The Road Ahead: How We Can Reinvent Insurance
Fintech disruptors are pushing insurers to revamp and relaunch their business models. But what is the future of insurance?
Insurance is about to enter a paradigm shift. A flotilla of disruptive startups are shaking up the industry. Industry source Crunchbase lists 342 insurtech companies in Europe alone. Many are winning serious backing, with 32 reinsurance partnerships in Q3 2020 alone, such as Hiscox partnership with online business insurance brand Thimble, and on-demand insurer Verily receiving backing from Swiss Re.
Incumbents need to adapt fast.
But what form should this shift take?
FintechOS Annual Summit 2020 asked five luminaries to sketch out the future of insurance. Each delivered their own vision of the revolution in insurance.
Teodor Blidarus, CEO and co-founder of FintechOS, laid bare the challenge. “It’s been an incredibly complex year for insurers,” he began. “The market cap of insurers, according to Accenture, is down 35 per cent. Call centres are flooded with calls, up to 1000 per cent more than usual. And if you look on the horizon there is a big wave coming. Amazon have designed their own motor insurance with a customer journey less than two minutes and discounts in the Prime Store. Google is partnering with Swiss Re to create a super interesting health insurance service. Or you’re looking at Elon Musk who plans to launch a new insurance service.”
He spelled out the situation: “Insurers need to evolve quickly if they want to stay part of the game.”
Alex Singla, senior partner of McKinsey, looked at the root causes of dissatisfaction with insurance. “If someone has an auto accident they will often touch their insurance company five to seven times for one claim. Often times that’s with five to seven silos. This is important. Because if an insurer has a goal of 95 per cent customer service, in theory one customer in 20 has a bad experience. But the reality from the customer perspective is that 5 per cent times five touchpoints, is 25 per cent of the time! That’s one in four with a bad experience, not one in twenty.”
How to move to the cutting edge
So what’s the solution?
It starts by putting innovation in the hands of product managers, not IT staff, said Blidarus: “There is a plethora of No Code, Low Code tools. It allows product managers to innovate with underwriters and customer experience designers. You can design your journey end to end, morphing, playing with data.” No Code, Low code tools make it possible to create new products in weeks, rather than multiple quarters or years. Rapid innovation requires it.
Naturally, this means giving management access to the right data. “Data must be at the core,” said Blidarus. “It’s not a fuzzy concept. And I’m not talking about a new data warehouse. I’m speaking about customer-centricity that is data-driven. Data you can use to understand what is happening in your company, and create augmented underwriting models and 360 degree customer views.”
It helps to learn from companies already living this reality. Marcin Warszewski, director of Deloitte Digital, pointed to the market leaders. “If you look at Revolut, they did something very simple. They noticed the high fees for exchanging currency when you go abroad. That was the opportunity for them to capture 12 million customers in a few years. And N26 in Germany noticed the German banking system is still paper based. It’s old fashioned and dominated by poor customer service. They entered this market and won 5 million customers in the last three or four years. So things which are bad in the industry are opportunities to offer something new.”
Insurers need to develop personalised products. Right now there is too much commoditisation. “I think the worst example right now is modern insurance,” said Warszewski. “We are still not very good at pricing. We have customers that we overcharge. And we have bad risks slipping into our portfolios. Poor customer experience. Insurers have been investing a lot, and changing this. But if you look at the average experience of customers, and compare it to retail and food delivery, insurance is still lagging.”
Warszewski advised: “One thing is usage-based insurance. If someone only drives their car at weekends you can offer a lower price. Pillow launched last year and it offers car insurance by the kilometer. There’s no black box to install, it’s low friction to get started.”
Personal health is ripe for a paradigm shift, he argued: “We have watches that track our sleep patterns and heart rate, and even the oxygenation of our blood. We have companies like Headup or Dacadoo that are offering smartphone-based applications offering health advice based on data. Instead of having contact once a year year, you have a constant relationship all the year round. Irish Life partnered with Dacadoo to launch MyLife health app in Ireland, capturing a huge number of customers from the competition.”
Warszewski believes the shift is already underway: “We can see a huge number of insurers trying to change the intrinsic way they operate, making progress in logical transformation focussed on the IT platforms. And also hiring the right people and changing the culture of the company.”
Learn from the best
A standout example is So Sure, the London-based mobile phone insurer. Chief executive Dylan Bourguignon revealed how he’s disrupting his market. He says it’s about trust. “When I was investing in insurance I realised consumers trust their bank more than their insurer, and that was five years after the global financial crisis,” said Bourguignon. “The first reason is fraud, the second is lack of customer centricity. When you think about fraud there are two negative aspects to it. First you are paying more for fraud – it’s estimated 15 to 20 per cent goes towards paying fraud. And second, it’s equally detrimental to the claim experience, because the insurers don’t know if you are a genuine customer or a fraudster when you claim. That’s why you end up with a genuinely painful process.”
So Sure solved this by offering huge no-claims cash back, up to to 80 per cent. Friends can be added to the Reward Pot, cutting down false claims (as no one wants to rip-off their friends). The customer experience is enhanced by clever services such as validating phones by taking a mirror selfie of a QR code with the So Sure app. Takes less than a minute. Ingenious!
Quotes are completed by So Sure in minutes and claims paid in hours. “Which is why we’ve got a net promoter score in the 60s, which is insanely high, when the rest of the industry is negative,” revealed Bourguignon. “We quote 10x faster, we are competitively priced, and the cover is designed to be read by a 15 year old. It’s Win-Win!”
The result? Total paradigm shift.
Summary: It’s time to commit
Mark Willemse, CIO of NN Romania, an insurer, offered this stirring conclusion to the session: “There are a lot of challenges, and they are accelerating. It’s fast forward. As a CIO community we cannot keep up. There is no fixed point in time, there is no silver bullet which gives an end result. There is one thing that changes, and that is everything.”
Only a total commitment to reshaping processes, and co-creating with an ecosystem of partners, will be enough.
Willemse offered this parting warning: “If we don’t win the courage to enter the arena, and co-create with our partners, then we should not have started at all.”
MAIN PHOTO Credit: Luke Stackpoole, Unsplash
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How Insurtechs Are Winning Trust
Insurance: The Root Causes of Low Trust
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Claims Management: How To Do It Right
“If Not for the Technology, The Business Might Have Been Shut Down Because of the Lockdown”
Insurance: The Scale of The Crisis
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