent on mobile, and 51% of these customers purchased insurance as a result of their research.
  • 25% of insurance shoppers do all their buying via their mobile devices.
  • 66% use a specific insurance company’s app.

Yet going mobile poses some challenges for insurance companies. For one thing, customers expect to be able to do everything from pay premiums to file claims, get driving tips or find a repair shop via a mobile app. That’s a lot of work for an app to do — and the more an app does, the slower and thus less appealing it is likely to be

Another challenge is the integration of older technologies with new ones. As Parmy Olson notes at Forbes, older telemetrics devices like Progressive’s Snapshot are starting to give way to smartphone apps that perform similar tasks, measuring speed, distance and other driving-related factors that can affect premium calculations.

These apps can seem more convenient to customers, but they can also make certain measurements or calculations more difficult. For instance, telemetric devices installed in the vehicle itself can more easily detect a crash and call for help, says Jim Levandusky, vice president of telemetrics at Verisk Analytics.

Embracing Industry Shifts

One solution? “Collaboration with the disrupters,” says Trevor Lloyd-Jones at LexisNexis Risk Solutions. Embracing mobile tools like telematics can make mobile apps easier for customers and more effective for insurance companies, and when these tools are approached through software as a service (SaaS) or similar providers, concerns about security or analysis are often addressed as part of the platform.

Companies that dismiss disruptors in the insurtech sphere do so at their peril, says Nikolaus Sühr, co-founder and CEO of KASKO. The era of relying solely on historical data may be coming to an end. “Disruption in other industries is actually changing user behavior and the nature of risk, so there is no relevant historical data anymore,” Sühr writes.

When moving into mobile for customers, agents or both, don’t be afraid to A/B test mobile apps, try new things and to innovate, says Amir Rozenberg, director of product management at Perfecto. While experimentation must account for the tight regulatory world insurance companies inhabit, trying out options in the mobile sphere allows P&C insurers to better understand how their customers use mobile — and how the company can use what it learns to attract and keep better customers.

Within this process, however, it’s important to keep mobile in perspective. “Even with this trend, companies need to ensure a mobile app supplements the overall experience and doesn’t dominate it,” says Rodney Johnson at Kony.

One Size Doesn’t Fit All

“With customers using more devices in more ways, there are new options for customer engagement,” stated a recent Incom Business Systems white paper. There are also plenty of challenges. Mobile devices feel personalized to customers, and with companies in other industries extending that personalization to their apps, insurance companies are feeling the pressure to personalize, as well.

A hallmark of in-person or traditional channels has been their one-size-fits-all approach to customers, according to Shashank Singh in an article at Insurance Nexus. Many P&C insurers have attempted to transfer this approach to the digital world, only to discover it doesn’t work.

Data and analytics offer insurers an unprecedented opportunity to understand and respond to each customer as an individual, from recommending products to calculating risk.

Digital distribution can also make it easier to capture a growing segment of the P&C insurance market that has changed its behavior as it finds itself priced out of coverage. “Rethinking distribution is key to successful inclusive insurance,” says Peter Wrede of World Bank Group USA. “Low distribution costs make insurance affordable for low-income people.”

A 2017 article by in The Street noted that 18 million adults in the U.S. currently cannot afford auto insurance, so they go without, often turning to public transportation or rides from friends instead. As a result, “personal automobile insurance is in a crisis,” said Dave Delaney of Owner Operator Direct. “Rates have been increasing steadily since 2011, and there is no end in sight.”

By turning to a digital distribution system to reduce costs, however, insurance companies gain the opportunity to make coverage more affordable, recapturing some of the 18 million customers who currently believe auto insurance won’t fit into their household budget.

See also: The Future of P&C Distribution 

Lack of Support Systems

Personalization of the digital customer experience, leveraging tools like mobile apps, presents a profound opportunity to understand and respond to customers’ needs better than ever before, said Ash Hassib, senior vice president of insurance solutions at LexisNexis. But “data availability isn’t the issue,” Hassib said. “It’s how you use it to underpin sustainable and profitable growth that’s the real challenge for insurers.”

And for many insurers, this challenge arises the moment they try to use that customer data within their current organization.

