October 11, 2019
The Future of Shipping Insurance
End-to-end insurtech platforms are helping logistics players turn insurance from a cost center into a revenue stream.
Logistics lies at the heart of the modern global economy, with figures from Transparency Market Research revealing expected growth from $8.1 trillion in 2015 to $15.5 trillion by 2023. Logistics are fundamental to the success of the complex network of supply chains that all 21st-century organizations rely on. Yet insurance has for too long been costly to administer for such firms and more of a hindrance than a help for the merchants it’s meant to protect.
Fortunately, things are changing. A new breed of insurtechs are offering logistics firms the ability to provide standardized policy benefits and claims handling experiences to shippers of all sizes at the time of booking, along with instant claims and pay-outs – driving confidence and profits. End-to-end insurance platforms offered by insurtechs are helping logistics players turn insurance from something traditionally viewed as a cost center into a legitimate revenue stream and providing a customer experience for their merchants that increases loyalty.
Out of the Dark Ages
Insurance has existed as a critical service underpinning the logistics industry for hundreds of years, ever since the first policy was created in 1350. While much time has passed, and things have surely evolved, modern insurance solutions have become complex and derivative of something that is no longer fit for contemporary use, while the customer experience has proven to be a frustrating process that often leaves merchants at risk.
Real-time software is now reshaping the entire matrix of insurance policies and distribution networks available to logistics companies and their merchants. The rise of insurtech companies and the API economy has meant that the logistics industry is finally able to dust off rigid insurance processes and deliver the sophisticated coverage that merchants have always needed. With the modern business demands on trade and logistics, this kind of customer-centric innovation is the only way logistics companies can be viable heading into the future.
See also: Insurance 2025: Smart Contracts
The Customer Is King
In all industries, the customer is becoming the focal point for product development, technology and the overall service offering. Businesses of all types are racing to catch up to the digital behemoths that have filled their coffers by prioritizing the customer experience and adding value at every touchpoint. With the global insurance market for logistics set to be worth over $61 billion by 2025, the scene is set for global logistics companies to drive additional revenue by solving common customer concerns and providing a little peace of mind.
Offering standardized end-to-end insurance solutions not only protects merchants against the inherent risks of shipping goods but also helps their businesses thrive. It generates confidence and a level of customer satisfaction that keeps merchants loyal.
Protecting shipments has benefits above and beyond just the shipment itself and creates a safety net for the merchant’s overall profit margins and provides continuing cost savings.
When the cost of failed deliveries has skyrocketed to $2 billion, the logistics firms that can offer customer-centric insurance solutions with real utility are best placed to significantly increase their ancillary revenue streams and customer loyalty.
Standardizing Solutions Across the Board
Insurance is a key prerequisite for anyone shipping goods globally. Goods may travel over hundreds or thousands of miles to reach their destination. Breakages, delays and other challenges are only natural. Companies need coverage to drive confidence and prosperity and to manage risk.
However, existing solutions are riddled with challenges. Traditional insurance policy benefits and claims handling processes tend to differ greatly across different carriers, leaving the merchant at an increased risk of being under-protected. Add to that a 30-day delay before a claim can be initiated, and the merchant is now under-protected and out of pocket should anything happen to shipments. Situations like this are not only creating unnecessary friction for the merchant but also stunting growth and expansion opportunities for logistics companies.
The good news is that insurance has changed. Thanks to technology, new end-to-end insurance solutions are now available and are providing a standardized approach to policy benefits and claims handling for any carrier globally. This means merchants can now get the appropriate level of coverage, regardless of the carrier, and have the ability to make claims and receive payments instantly via an automated process for loss notification and declaration of value.
A standardized approach gives the merchant confidence and peace of mind while providing a service that adds value to the day-to-day business and reduces financial risk. While solutions like this put the customer at the center of the insurance experience all the way from booking to claims, they can also fast-track growth for logistics companies looking to expand.
The Insurtech Solution
Insurtech’s impact on the logistics industry is a rare example of modern technology bringing processes previously deemed unworkable back from extinction. Whereas before, insurance was an impractical distraction to the main business function, it’s now a legitimate ancillary revenue stream that’s providing real value to merchants.
The data and technology-led approach used by insurtechs has evolved insurance beyond rigid blanket policies to give businesses insurance products that are fit-for-purpose, at the right time and at the right cost. They have also put customer needs first, removing operational costs, accelerating processes and breaking the insurance broker stranglehold on the industry.
Insurtech and tech companies have created customer-centric protection with real utility and kick-started the revival of insurance in the logistics industry, making it viable and valuable again. It’s also becoming easier for merchants to claim without incurring losses and lengthy delays. Furthermore, whereas 20 years ago the complexities of the insurance process became detrimental to the core business, insurtech has facilitated the opportunity for insurance offerings to fill the modern need for ancillary income.