While you’ve no doubt heard about the growing and successful union of Finance and Technology, with fintech now fully incorporated into the everyday lexicon. However, what you’re unlikely to have heard about is the emergence of Insurance and Technology or insurtech as the cool kids are calling it.
Insurance + Technology = #InsurTech
Much like fintech, insurtech is quite simply the application of technology to address the long list of problems that currently faces one of finance’s most unloved siblings, Insurance.
However, what you probably don’t realise is it’s potential impact on an industry that contributes over 25% of the UK’s total net worth yet consistently delivers poor customer experience.
Globally 47% of customers have positive experiences with their insurer, but only 37% of Gen Y customer do — Capgemini World Insurance Report 2016
As an example, when was the last time you said to a friend, “I totally understand how insurance works, I really enjoy buying it.” We’re willing to bet never.
However, with the emergence of new technologies and their application in insurance things are looking up. Hopefully, in this post we can provide you with a bit of an insight into the world of insurtech, how it could benefit you and what to expect over the coming years.
Current State of Play
While technology has been quick to revolutionise many industries, including travel, news, retail and more recently banking, the marriage between Insurance and Technology has taken a lot longer to get off the ground.
Perhaps this is in part due to the complex and heavily regulated nature of the industry itself or maybe it’s just quite simply that the ‘big players’ have lacked incentive to do so — either due to the fact that they’re making more money that they know what to do with and have been for the better part of a few centuries or… no that’s probably it.
Regardless of the cause it’s quite clear to us that insurance is stuck in the land that time forgot.
Enter, ‘startups’. Smaller, leaner companies who are building new digital propositions almost daily, which are actually delivering what people want — a fundamentally better experience.
Applying not only new skills (across software and hardware), but also new techniques evolved by the new digital world (from Design Thinking to Lean UX), which is leading to the creation of products and services that are designed with us in mind, meaning they actually address the problem we have in a way that is effortless when compared to anything that has come before.
These ‘startups’ and more specifically the ‘entrepreneurial spirit’ they encourage when combined with new technologies have the potential to revolutionise the insurance industry. Hopefully, this will mean that we can all access a product without being reliant on big incumbents.
It’s unfair not to mention the efforts of some of the incumbents, which so far have been mixed– I mean a customer service bot for Messenger may be a first, but it’s not exactly going to fix the underlying issues at play.
However, as we all know it does take a lot of effort, time and money for any large company to move at the pace that is required to keep up with technology.
While the majority have recognised this and started to invest, purchase or incubate some of the more successful InsurTech startups out there, rather than build their own solutions,
I can’t help but think that the big insurance institutions will eventually cannibalise these companies - stripping them of their ‘jewels’ and then slowly grinding them down until they become just another piece of mediocre decoration that sits upon their vast mantelpieces.
Looking to the Future
Wearable Tech, such as FitBits and Apple Watches may seem like a bit of a passing fad, but in the future they could be of huge importance to us. Largely because we these devices can be used to passively monitor our health and wellbeing— everything from heartbeat to blood glucose levels, all in real-time.
That data can then be used to make smarter health decisions (passive being the key, as the majority of solutions currently available still require constant input and as such behaviour change).
Obviously, health insurers can then use this data to drive premiums down for those that they deem are looking after themselves. For this to work however, it will require public institutions and private companies to work closely together to ensure that any scheme doesn’t just reward the fit and punish the unhealthy, but works to benefit everyone, which in turn will reduce strain on health services and benefit the economy as a whole.
Furthermore, with the huge swathes of devices that are set to come online in the next few years, forming the Internet of Things, we should similarly see other types of insurers begin to assess risk more effectively - hopefully incentivising those that are higher risk to bring it down. Everything from how you manage your home to how you drive you car will begin to be analysed and risk profile optimised.
Annoying things such as burst water pipes will be a thing of the past as your households data centre will automatically turn the water off if it detects something untoward. These preventative measures will remove potential danger while also reducing existing insurance costs.
While we could continue to wax-lyrical about the potential of other new technologies, such as Big Data Analytics for calculating risk, A.I brokers or Blockchain’s smart contracts, we can’t help but think that the majority of technologies currently being talked about are just a big set of hammers. And unfortunately, the majority of people wielding them in the insurtech space (or any space for that matter) are seeing every problem as a nail.
Subsequently forcing a new technology to a problem, rather than as it should be — defining a problem and then developing the right solution regardless of technology.
If we can all agree that the biggest underlying problem is not perhaps insurance itself, but a genuine distrust from the average person caused by companies over-inflated prices, utterly confusing customer experiences and poor claims processes, then why should people begin to invest their time in new insurance products regardless of how much technology they employ?
Until many of the fledgling technologies we’ve mentioned can fully mature (without being misused by insurers) then we here at so-sure feel that the potential comes in the following forms:
1. Rethinking the Product
People still want the peace of mind that if something unforeseen happens to them, their possessions or their loved ones, are covered. However, who really wants an insurance product for every item they possess? As such, what is exciting is the handful of InsurTech startups that are starting to make forays into the one life, one policy concept.
Imagine being covered for everything you need for one monthly fee!
2. Managing the Product(s)
Until this one life, one policy concept actually comes to fruition (which will no doubt take years given the nature of the regulatory nightmare this presents), we will have to make do with a series of products that allow us to manage the various policies we do own.
If you do happen to have numerous insurance policies then there are a few exciting products that can help you manage your insurance policies (see: Knip), spot gaps in your cover (see: Brolly) and easily seek out new policies should you purchase something that requires it (see: Trov).
3. Rethinking the Entire Model
Given the emergence of the on-demand economy it was only a matter of time before someone started applying it to insurance, such as Cuvva or Sure.
However, they still don’t (yet) have full control of the process. As such, the underwriting often falls to the same ol’ faces and subsequently insurance claims are often not actually controlled by those who are selling it. All of this results in a poor customer experience that damages the brand and perpetuates the cycle of distrust.
Perhaps the real innovation that will emerge in the not so distant future sits with those employing a peer-to-peer model. The reason being that while the majority employ well-designed front-end mechanisms for selling and managing the insurance, the actual peer-to-peer nature of their product actually reduces the moral hazard of insurance and therefore reduces the cost of insurance.
Therefore, once the savings can be passed back to customers perhaps people will begin to trust insurance a little more. After all who doesn’t like money back, especially when they haven’t even used the service they were paying for!
However, that still leaves the claim experience up for grabs…
Welcome to Social Insurance
In the coming weeks, we are launching so-sure, which will take peer-to-peer insurance to a whole new level. Focusing on addressing customers’ needs. Social Insurance ensures that customers have a great experience from purchase to claim.
Moreover customers can get up to 80% money back, every year, if they and their friends don’t claim. Created to serve its customers rather than insurers, we are starting with mobile phones, as these are expensive devices which we would all struggle to live without.
It’s not going to be easy, but we hope you’ll join us on our journey.
Extracts of this article were taken from our CEO, Dylan Bourguignon’s recent article in The Fintech Times — ‘Why Disrupting Insurance is Hard’