28 Nov Insurers are left behind in the insurtech digital innovation race: distribution and affilate partners are ahead of game
In the last few years insurers have raced to capture the massive opportunities created by new technologies and have learnt to turn the threat of insurtech start-ups into smart collaborations. The result has been the avoidance - so far - of any significant loss in revenues and profitability.
Nevertheless, not only technology continues to progress rapidly, but the American and Chinese tech giants, with their global ambitions, pose new challenges to the industry. Policyholders have come to expect the same level of convenience and engagement from their insurers, and some observers even start to fear that, in their ruthless march to global domination, those giants may encroach into insurers’ territory.
Early evidence shows that this is far from obvious and insurers have a window opportunity to leverage their consolidated customer base, deep industry know-how and solid balance sheets to strengthen their competitive position. Take for instance Google Compare, an auto insurance aggregator launched in US and UK which has been far from successful.
However, to pursue long-term profitable growth, insurers should start focusing on opportunities for non-disruptive market creation as well. Most of us, including insurers and insurtech start-ups, have come to equate technology with disruption, where a new market is created by a new solution which displaces an existing one. Take for instance KYC technologies that are replacing the need for face-to-face interactions.
In reality, as pointed out by Professors Kim & Mauborgne in Blue Ocean Shift, the sequel to their global best seller Blue Ocean Strategy, a focus on disruption is limiting and leaves half the opportunities to create new growth and new markets off the table. The key is to realize that we do not necessarily need to destroy an existing market in order to create a new one. While disruption sets out to better solve an existing problem faced by current customers, non-disruptive innovation creates “blue oceans” by targeting noncustomers of the industry or solving “brand new” problems.
Take for instance BIMA, which is creating a blue ocean by offering affordable microinsurance products to the “bottom of the pyramid”. BIMA, which was established in 2010 in Ghana, has rapidly gained scale and is now bringing microinsurance to 24 million customers across Asia, Latin America and Africa. Over ninety percent of its customers live on less than 10 USD per day and three-quarters are accessing insurance for the very first time.
Developing countries have economies that are generally based on farming and agriculture and require a wide range of insurance products from health and life, accidental death and disability, agricultural and property insurance, to catastrophe cover. In those countries microinsurance already covers around 135 million people, which represents only around 5% of the entire market potential, with an estimate annual growth rate between 8 and 10% for the next years.
Similarly, microinsurance can be marketed in developed countries to reach the underserved segments of the population who struggle to afford more comprehensive products.
However, microinsurance is not just a reduced cost coverage for low-income customer segments in both emerging and developed economies; it is an entirely new way of selling insurance and create new demand. In fact, consumers that can afford traditional covers may not perceive the need for insurance until an event occurs or an intermediary simulates such awareness. As a consequence, they are often unaware of the need or just the possibility to insure against a specific risk. When awareness is not the issue, insurers submit complex and cryptic contracts requiring a lengthy and cumbersome purchasing process that individuals are not able or willing to follow.
Not surprisingly recent studies report that Millennials are the most underinsured generation, and are the least likely to have any health, rental, life, and disability insurance. Millennials are just one of the segments of the so-called "connected generation", an immense blue ocean opportunity also including Generation Y and the Silent Generation, Baby Boomers, and Generation X, who are shifting to mobile purchase habits. Empowered by technology, all these individuals look for authentic services that they can access across multiple platforms and screens, whenever and wherever they need. Their protection gap is estimated at over 3.5 Trillion Dollars.
The key to selling insurance to the “connected generation” is to reach them with the right proposal through engaging touchpoints on a device they swipe, tap and pinch thousands of times a day, their smartphone.
Helping insurers to unlock this blue ocean opportunity with a customer centric mobile insurance proposition is the mission of Neosurance, the start-up we co-founded and which created the first virtual AI-based insurance engine.
Neosurance stimulates the protection need “pushing” the right cover at the right time on customers’ smartphone, thus triggering an emotional and impulse purchase for a small-ticket. Insurance purchase becomes a “rational impulse” and the transaction is completed at the “Point of Need” rather than at the traditional “Point of Sale”. This is possible because the customer experience is entirely paperless and takes less than 20 seconds.
Neosurance relies on a partner-friendly “plug and play” SDK easily embeddable in any app, allowing carriers not only to target their captive audience, but also to tailor their insurance proposition to the front-ends and customer journeys of their community partners. In doing so, insurers (and reinsurers) can maximize customer engagement by protecting people’s common interests and passions and build a holistic ecosystem of digital communities to create a blue ocean of uncontested demand.
In the coming future, as insurers learn to leverage the massive amount of data they collect and to analyse it through context, psychographic and behavioural profiling, more blue ocean opportunities will be generated. In particular, carriers will be able to upgrade their role throughout the end-to end customer journey from that of a simple "payer" to that of an active "player", multiplying customer touchpoints, boosting satisfaction and ultimately creating new opportunities to cross-sell insurance and non-insurance products and services.