By Chris Kay · June 27, 2022
6 minute read

Combined commercial: any flavor, so long as it’s vanilla, part 2

Combined commercial: any flavor, so long as it’s vanilla, part 2 - SME insurance

Combined commercial insurance could be doing so much more to serve SMEs than it currently is, Chris Kay, sales director for insurance at FintechOS, will explain at DIA Amsterdam. In the second part of our blog series, we consider utilizing Big Data in digital combined commercial from the perspective of the SME insurance industry.

Personalized embedded insurance products are in their infancy – and Big Data should be used to offer truly tailor-made, innovative, and unique products. This would bring myriad benefits to small and medium-sized enterprises (SMEs) and the wider economy.

Embedded insurance is currently only operating at the very tip of its iceberg of potential, Chris will explain at his presentation during the Digital Insurance Agenda event in Amsterdam (DIA Amsterdam) on June 29-30. The presentation will include a live demo of the FintechOS Northstar platform, showing how it can talk with both financial services and insurance providers, and use Big Data to provide bespoke insurance solutions that go way beyond what’s currently on offer for SMEs.

The benefits of intelligent, better use of Big Data are significant. In part one of this blog series, we detailed the positive impact better data would have on SME finance. In this article, we look at its positive impact on SME insurance. If you’d like more detail on either, a full report is available, titled Combined commercial – any flavor so long as it’s vanilla.

Download the full report: Combined commercial – any flavor so long as it’s vanilla

SMEs inherently generate vast amounts of data on a daily basis, thanks to their propensity to use a variety of financial services apps (accountancy, transactions, banking), yet insurance add-ons are personalized at only the most basic of levels, and policies are far from customized. Hence the report title: Any flavor so long as it’s vanilla.

This situation means that SMEs are chronically under-insured and occasionally over-insured, while the process of buying insurance is laborious at best, deterring SMEs from investing precious time and resources in the application process.

The FintechOS platform allows for a better solution, one that doesn’t just save SMEs time and money, but also offers insurance options tailored to their needs, and provides them precisely when and where they need them.

At its most straightforward, this means that when an SME is making a loan application with a bank, the existing data that an SME has already generated would be used to assess the application. For example, their sales ledger and accountancy software.

Not only will the loan application be based on intelligent assumptions, but an insurance provider can also check the system, assess the SME’s bespoke situation and needs, and offer – as part of the same transaction – insurance cover to suit their current risk.

Smart combined commercial can bridge the insurance gap

In addition to saving the SMEs a huge amount of time, dramatically simplifying the application process would also encourage them to access more optional insurance products that would decrease their risk exposure and increase their chances of survival.

For example, such additional coverage could include things like cash flow protection against late or non-payment of invoices, or cyber insurance as part of domain hosting packages.

Chris Kay, sales director for insurance, FintechOS
Chris Kay, sales director for insurance, FintechOS

It would bring true meaning to embedded insurance. The insurance offerings would be embedded into the SME’s day-to-day business, rather than the SME having to go out and find coverage that they most likely don’t even know exists.

Taking this one step further, the use of data would allow the conventional customer journey to be flipped on its head. Instead of, ‘I’m the insurer, what products can I sell to the SME?’, think, ‘I’m an SME owner, how much can I afford to spend on insurance?’

Chris Kay, sales director for insurance at FintechOS

It’s rare for an SME to have enough budget to cover all the potential risks they face, but what if they could ask instead: ‘what’s the best coverage for me, based on my data and what I can afford right now, this month?’. Plus, if it was provided on a monthly basis, it could be amended as the needs of the company evolve over a year and longer, much like a Netflix subscription can be easily amended month by month.

Too late for one crisis, but could combined commercial be ready for the next?

At FintechOS, we believe that if this level of personalization had been available during the COVID-19 pandemic, fewer businesses would have had to close.

Why? Because if businesses had been able to claim a lower amount but access it immediately, rather than having to hold out for a bigger payment that would take months to come through, cash flow failures wouldn’t have become the problem they did.

As we continue to face uncertain economic times, this enhanced level of support for SMEs will be crucial to our economic well-being.

Yet, the presentation at DIA won’t just show the ease with which embedded insurance can be made truly personal and useful, it will also show the logical next step for this real-time data: robo-advice, and how the insurance industry can fill the ‘advice gap’ created by well-intentioned market regulations to provide scalable, automated customer guidance.

The opportunities for embedded SME insurance

The Big Data available via embedded insurance and embedded banking would provide a solid basis for advice and recommended products, using perhaps a group of 2,000 very similar SMEs, that the customer is under no obligation to buy.

The data-based advantages of offering robo-advice are clear, and as Chris will show at DIA Amsterdam, wouldn’t it be better to be treated fairly based on data collected from 100,000 customers, rather than on one individual human’s opinion?

The opportunities are clear, but what isn’t so clear is who will be leading the charge? The innovation is ready and waiting to be developed – it now remains to be seen if it’ll be the neo-banks, challengers, and disruptors taking this to the SMEs, or if it will be the traditional legacy players. Either way, the smart use of data paves the way for a clearer, brighter future with truly tailor-made coverage and easier processes for SMEs.

To find out more about what Chris demonstrated at DIA Amsterdam, and what FintechOS can do to enable digital SME combined commercial banking and insurance, download our report.

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