Updated: Apr 11
(original article from Nov 2015)
Last Sunday I’ve built the summerhouse in my garden. While I was taking a picture with my phone of my brother-in-law on the roof of my almost-finished creation, I was wondering to what extent he was actually insured. I could have searched in the polis that should be tucked away somewhere in my office. But I did not have the time for it. So I did not know. I couldn’t easily find it. But even if I would have known whether he’s (not) insured, there wasn’t a way to get him easily insured on the spot.
The spoiled consumer
Consumers have been accustomed to having everything available at their fingertips: agenda, encyclopedia, calculator, pictures, banking, maps,… Everything is available within one or two clicks. Many industries offer this service today. The travel industry has moved from a business where everything was done for you to a business where the customer takes control via digital and mobile. Payment has been made possible via mobile, while it previously was considered not safe enough. Fresh groceries are delivered the next day after being ordered online. But it was impossible to access my insurance without having to dive into a pile of paper.
Startups are filling in the void
In 2014, 1.4 billion dollars of Venture Capital was invested in insurance start-ups. Many don’t have a background in insurance. But each one of these start-ups is focusing on types of services that are largely left untouched by the incumbent companies. With consumer research indicating that over 30% of customers are willing to switch to "Utility Supplier" for a better app experience, it seems like these consumers are up for grabs. Insurances are bound to evolve towards a new type of service, driven by the possibilities of technology and desired by the expectations of the consumers.
1. Insurances will become simple
If there is one returning complaint about insurance it is about the complexity. It is complex to know your premium. It is complex to organize a meeting. It is complex to make a claim. It is complex to stop your insurance. Mobile offers the possibility to make things simple. In fact, mobile-only works when things are straightforward and simple. It should be addressing a clear need, and be designed to a specific context. For example, Kroodle addresses this need for simplicity with a 100% mobile approach: They allow signing up via Facebook; don’t use polis numbers; give mobile access to your info; easily allow you to make a claim or quit the insurance. This is the kind of services consumers will require from their insurance.
2. Consumers want personal insurance.
Digital allows consumers to search for the product that fits them best. Insurance on the contrary offers general, one-fits-all products, which leaves the client largely unsatisfied: Health insurance is based upon very little personal health data, car insurance is primarily based on the car and the years of experience of the driver, and so on… In the US and the UK, insurance companies like Metromile and Progressive, today offer tools that can be plugged into your car. They allow the gathering and sharing of data with the insurer in order to receive a personal quote for your insurance. Beam is a dental insurance that connects your electronic toothbrush with the insurance premium, by adapting your quote based on how often and long you clean your teeth. Today, connected devices and sensors allow client to share their personal data with their insurer to receive a more personal insurance product. Based on the success of the “shared economy” business model, insurances can expect this to be a radical game-changer in their business.
3. Transparency is key
When buying insurance it is very difficult to compare products. Today, however, we see companies like Coverhound in the US, or Google in the UK, offering clients the means to compare different insurance products. These companies try to answer the need for more transparency between insurance products.
But transparency will play another big role in the future of insurance: Insurance clients that did not make a claim, feel most unsatisfied. They've paid for something they didn’t need so they are left puzzled about where their money went and whether that cost was actually worth it. Different start-ups are addressing this need by taking insurance back to its’ roots: creating a peer-to-peer type of insurance. Companies like Guevara and Friendsurance allow people to group online and create a pool into which the premium goes. This offers the insured not only transparency on where their money went but also allows them a refund when the money wasn’t used for claims.
4. Proactivity will lower insurance costs
As mobile is a perfect tool to change behavior and motivate people, there is a huge opportunity for insurance companies to focus on prevention. For example, Oscar is a google-funded health insurance start-up that is strongly focusing on proactivity. Driven by the opportunities technology offers, Oscar focuses on reducing insurance costs by facilitating their customers with easier access to medical assistance. They even pay their customers to track their activity and stay healthy. Many other companies are focusing on this preventative approach. Also, Cigna has been executing successful pilots where activity trackers have led to lower insurance costs.
5. Insurance is about reassuring
Insurance products must be reassuring in a time of need. Compare it to Google maps on your phone which assures you that you’ll never get lost; the weather app that helps you in choosing your clothes before your leave; messaging when you are meeting somebody without having exactly agreed upon time and place. Insurance should help people when they need it most, with the least effort and the best result. Beaglestreet is a life insurance startup that not only focuses on each of the points above, but it also assures you that your family will receive all necessary support when you come to go.
Tomorrow, customers will shop for their insurance products online. By uploading personal (health, car, house, …) data, people will immediately receive a personalized, simple offering that will allow them to compare between companies. Signing up for insurance will be done in a couple of clicks. The insurance rates will change daily, based upon the data from their lifestyle, sleep, food & drinking habits, driving, in-house air quality, etc… Insurance companies will have to gather and manage all this data in a fast and flexible way, allowing them to have more information on people than any other company. This in turn will radically change the type of products insurance companies might offer in the future.
Incumbent insurance companies must start today
Of course, Rome wasn’t built in one day. Incumbent insurance companies cannot change their business model and technological architecture overnight. Nevertheless, it is important to gradually take steps in satisfying the customers’ needs. Insurance companies can already shape new customer experiences by offering other means of communication or access to their insurances. Today, it is also possible to gather data and - to a certain extent - already challenge the existing pricing granularity. Only when taking it step-by-step, insurance companies will learn how to create new and enhanced products. By starting today, incumbent insurance companies can start adapting their services to the current needs of their customers and protect their business model for future new challenges.