Marnix Zwart shares his insights on technological developments in InsureTech.
Imagine a world where you could get car insurance based on exactly how far you drive or the number of minutes you spend in your car. Where instead of a one-size-fits-all travel insurance plan, you could have one quickly tailor-made for your exact needs, like extra phone insurance the day you go bungee-jumping. Or imagine being able to file and receive claims painlessly and efficiently with just a few short swipes on your smartphone. Such flexible and customer-centric innovations may already seem commonplace in lots of industries but in insurance they can appear like something from a utopian future. But with more and more insurers today embracing the latest international digital developments that can bring about change at every point along the industry's value chain, the future is no longer that far off.
The Financial Technology (fintech) boom has been well-documented, and it continues to shape the financial institutions of our future. Hot on its heels comes the quieter but no less impactful surge of Insurance Technology (insurtech) - innovations being made by startups and insurers alike that have the potential to impact the entire industry. From collecting and harnessing customer data more effectively, to revolutionising the way that insurance is underwritten, and improving customer engagement and satisfaction, these innovations are happening across the globe. Insurtech is a flourishing field. According to CB Insights, $0.7 billion was invested in insurtech startups globally in 2014, a figure easily surpassed in 2015 to the tune of $2.65 billion. 2016 is expected to be yet another year of spectacular growth.
The traditional structures of the insurance industry run deep, but far from being resistant to change, the best insurers recognize that the benefits from insurtech are very real. The recent Digital Insurance Agenda Conference in Barcelona, dedicated to accelerating the digital transformation of the insurance industry worldwide, is one indication that it is taking insurtech seriously and keeping abreast of cutting-edge developments. Tickets to the two-day event quickly sold out, and it was well-attended by thought leaders and key players in the field. Many were there for the showcase of tried and tested technologies from across the world. GoBear was one of 50 innovative companies hand-picked by event organizers to participate in DIA, each highlighting how the best "disruptive" insurtech could be integrated to engender evolution in the insurance industry.
At GoBear, we're focused on how insurers can make life easier for their customers, opening up possibilities for better engagement and making customer acquisition more effective. These are some of the developments we think will have a huge impact on the industry:
The end of one-size fits all
Standard insurance coverage is a bugbear for many people, who find that their policies are chock full of things they don't particularly need, while they can't always get coverage for the things they do need. Insurtech innovations driven by sophisticated data analysis, are already allowing some customers to move beyond these issues. Zhong An, China's first complete online insurance company co-created by Alibaba, is carving new pathways and venturing into new segments that traditional insurers tend to shy away from. Their micro-insurance products, like protection against return-delivery on Tao Bao, have been sold to over 150 million customers, highlighting nascent demand. US-based Trov is another great example of how providing more customization is adding more value for consumers and the industry alike. Instead of a predetermined home insurance bundle set by insurers, consumers are able to identify key items they would like protected.
Upending traditional customer care structures
Innovation is also providing alternative distribution channels to the traditional broker-dependent push model, and helping to fix major customer care problems at the same time. A future of robo-advisors was all the rage at DIA Barcelona. Providing Artificial Intelligence with information on their existing policies can mean customers are able to connect with completely unbiased assistance 24/7. Conversational search can easily help them to find the best deal if they want to compare existing products. The often painful claims process also has a workable solution in sight. Thailand's ClaimDi is an auto-insurance startup that is doing away with inefficient paper-based claims systems. Their app is facilitating more open communication between insurers and their customers, leading to greater customer satisfaction.
Peer to Peer (P2P) Insurance
Much further into the future is the possible rise of P2P insurers, which may lead to falling premiums and even bypass the insurance industry entirely. The technology to create such a system is already available, and with the rise of sites like Kickstarter, people around the world are becoming more comfortable with the notion of crowdfunding and P2P lending in general. This highly disruptive yet exciting development is probably a long way off yet thanks to continued issues around compliance, but if insurers fail to become more transparent and cultivate trust with their audiences, it will be hard for consumers to overlook the potential cost savings and not jump ship.
Insurtech's most exciting solutions aren't promising to overhaul the entire industry on their own. Rather, they've latched on to the massive opportunities that exist for niche players to come in with modular products that solve particular pain points. That's good news for insurers, who have the option of improving on outmoded structures in an organic and manageable fashion. Growing consumer demand for clear, unbiased information is further creating an impetus for transparency and change, so what insurers cannot afford to do is stand still as their traditionally offline industry is taken further into the digital age.
On their own, each solution may seem like a small step forward, but by working together, the insurtech movement represents a big leap forward for the insurance industry. It's therefore up to insurers to recognise that their industry is changing and to consider incorporating the best and brightest innovations. Consumers stand to benefit a great deal from these improvements, but ultimately insurers too will gain from engendering greater trust and loyalty, and expanding their market share.
This article was originally published on MIS-Asia.