In my last blog piece, The insurtech effect: Insurance gets a makeover, I talked about how insurtech – the technology and its related startup culture – is changing the face of insurance. I received a lot of positive feedback on that piece, but was interested to see many focussed on the disruption element rather than the opportunity.
I personally think insurtech is less about insurers becoming obsolete and more about transformation. New business models and technology are leading to amazing new ventures.
There are, of course, implications for incumbent insurers and, contrary to what some might think, these could be extremely positive. So in this article, I want to talk about how leveraging insurtech could solve some of the problems the industry faces and lead to enhanced customer experiences.
Disruption is not a negative thing. While those that fail to adapt can become casualties, digital change can be empowering, creating better experiences for customers and allowing business more bandwidth to do greater things.
Insurance, by its very nature, exists to help people. Yet studies consistently show that consumer trust is low, with only 10% believing that insurance brokers have high or very high ethics¹ and only 27% of customers trust their provider.
We’ve seen in other sectors how technology has allowed people to interact with, and talk publicly about, brands. It is now insurance’s turn to benefit from these societal shifts. Far from being a threat to incumbent insurers, insurtech has the potential to boost customer loyalty and appreciation.
Insurers have already driven incremental change and many now offer some form of digital interaction with their customers, from apps to web portals. To compete with the disruption of the concepts explored in my previous piece, though, they now need to embrace and leverage digital innovation to drive wholesale transformation.
There are many advantages that insurers can gain from insurtech that will help them connect with customers, provide better service, and allow them to grow and work smarter.
Artificial intelligence and the use of robotic process automation will allow organisations to streamline processes and identify bottlenecks within the business. Efficiencies in underwriting, customer interaction and getting new products to market will allow for a sleeker operation.
Taking the manual work out of routine jobs will enable staff to focus on higher-value tasks. For example, claims can be automated via AI, such as with Lemonade’s claimbot and its three-second start-to-finish claims record², or Snapsheet’s app that allows users to send photographs of their auto bingle and have their claim paid out in an average of 2.5 days. Snapsheet is already being licensed to 35 insurers in the US, including newcomer Metromile³.
Chatbots, virtual customer service representatives, such as Spixii, which speaks six languages or Flamingo’s ‘Rosie’ which ‘learns’ from your business in order to respond to customers, may lead to reductions in customer service staff – again, allowing their deployment into areas that provide greater business value.
AI will play a big role in augmenting and automating underwriting processes, leading to more sophisticated and accurate risk modelling and better understanding of customer needs. Drones, which are already being used for assessment in hard -to-reach or dangerous areas, will play a part here too, for instance in the mapping and modelling of properties for personalised underwriting. Canada’s Fluttrbox aims to crowdsource drone pilots, for example, and enable insurers to buy the data, maps and modelling, allowing for faster assessment and more accurate pricing of risk.
In terms of technology, insurtech could help insurers bypass much of their legacy system woe. APIs, applications that can access an insurer’s existing data and make it useable, and software as a service (SaaS) options will allow insurers the freedom to provide greater consumer options without overhauling entire IT systems.
Software options already exist on the market, such as video technology that lets customers call their insurer who guides them through getting the audio, video and image evidence needed to process their claim – why wait for a loss-adjuster to come out and report back?
The best part of all these great changes? It is the customer connection that will benefit the most.
Currently, touchpoints with an insurer are often negative, boiling down to making a claim or being asked to renew. If these are the only two experiences to be had, it’s no wonder customers have little affinity with their insurer. By communicating more, via apps, web and social media, both sides will build trust (established by the consistency of messaging over time) and understanding.
Using web platforms and phone apps, customers will be able to control their data and see where their claim or policy is at any point of the day. Australia’s Hello Claims offers video streaming for claims reporting and assessment, and notifies customers as vehicles move through each part of the claims process. Customers can log onto an online dashboard whenever they like to see where the claim is at, eliminating the need to spend long periods on the phone to customer service within restricted hours.
The speed with which claims, renewals and policy buying takes place will quicken. Blockchain promises smart contracts, that activate automatically when notified of a loss (by the customer or an external metric, such as the magnitude of an earthquake), and are validated by third parties connected to the blockchain – for example, a body shop, or the police station where a theft has been reported.
With AI assessing the loss and amount to be paid out, a human may never need touch the claims process. Imagine how quick that would be! Jumpstart Recovery, for instance, would like to automate earthquake payments in California. The model works on the premise that an earthquake of a particular size will lead to a certain amount of nuisance damage. If an earthquake hits a set magnitude, a text could be sent to customers affected and, if they reply with confirmation, an automatic payment would be sent to their bank account.
Finally, with better interaction and design that’s user friendly and intuitive, customers are likely to become better educated. Particularly if, as many of the insurtech startups are doing, information is presented in easy-to-understand language, going a long way to demystify complex insurance terminology. More knowledgeable customers are less risky, understand the need for insurance more and ultimately, buy more cover. Everybody wins.
It won’t be an easy road for insurers to transform in this new world, but at least now there is a path to follow, and not a wall to face. Insurtech startups, who often fundamentally understand the customer experience piece – due in part to the fact that many form to overcome bad service – have a head start.
Insurance, though, is complex and varied, and regulations are different in every country in the world, if not every state. With the knowledge, skill and customer data incumbents possess, the successful implementation of insurtech will give them an edge over those from outside the industry.
The lesson to learn, however, is not how to beat insurtech startups. Indeed, many incumbents will partner with them to great effect. How to remain agile and always keep the customer as the end goal should be the focus. Implementing technology today does not mean it will work for the next hundred years.
Being digital is a journey, and customers will be the judges of its success.
To read more on the state of insurtech, download PwC’s 2017 report Insurance’s new normal: Driving innovation with InsurTech here.
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