Adjusting for Insurance 3.0
The insurance industry needs to get ready for ‘Insurance 3.0’ – the next stage to accommodate the changes brought on by the COVID-19 pandemic.
But wait, aren't we still trying to reach level 2.0? Yes and no. The timetables have changed, and insurers need to adopt new approaches fast. Some of this is driven by technology, yet it is most necessary to change the culture and models that insurers rely on.
Let's articulate what Insurance 2.0 is. The insurance game is changing, fast. I would compare several types of insurance to a camera. The camera still exists today, but the majority of cameras are embedded in smart devices. We now get a camera as part of a larger package. That has real consequences, such as Olympus announcing it won't be making camera equipment anymore.
Products such as personal insurance are facing the same danger. Not only is it very feasible for non-insurance businesses to have insurance services, but many are already doing so. Today you can buy a phone with that camera, and insurance is often included. Sometimes that insurance comes through an agreement between the telco and underwriter, but over time those services will be internalised, and the underwriter will lose out.
Insurance 2.0 recognises the rapid disintermediation happening in the industry - not only with middlemen such as financial advisors but also to the companies that control those processes. This system has been further undermined by the arrival of Insurtech trailblazers who are using data, automation and a new approach to the insurance business model to change everything.
For example, internationally we've seen Lemonade Insurance, and local start-ups such as Naked Insurance, take different approaches including flat fees and giving unclaimed premiums to non-profits. They do so while offering vastly lower prices and yet can honour their obligations whilst making a profit.
Insurance 2.0 is also customer-centric. Any honest evaluation of the general insurance industry shows that customers are routinely marginalised instead of supported. It's only been the lack of alternative models that have kept them from leaving. A 2.0 insurance business takes customer data and personalisation very seriously. The prominence of telematics on cars and fitness watches for customers demonstrates this trend.
Every insurance business should aspire to be a version 2.0. So, the bad news is that we've already got to move to Insurance 3.0. Once again, the COVID-19 pandemic has brought the future much closer to now than anyone had anticipated.
What do I mean? In the long-term future, an example of a massive threat to insurance companies is self-driving cars. They don't have drivers to insure, and instead, the insurance will be on behalf of the software company or car company behind that vehicle. Given the tremendously low risk these vehicles are likely to pose, it will make sense that they run those insurance operations internally. Personal coverage for cars will plummet.
Yet this is already happening due to the pandemic. People are driving less, and many use ride-sharing services for quick trips. Something similar will occur around property and workplace liability insurance, simply because many people are no longer going to offices. You might hope that we will return to the old way of doing things, but I get the sense that won't happen. Already I hear business leaders speak of lower rent, great productivity, and - if you can believe it - a drastic reduction in office politics. No, we're not all jumping into our commutes again any time soon.
This is the Insurance 3.0 reality: all the demands of the 2.0 model, now compounded by a future that has arrived much sooner than expected. In 3.0, you can't still debate if you should use automated processes or Artificial Intelligence (AI). Those are a given. You can't still mull if you should be closer to your customer. That's a fact. You need data to understand your customers and technologies that streamline and automate your services to save time and money.
Behind all of that is a new business model. This model can only be built with two ingredients: a data-first culture that collects and implements insights, and a responsive customer-first culture that changes with the market's needs.
Insurance 2.0 is no longer up for debate. It's now a reality that must be embraced, or you'll go the same way as cameras. It's time to define and create Insurance 3.0. We've run out of time: customers are fed up, newcomers are taking away business, new habits reduce the extensiveness of coverage, and COVID-19 has brought everything forward by several years - whether we like it or not. As a result, insurers need to look towards the right technology provider who can offer them the best solutions that future-proof the business and seamlessly transition to Insurance 3.0.
This article was contributed by Kumar Utpal at In2IT Technologies
4 ways to digitally enhance an insurtech customer experience
Insurtechs run the risk of cannibalising their own mission to boost coverage by getting sidetracked focusing on the latest and greatest technology.
These folks may advertise an end-to-end digital experience, but behind their slick customer-facing portals, they struggle to overcome the same problems that established insurers still face: a broken customer experience.
If an insurtech platform delivers a digitised version of a broken process, shoppers may be deterred by the same pain points that they were hoping to avoid by going with the more modern insurer. This might mean that shoppers are required to fill out a series of confusing forms that don’t apply to their industry or even be required to pick up the phone and wait in a queue to secure the quote they got online. Spoiler: neither experience leads to conversions.
