There are emerging mobile players in the insurance industry, and despite the industry’s complicated, firmly rooted environment, there is more opportunity than ever to introduce customer value with mobile solutions. Driven by the surfacing of FinTech and InsurTech startups, the insurance industry is amidst a systematic change in business operations, not unlike the transformation banking institutions are skillfully mastering now.
Insurers should look to banking institutions who have entered the FinTech space as an inspiration for digitization. Banks are partnering with FinTech enterprises to operate at lower costs and alleviate the reliance on legacy systems. As a result, banking institutions are able to retain clients, while FinTech companions improve customer experience with user-centric, mobile solutions.
The urgency for financial services to offer digital products has hit the world hard and is moving faster than originally anticipated. The insurance sector needs to view entering the InsurTech environment as an opportunity to create partnerships and build mobile strategies focused on providing value in this increasingly digitized financial ecosystem.
Mobile devices are a core element of everyday life. Covid-19 has created massive waves of disruption across everys ector, and financial services are no exception. Customer demands have shifted. Customers are no longer seeking services, instead, they are looking for mobile insurance solutions which integrate several areas of assistance on a single platform.
Many insurance companies are aware of and embracing this shift in consumer demand. Rather than panicking at the potential threat of InsurTech and FinTech competition, insurers are looking at these startups as catalysts for innovation.
Covid-19 has significantly accelerated the digitization of Canadian Financial Services companies throughout 2020. KPMG’s Pulse of FinTech 2020 report cites that many large financial institutions recognize the pressing demand for and use of digital platforms, digital banking, and all other fintech related services. These institutions are making substantial investments and partnerships in the growing technology space. There has also been an increase in insurance companies working on all matter of proof-of-concept (POC) initiatives to provide policyholders with better digital customer experience.
FinTech set the bar high for the insurance industry. Customers are expecting higher quality mobile experiences from all their financial services, similar to the experiences they receive from Apple, Google, Amazon, and other heavy-hitters.
According to the McKinsey Global Institute, 75% of InsurTech business has primarily served retail clientele. The younger end of Gen X demographics and millennial customers favour mobile channels for financial transactions. As well, these segments tend to be less loyal to financial companies and more likely to swap financial services and insurance policies to fulfill changing needs. Younger age groups value convenience, remote transactions, and as little direct interaction with institutions as possible.
Winning young customers is lucrative for insurers. In many ways, business from a millennial is more beneficial than opening a new policy with a baby boomer because there is ample opportunity for long-term business, potentially lifelong business. Younger demographics are far more receptive to technological advancement. Providing these potential customers mobile solutions and optimizing with InsurTech is how to gain loyalty with younger policyholders.
Financial service companies understand the demand for a mobile-first experience. PwC’s recent FinTech global report notes that up until Covid-19 disruptions, mobile applications were seen as a “nice-to-have” add-on to electronic banking. Advancing technology and changing demands of the consumer in a Covid-19 driven world is forcing financial and insurance companies to adopt a mobile-first view of features and development.
Similar to FinTech, InsurTechs have many advantages insurance companies can leverage. These lean startups are free from legacy products and processes; they can use emerging technologies to build brand new systems; they can target specific value pools instead of offering lengthy end-to-end solutions that don’t meet everyone’s needs. Overall, InsurTech’s can go to market entirely different than traditional insurance companies. By partnering with InsurTech enterprises, insurers can offer:
Enriched Connectivity. Artificial intelligence (AI) solutions can eliminate friction at several touch points in the customer journey. Chatbots will be able to understand and act on customer queries at any time. With deep learning, chatbot solutions can further interpret sentiment to identify when to introduce a human agent.
Personalized Product Offerings. Again, AI technologies help InsurTechs offer targeted products. Today, customers want the flexibility to purchase very specific insurance and they want the ability to decide when they can purchase and how often.
buzzvault is an InsurTech enterprise providing customers with a digitized inventory of their possessions data. By uploading home contents data, customers of buzzvault can create extremely personalized insurance policies with the flexibility of adding or removing items from their policy at any time.
Slice is another on-demand InsurTech venture that allows customers who are renting out their homes or cars to only pay for insurance to cover the time they are renting them.
Exceptional Digital Customer Experience. End-to-end automation. The concept is simple. Customers are more than ready to leave manual claims processing behind. At the moment, apps like Lemonade allow users to report home insurance claims on their mobile app and get their claim reviewed, approved, and paid out almost instantly.
In the very near future, enhanced data collection from cars, wearables, and smartphones will further enable claims automation. If accidents occur, diagnostics from these devices will automatically contact insurance providers, process claims immediately, and even withdraw payment from designated bank accounts.
FinTech and InsurTech startups are successful mainly because they address the most pressing pain points customers have with banking companies and eliminate them. A key area moving forward will be an increased focus on raising customer interest and encouraging interaction.
Policyholder pooling is already a popular social engagement tool to lower insurance rates. Friendsurance, for example, launched the very first peer-to-peer insurance model. Essentially, Friendsurance is a social network for policyholders; individuals with the same insurance type connect, and if no claims are made within the group they are rewarded with cash-back.
Immediacy will also be a growing tactic for insurers looking to digitize addressing customer pain points. If customers can’t get information, advice, or make claims at any time, insurers run the risk of rapidly losing business.
There are a number of different strategies you can adopt to prepare for the quickly evolving InsurTech environment:
Gain an internal focus. It’s critical to have an understanding of the evolution of the InsurTech ecosystem. Participating in InsurTech accelerator programs, or hosting hackathons with InsurTechs are both helpful ways to become familiar with the value of entering the environment.
Engage with the community. Seek out inspiration and look for opportunities to collaborate. Different perspectives on the industry are tremendously helpful for identifying new ways to generate value. By establishing partnerships insurance companies can work with InsurTechs to develop POCs or launch incubator programs.
Take Action. Eventually, insurers will have to take action; whether that’s collaboration, investment, or changing the organizational culture.
The insurance industry is ready for transformation, to support new business operations, and to maximize efficiency. To make headway, insurance companies will have to look to InsurTechs for inspiration and partnerships. While InsurTech is rapidly transforming the industry, it does not aim to overtake traditional insurance, rather it is opening the doors for both counterparts to extend the value chain and increase mobility overall.