Insurance is perfectly positioned for a radical digital transformation over the next few years (or maybe months) – customers feel they don’t get value from insurers (unless something goes wrong, at which point they see the value); there is a general poor to dreadful customer experience of most insurers; there are still antiquated business models (why do we still have to buy annual policies? Why can’t we have subscription-based or pay as you go policies?); and then there’s the fact that most car insurers don’t make much profit in the first year of a new customer either.
Here is some insight from two recent insurance events where the main topic has been about digital transformation, disruption and innovative ideas.
Robo Advisors in Insurance
The first event was at ACORD, the industry body for insurance where Larry Shapiro from the Surely Group spoke (disclaimer – I know Larry outside of work).
First things first, Robo Advisors are a terrible label. They are usually neither robotic (i.e. physical) and they often run a logic algorithm rather than offer advice. Actually they are starting to use more Artificial Intelligence – but it’s still an algorithm rather than advice (which might contravene various regulations). Another way of describing Robo Advisors is that what used to be called automation is now labelled Robo Advisors.
Robo Advisors have been used in banking by wealth management divisions. If you’re an ultra-high net worth individual, you probably deserve a wealth manager – a human. But if you’re in a large pool of similar risk profiles, it’s cheaper for the bank to use a Robo Advisor to service your investments than a human.
And using Robo Advisors makes perfect sense. The personal insurance market started with brokers, moved to a direct consumer model with telephone insurance, then web-based and was quickly followed with price comparison sites or aggregators.
So the next generation will be “Robo Brokers” – the Robo still won’t be a Dalek, but the broker will absolutely be an electronic broker. And from here we can see other insurance innovation:
- An insurance wallet to keep all policies together
- Understand at a glance what is covered, not covered and duplicated
- Send alerts and reminders when coverage is about to end
- Source new policies based on upcoming expiry
- Keep policies optimised
Surely Group and ACORD have written a whitepaper describing these concepts in more detail which is well worth a read especially if you work in the insurance industry.
Digital Transformation in Insurance
I went to the second and last day of this insurance event sponsored by Verdict Financial.
The key theme was as the title suggested, digital transformation programmes, although some of the presentations discussed innovation.
André Guyer, the Head of Global Transformation at Zurich Insurance provided his retrospective view of their digital transformation programme. The key points were moving the business to a more Agile model and putting the customer at the heart of all decisions. They didn’t assume anything which the customer wanted – they asked them. This is a big step for insurance companies which Zurich should be commended for.
The result is a real-time, global web application which looks like a top class modern dashboard. Data can be drilled into, dissected, and only shows relevant information to the customer.
— Bradley Howard (@bradbox) May 26, 2016
Zurich followed the philosophy of developing an MVP (Minimum Viable Product), and required a culture change to be able to develop a prototype, then iterate the product until it was production-ready.
The product oozed customer-centricity, with feedback buttons on every screen and sharing functionality. It used to take two weeks to generate some reports which are now shown in real-time.
But André only really cares about one metric… customer retention. And while he wouldn’t disclose specific information in front of competitors, he showed us a graph showing how far they had come.
Unfortunately Andrew ran out of time because I’d have loved to have asked what was next on their roadmap.
Patrick Watt from BUPA gave a presentation of the BUPA Boost app. Boost is like most other activity tracker apps, but the strength of the BUPA brand encourages a larger customer base. Boost uses gamification – with user-generated competitions and leaderboards for exercise and nutrition.
BUPA anonymise the data, to understand trends rather than let the data affect a specific individual. Patrick said that “if users think the data might be used against them, specifically their premiums, then they will disengage” and went on “if all roads lead back to insurance, consumers will always associate BUPA with insurance” – and that’s not what the company wants.
Patrick showed some insights which BUPA had learned so far:
- Women use the privacy feature more than men – they set their own goals and keep the progress private
- Being at the top or the bottom of a leaderboard are coveted positions for men
- A large number of goals are around nutrition (rather than exercise) especially drinking water and drinking less alcohol
- 18-35 year olds think of wellness as their whole lifestyle rather than older people thinking of wellness specifically as being fit or sick.
The bottom line is that insurance is undergoing some radical transformation. It’s putting customers at the heart of new programmes. It’s trying to understand customers through collecting data.
But two things are missing – first, insurance companies need to think of themselves as technology or data companies, and secondly, they need to be bolder. A mobile app on top of an annual policy isn’t enough. Business models need to be challenged and rewritten.
Once start-ups have grown bored with fintech, instech* will be in firmly in their targets.
* or insuretech… the term is still ambiguous.