The digital future of insurance post-COVID-19
Pandemics profoundly impact communities and change our way of life.
‘The War on Tuberculosis’ public health campaign in the 1890s led to Americans refraining from sharing cups and spitting outdoors. The Spanish Flu of 1918 greatly increased the number of women that chose nursing as a career.
With the global economy crippled and many well-established businesses on the , COVID-19 will reshape human behaviour and buying patterns forever. But what impact will this have on the global insurance industry?
The worst for insurers is yet to come, with filed over denied business interruption claims due to the pandemic, and POTUS insurers cover these claims, even though these policies explicitly exclude coverage against pandemics.
But what does this mean for the insurance industry’s digital transformation?
The problems have just begun
Insurers’ excessive reliance on third-party service providers will be severely tested as operational and technical issues combined with general business interruptions hinder their ability to serve policyholders. The inevitable communication delays around outstanding claims will lead to reputational and litigation risks.
Down the road, this will create difficulties in pricing of various products. For instance, the workers’ compensation pricing model would have to be reimagined due to long term effects of COVID-19 infections, and the emergence of gig workers.
COVID will change needs and demands from customers
Insurers have continuously evolved their offerings to meet changing customer needs but the post-COVID-19 world will accelerate new product offerings at an unprecedented pace.
For products like personal auto, consumers will now demand a truly digital, contactless experience. The ability to make digital claim payments, for example, will be a huge differentiator.
Several firms like Twitter plan to have their non-essential staff permanently work from home. This would imply pricing for cyber insurance moving away from a guesstimate model to accurately assessing and pricing risk – a task hitherto avoided due to the sensitivity around the sharing of risk data.
Businesses have been hit hard by COVID-related closures and have been unable to file for business interruption claims. This will start a major shift in how businesses buy insurance with several business owners, going forward, including pandemics as a covered cause for BI coverage.
This trend by itself will give rise to others like dual-trigger parametric insurance policies, leveraging insurance as a derivative contract and episodic insurance.
On the consumer side, usage-based insurance will be a de facto expectation for segments like personal auto.
The role of technology
Insurers have always in their product offerings but on the technology front, a legitimate criticism of the industry is that it has been slow to react. This will change going forward with the emergence of a new normal.
These changes are needed as that’s what a safe and pleasant customer experience demands. Imagine being involved in an auto accident, and having to physically interact with several parties, just to exchange some paper documents!
The changing demands across both ends of the spectrum call for inter-firm coordination and seamless B2B communication. Inter-firm coordination is challenging, with a lack of transparency and visibility into the process. A simple claims adjudication process for auto claims involves multi-party coordination, making it impossible for a customer or a customer service rep to get an updated status on the claim until the other party finishes their work.
A straightforward product like parametric insurance should ideally guarantee instant payout once the triggering condition is met but today it takes weeks, even months at times.
Blockchain is a medium for firms to communicate with each other in a secure manner so as to seamlessly exchange data. Purpose-built enterprise blockchain platforms take this concept a step further and ensure that only the parties involved in a transaction view the transaction.
What that means in a multi-party scenario like claims adjudication is that there is a consistent view of the claim across the customer, customer service rep and auto service shop. They can exchange data securely across organizational boundaries by deploying an application that is “consistent yet unique” in how each one of them views it.
In the parametric claims example, a smart contract can evaluate all the policies placed on a ledger, determine which ones meet the underlying condition, initiate and complete payout on the ledger – all in a matter of minutes without any human intervention!
But, not all smart contracts are created equal – some blockchain protocols refer to a piece of code as a smart contract; while others implement smart contracts to refer to a piece of code executing against a legally enforceable contract – which in insurance is nothing but the policy document!
So, will everyone move to blockchain?
Given that the network of participants involved in placing a contract or adjudicating a claim cuts across organizational boundaries, an insurer cannot be truly digital unless its network is digital.
This would imply an end-to-end digital application framework that allows all parties to securely communicate with each other to exchange data. This is a textbook case of blockchain, so yes, we will see an acceleration in blockchain technology adoption – across consortiums as well as non-consortia initiatives like parametric insurance, cyber insurance and beyond.
To go back to how we started this piece – pandemics reshape society. With COVID-19 and insurance, the effects will be seen through the industry being more open, accessible and flexible in terms of preparing us for future disasters – yet another example of insurance protecting society at its most vulnerable.
This article was contributed by Ronnie Kher, Director of Insurance Business Development, R3
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.