As the Chief Marketing Officer and company co-founder, I’m a fervent advocate for putting small business owners and their customer experience (CX) at the center of insurtech product design. At B2Z, we provide digital, self-driven business insurance to small business owners by amassing digital intelligence through vast amounts of data, then leveraging it to streamline their insurance experience. That’s because our audience doesn’t have time to pick up the phone and wait to talk to an agent or chase emails over days or weeks waiting for a coverage decision.
1. Excel where others fall short
To understand where you can improve your CX, start by auditing the current insurance experience for potential customers in your target market. By identifying the common touchpoints and locations along the customer journey where the competition falls short, you can also find opportunities to pull ahead.
At B2Z, we found that most policy offerings were cumbersome and incomplete, but there were two major pain points we saw time and again:
- Irrelevant questions led shoppers to question whether they were applying for the right product. Small business owners could receive a quote after answering questions in an online form, but the process wasn’t tailored to their business. For example, pet retailers would be asked about liquor sales at their establishment.
- Shoppers couldn’t complete the process entirely online. Even after they were promised a completely digital experience, too many small business owners were required to follow up over the phone to secure coverage.
Why are these such serious issues? Small business owners are busy people. More than 70% of them work more than 40 hours per week as they fill a variety of different roles across their organizations.
This disjointed process left busy entrepreneurs with coverage gaps or uninsured altogether: over 70% of small businesses are underinsured, and 40 percent aren’t insured at all. And having the right kind of insurance can be the difference between a business shutting its doors or enduring. This landscape created an opportunity for thoughtful technology to improve the customer experience.
2. Use technology to solve pain points
In the property and casualty space, insurtechs can shrink expense ratios to almost 40% lower than those of traditional insurers. But they don’t do this by implementing technology for technology’s sake. Instead, they identify and target specific areas where tech can improve the customer experience and they strategically design the right solution for their customers’ needs.
Our work with chatbot design is a great example of how insurtechs can leverage innovative tech to differentiate their products and services.
Most insurtech chatbots are equipped to answer simple, formulaic questions you’d find in the FAQ section of their website. While this type of bot helps shoppers and customers access the right information at the right time, their limited natural language processing capabilities too often means customers must input the exact keywords to get a helpful response.
After examining where other chatbots fell short, B2Z developed Diya, a digital guide to small business insurance. During the application process, Diya chimes in at potentially challenging moments to ensure small business owners quickly secure the right coverage.
For example, when asked to select their business classification code, customers can type, “I cut hair” and select from relevant codes for barbershops or beauty salons.
By being purposeful about implementing new technologies, insurtechs can streamline the customer experience and differentiate themselves from others in the space.
3. Align your CX with customer expectations
The pressure is on for insurtechs to match the digital experience customers now expect when they shop for groceries or refill their prescriptions.
The COVID-19 pandemic changed behaviors and accelerated customer expectations for entirely digital experiences (which have existed since at least 2015). In the US, 73% of customers have tried new shopping behaviours since June 2020 and over 75% intend to continue them.
To achieve this, insurtechs must leverage data to streamline the customer experience. At B2Z, we leverage our digital intelligence to help small businesses quickly identify the right coverage options based on the risks within their industry.
For example, to gauge the right level of coverage for a contractor, we need to know whether their employees regularly work on platforms more than 15 feet off the ground. Rather than asking the business owner to provide this information, we leverage third-party data, and our algorithms review county records of similar businesses.
Then, by collating this information with millions of other contractors across the country, we can automatically match their business up to an existing model from an underwriting perspective. This leaves the customer with fewer questions to answer manually, streamlining the customer experience and shortening the application process to as little as five minutes.
By drawing from all available data sources, insurers can deliver a speedy, fully digital customer experience while holistically evaluating customer risks.
4. Every digital touchpoint is an opportunity to enhance the customer experience
As insurers rush to adopt new technology, incumbents and insurtechs don’t consider how their decisions will impact the customer experience.
By taking stock of the competition, implementing new tools that are designed for a specific purpose, and using data to gauge customer expectations (and design to meet them), you can keep your customers at the centre of an increasingly digital experience.
About the author: Stephanie N. Blahut is CMO and Co-Founder at B2Z Insurance. B2Z Insurance is a new small business insurance company that provides coverage for on-the-go business owners: simple explanations, easy application, digital quotes, and mobile claims. Stephanie is a seasoned digital marketing professional whose experience spans the insurance, publishing, and software industries. As B2Z’s CMO she leads their digital-first customer acquisition and marketing strategy.