“Insurers have focused on digitalizing the front end, with insufficient focus on the systems that support distribution,” said a May 2017 report from the Insurance Governance Leadership Network. Additional challenges in retention have resulted, with insurance companies noting that customers leave because the system doesn’t provide adequate support for their experience.

Customers who use multiple channels to communicate with insurance companies are more likely to face problems caused by insufficient systems inside the organization itself. Perhaps this is why, relative to other industries, insurance company employees rated their companies 9% lower on providing a high-quality customer experience, according to Tom Bobrowski at The Digital Insurer. P&C companies were also rated 8% lower than average at “good cooperation between functions,” allowing the company to meet the customer’s needs effectively.

One option is to take a hybrid approach, says Sasi Koyalloth in a Wipro Ltd. white paper. A hybrid approach focuses on incorporating human agents into the digitization process, focusing on giving agents and employees the digital tools necessary for seamless communication throughout the organization.

Regardless of approach, “a single view of the customer is crucial,” says Robert Paterson at Afinium, noting that software as a service (SaaS) providers already exist with the tools and support needed to help P&C insurers move to a single platform for managing information.

And the systems’ cost needn’t be onerous. “Another key driver for adoption of SaaS solutions is its use in developing pricing models that can be directly related to system usage,” Paterson says.

Final Thoughts

The switch to digital is now or never for P&C insurers. Working with knowledgeable insurtech providers can help companies address concerns about data security, analysis and customer experience, allowing insurers to take full advantage of the digital world to build more personal and long-lasting customer relationships.

Matching Game for InsurTech, Insurers

What is it with InsurTech startups and insurance companies?

To any outsider, it’s very clear that InsurTechs and insurers make for very odd bedfellows. InsurTechs are quite ephemeral. They sprout up with the sweet rains of venture capital funding and die as their funding dries up. They are nimble and innovative. They aspire to be the next Google — ready to disrupt the establishment in the best “moon shot” tradition.

Insurers, on the other hand, tend to be corporate immortals, often measuring their tenure in centuries. Their processes appear fixed and hidebound, handed down from ages gone by. Their speed of innovation is positively glacial, and their customer proposition has “rock of Gibraltar” stability. Insurers are the very establishment that InsurTechs are seeking to disrupt.

Opposites attract — or so they say.

The fear of disruption

The insurance industry has seen an ever-growing demand for “creativity,” “disruption” and new digital technology since 2013. AXA was one of the first to declare its intent to become a digital insurer. In April 2014, the company established a lab in Silicon Valley and announced its tie-up with Facebook. At the time, everyone in the industry was waiting in trepidation for the market entry of the tech giants such as Amazon, Google, Facebook, Samsung and Apple. The fear was that those companies would sweep away the traditional insurers in an Uber-like tech tsunami.

Well, the tide came in, but it was no tsunami. Google breathlessly launched into the motor insurance compare market in March 2015. Just a year later, it unceremoniously departed. The industry heaved a collective sigh of relief because there was little or no impact. Yet the tech giants linger and remain the insurance industry’s boogie man.

See also: An Eruption in Disruptive InsurTech?  

Follow the money

The presence of the tech giants has created a created a rush to fund new InsurTech startups. Many of the leading insurance firms have set up VC funds focused on InsurTech. AXA is, again, one of the more notable in this area, providing funding to the tune of €230 million over the last 18 months. VC funding for InsurTech startups has increased 250% year-on-year, from $750 million in 2014 to $2.65 billion in 2015. For insurers, they get financial rewards and get to be at the forefront of any industry disruption if the technology takes off.

But many insurers see the need not only to fund innovation but also to “do” innovation. Hence, we’ve seen a steady stream of insurers around the world establishing innovation labs, collaborative spaces, digital garages and centers for digital disruption. Time will tell if these are fundamental drivers of strategic change or are unmasked as simply “window dressing” for the market.

Widening the net

The InsurTech “boot camp” is another recent phenomenon that has opened up a wider range of innovative startups to the insurance industry. These camps are a cross between an accelerator program, a beauty pageant and a reality TV talent show. For the small price of some equity and the added incentive of some up-front “pocket money,” the InsurTechs get to rub shoulders and gain insights from industry mentors and leading insurers. These boot camps are quite grueling, as they extend over several months. Competition can be fierce, with the best of the best InsurTech teams pitted against each other. The participants get to hone their solution pitches, demos and financial plans for the gathered insurance brotherhood and their fellow InsurTechs. Yet some InsurTech teams are frustrated by the insurers’ lack of urgency and their naïve view of how much effort is really required to make an innovation alliance work.

