How will the insurance industry change before 2025?
Change is in the wind for the insurance industry. In the midst of this black swan event which is the global pandemic, insurers the world over are finding that current practices are fast becoming out-of-date. Customers have new needs and expectations, and algorithmic models have run out of historical data to base judgements on. Now centre stage in one of the greatest international crises in modern memory, the – until now relatively slow to transform – is beginning to feel the force of long-term disruption.
Much is changing as we speak, but the true impact of COVID on the insurance industry will only become apparent in the years to come. Of course, only those prepared for adaptation in the face of the challenges and opportunities ahead will be shaping the future of insurance. For now, reacting to trends like those outlined below will be the key to preparing tech-savvy and flexible insurers for moving with the seismic shift we’ll see in the coming years.
A typical Insurer today is set up in a very traditional manner. There remain distinct, separate departments for the key functions: including assessing risk, acquisition, customer engagement, claims handling, customer protection and renewal. This is in addition to maintaining the operational, financial and organisational support structure that’s needed for the firm to survive.
Yet very few insurers have a truly joined-up view of a customer’s full journey with their organisation, let alone what can be done to optimise each interaction. What’s needed is the ability to understand each customer touchpoint as they traverse through their journey, as well as the ability to make decisions as to how best to engage them.
This imperative is more urgent than it might appear. One example of a forced change for insurers is the recent that was very critical of ‘complex and opaque’ pricing processes. In particular, it criticised the industry’s 'loyalty tax' on customers that renew with the same providers each year. With this regulatory mandate for change, insurers will be forced to take a more holistic approach to the way they price policies for their customers, across both new business and renewal processes.
Insurers often cite legacy policy admin and claims systems as the biggest barrier standing in the way of this approach being adopted. By 2025, however, the most successful insurers will have broken those barriers down, gaining an unprecedented understanding of their customers’ needs and preferences, and the ability to offer pricing plans that are both fair and competitive.
We've long heard of 'digital transformation' being a key objective for insurance executives. However, by 2025 it’s expected that successful insurers will have completed this transformation. Digitalisation will no longer be the differentiator, it will be the default. As a result, a new way to drive business advantage will have to emerge – and it will be centred on the use of algorithms to drive business decisions.
This is not a new concept. 'algorithmic business’ as the ‘industrialised use of complex mathematical algorithms pivotal to driving improved business decisions or process automation for competitive differentiation'.
We’ve already seen some insurers start this journey in their claims function. Companies, , have long automated decisions concerning whether a vehicle is deemed a total loss or not. However, the trend will become much more prevalent, with that, by 2023, over 33% of large organisations will have analysts practicing decision intelligence, such as decision modelling.
It’s clear by now that COVID-19 will fundamentally change how insurance is done – both in terms of how customers want to interact with insurers, and also how insurers need to adapt. While we hope this pandemic won’t be with us forever, it has opened the eyes of many executives to what is possible within the customer-facing parts of their organisation.
From my discussions with insurers, many have commented on how well employees and customers have adapted to the new normal. While there were initial logistical hurdles in virtualising contact centres, they’ve been impressed at how well staff have adapted under pressure to deliver what customers and shareholders expect. Many are likely to follow in allowing staff to work remotely for the foreseeable future.
Indeed, the previous months have exploded the myth that minimal policyholder interaction is a barrier to . Technology can more than fill the gap. As companies like By Miles have shown, on-demand or telematics-based products can deliver an insightful monthly, weekly or even daily dialogue with customers.
Insurance has long been society’s safety-net, protecting us when something goes wrong in our lives. Yet, it would be to everyone’s benefit if risk could be avoided altogether. The use of telematics to assess the risk of younger drivers was the first big industry push here, but by 2025 we will see this becoming ubiquitous across many other products and customer demographics.
The of Munich Re’s acquisition of IoT service provider Relayr will benefit manufacturers with a ‘pay as you use’ model. This will enable them to be more flexible and react faster to market changes. The is also exploring new ways that data extracted from connected sensors and devices can help to transform risk assessment and empower insurers with data.
This is no small step for any traditional insurer. But it is one that puts a truly customer-centric lens on the service that insurers deliver. Data-driven risk prevention allows for significant product differentiation, taking insurers out of their comfort zone and enabling them to explore whole new opportunities.
Come 2025, we will be living in a very different world with new risks that require novel insurance solutions to resolve.
One of the largest looming threats is insurance fraud. shows that fraudulent claims rose by 5% in 2019, and there are concerns the current economic climate could see this rise even further. In the aftermath of the 2008 Financial Crisis insurance fraud rose by 17%, and there’s no guarantee this won’t happen again on the back of growing practices like crash for cash fraud and ghost broking.
Putting in place an effective defence mechanism to intelligently detect, prevent and investigate potentially fraudulent claims will be an essential requirement by 2025. Fraudsters are nothing if not resourceful and they regularly target the weaker insurers. A soft defence is a liability while those that take fraud detection seriously will drive a more profitable outcome. This is especially true when it was announced recently that
Insurers have plenty to consider as we await a future without the pandemic. Those who can spot these patterns in their interactions with customers right now, and consequently adjust business models, data sharing and , will be ready to compete to redefine the industry in a post-COVID world. Looking to the future of insurance, based on what we’re seeing now, is the best way to get a strong head start.
This article was contributed by Adam Goldsmith, Insurance Specialist,
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.