See also: InsurTech Start-Ups: Friends or Foes? 

A new hope

All of this activity has not been lost on governments wanting to push a “clever economy” strategy, creating sovereign incubators for the development of new or exotic financial services products and business models. The Singapore and U.K. governments are leading exponents of this new way of thinking and have spawned a wave of innovation emulators from Australia to Germany. These innovation-friendly government policies generally encompass a mix of:

  • Seed funding for startups;
  • Provision of “collaborative” spaces;
  • Incentives for the establishment of innovation labs; and
  • Regulations fostering the flexibility/tolerance to try new things in public that may fail.

Breaking new ground, the Monetary Authority of Singapore (MAS) has launched its own innovative boot camp: the Singapore FinTech Festival. It’s a coordinated way to accelerate innovation for the whole financial services industry, drawing on FinTech and InsurTech talent from around the world. Singapore is putting its money where its mouth is, funding a “Hackcelerator” competition as part of the festival. This competition will run 10 weeks, starting in September 2016, and it has more than $500,000 of funding and prizes to be shared — no equity required! All the teams need to do is be in the top-20 at solving at least one of 100 problem statements set by the organizers.

In a similar vein, Singapore insurer NTUC Income has announced its own InsurTech accelerator program. It’s offering funding of S$28,000 apiece for 12 top InsurTech startups. Again, no equity required. The program runs from January to March 2017.

If this trend continues, boot camps will be out of business — at least in their current, equity-gobbling format.

But where are the traditional insurance tech vendors?

In all this activity, where are the insurance legacy tech suppliers (LegTechs)? Many of the traditional consulting firms are doing quite well, tying up with some of the boot camps. But those vendors that were selling mainframe systems, software development services and the like, where are they? The answer for the most part is nowhere — the land of digital transformation. Perhaps it’s indicative of the level of mistrust between insurers and their LegTechs that insurers “go direct” to the innovation source. Perhaps it’s the fear that the innovation will too quickly be commoditized by these vendors and spread to insurers’ competitors. Whatever the case, LegTechs are being cut out of the conversation.

This is a big mistake.

LegTechs are better at partnering. They typically understand the innovation process and have a product mentality, which would really help package what InsurTechs have to offer. There is also an alignment on maximizing profit on technology with a common view of pervasively selling into the market. As a consequence, the LegTechs have a large, well-established, tech-savvy salesforce ready to carry the InsurTechs’ message to the market. This is one of the most decisive reasons why InsurTechs should partner with LegTechs. The final reason is that LegTechs are a goldmine of useful resources. They have an army of developers, lab space, sandpit environments, technology centers of excellence and distinguished engineers/architects with decades of experience — all of which would rapidly bring robust InsurTech products to market.

See also: InsurTech Boom Is Reshaping Market  

For LegTechs, there are also many attractions. Systematic partnering in this way would inject innovation and an entrepreneurial spirit they badly need. InsurTechs would provide an outlet for some of the LegTechs’ brilliant engineers, giving them an opportunity to dabble with the heady challenges of a startup while maintaining their security. This would definitely boost retention and attraction of this scarce talent pool. Finally, the LegTechs could get into new growth areas rather than stagnate on a declining commodity technology business.

The bottom line

Change is the only constant in an industry fiercely trying to catch lightning in a bottle. The lyrics from the Pokémon song are really quite apt for this current stage: “You teach me, and I teach you,” as I doubt we can “catch ‘em all.” We have a vision but have yet to stumble on the magic formula for repeatable innovative disruption. We hope we’ll find it in InsurTech’s perfect match. Or, perhaps, it has already happened but we just don’t know it. In any case, with boot camps, hackcelerators, insurers, VCs, governments and LegTechs all at hand, our visionary InsurTechs will soon deliver further breakthroughs. Let’s hope their beauty and passion rub off on an old industry.

This article originally appeared in InsurTech News.