09 Oct Robin Kiera, one of the known faces of insurtech, discussing startups, incumbents and the future of the insurance industry
An “old style” industry that has to move on!
Insurance is finally changing. It cannot but do so in order to stay competitive in a technology-driven world where customers have ever increasing expectations regarding service delivery, with a clear tendency towards “on-demand”.
Initially the insurance industry has been slow to promote digital innovation, but shifting customer expectations together with an increased importance acquired by digital channels are forcing all players to seriously consider digital investments in order to offer customer-centric products and services.
A tendency towards ecosystems can be identified as the insurance value chain is becoming more fragmented and boundaries between the classical roles of distributors, insurers and reinsurers are getting blurred. This transformation is affecting all phases of the customer journey and the insurance value chain.
Let’s face it, we all know the industry is not famous for its capacity to react fast and innovate. What better evidence to that than observing major insurance player’s current struggle with how to meet the demands of their digital oriented customers: ease of use, transparency and accessibility is what they expect from Insurers precisely because they already have it in other sectors like banking, shopping and so on. They want insurance coverage tailored to their needs, choosing value over price while demanding easy access to information from behalf of the Insurer via the channel they prefer.
If mandatory insurance is usually sought after by the customer who has to get covered or deal with the consequences, non-compulsory policies present a much lower level of interest and receptiveness from behalf of clients. Even in today’s connected world, the insurance agent or broker remains the most diffused means for selling non-compulsory insurance coverage to potential customers. This statement is (and will remain) imperative in the insurance industry: “Insurance is sold, not bought!”. Even if smartphones and tablets are taking over the daily lives of customers, insurers don’t seem very able yet to take advantage of this opportunity, thus missing their chance to intercept the customers where they feel most at ease. The lack of a comprehensive vision when it comes to the channels used and the integration between them is unconceivable and represents a major handicap that customers surely perceive. Rigidity and complexity, that’s what customers often associate with insurance coverage and insurers in general. Nevertheless companies still benefit from a high vote of confidence as institutions in the eyes of the customer, is it really not possible to maintain this asset and be innovative at the same time?
Customers often have difficulties in understanding the value offered to them by insurers when a claim occurs because of complicated contracts that are difficult to follow. They do not feel like they are getting customized offers that fit their needs and realities. Other industries have done much better in creating the feeling that they care about individual customer needs and habits and that they can offer a service which better matches the real requirements of the single client.
Mass insurance is becoming obsolete as newcomers shift toward context and utility. These newcomers are called InsurTechs and we can definitely say they have started to shake up the industry. They are seen as a fresh alternative to the incumbent’s model of doing business in today’s and tomorrow’s connected world. A deep collaboration between incumbents and InsurTech start-ups to deliver innovative solutions is one of the most envisaged trends by experience professionals in this world and we’re already starting to see some great examples.
The potential that InsurTechs have is great even if traditional Insurers still make the rules because they have the means to do so – capital, infrastructure and knowledge. But in order not to lose their upper hand incumbents should embrace the solutions put forward by InsurTech startups – which are legacy system free, resourceful and creative but usually lack in-depth knowledge about the insurance sector. Whether it is risk reduction, cost optimization or context-based pricing, the advantages are becoming clear for incumbents.
To cite Matteo Carbone, insurTech thought leader, in order to stay relevant in the future insurance companies must themselves become InsurTechs. And how better to do that than by working closely with the newcomers.
Micro-insurance or how to sell the right coverage, at the right moment and at the right price
Push mobile micro-insurance is a very good example of how InsurTechs have found a solution to the anti-selection issue that troubles the micro-insurance space. This new approach to selling insurance manages to address existing challenges by utilizing digital (mobile) channels for communication, registration, payment of premiums and claims processing (claims submission, and claims payouts).
I believe that the potential of micro-insurance to revolutionize the insurance sales process is very high. In addition it could help reduce the protection gap in developed countries for several types of risks and it can be a way to target millennials with limited financial education and low trust in traditional intermediaries.
The main scope of micro-insurance is to deliver innovation to customers who seek it. At the same time it helps the insurer get more insight on the individual client so that it can address his or her needs without second-guessing.
Micro-insurance can also be considered a form of micro-financing because it offers low cost coverage for a limited period of time and its applications could be huge. The reason for which I believe that more investments will be made in this specific type of innovative solution – micro-insurance – is the rising amount of data available out there and the ability to analyze it in a way that brings added value to both insurer and customer.
Consider micro-Insurance as a concrete way to handle usage-based needs by covering specific risks for specific durations of time. As with all financial services lines of business, insurance providers are leveraging sophisticated data and insights to provide highly personalized products to meet consumers’ increasingly specific expectations. The sharing economy demands niche products, and only those products that are relevant to users’ usage and behavior patterns will remain successful.
The Italian InsurTech start-up Neosurance brings the first worldwide example of push micro-insurance with a B2B2C business model
Italy represents the worldwide leading edge experience in car insurance innovation and thanks to the use of the black boxes, which started 10 years ago, the Italian market is the only market worldwide where auto insurance telematics is already mainstream with almost 5 million active black boxes and a penetration higher than 16%. This (from some points of view) incredible performance has been possible thanks to the collaboration between insurers and tech companies. A collaboration that allowed to use the black box for data collection in order to select risks and improve claim management.
Due to this extremely successful experience with car insurance, Italy represents the “Silicon Valley” for the evolution of innovation in the insurance industry. Neosurance is a good example of how an Italian start-up has managed to gain traction on the market after positioning itself as an enabler for traditional carriers to take advantage of the huge opportunity presented by “micro-insurance”.
Neosurance is a 50/50 joint venture between Neosperience, specialized in Digital Customer Experience, and Digital Tech International, operating in InsurTech sector. Neosurance works with the ambition to create a new insurance market with a completely new and innovative insurance product. Its positioning is unique in the field of "one-time insurance": its technology platform is an advanced machine learning engine based on proprietary algorithm which matches insurance coverage to customer needs in milliseconds.
The solution put forward by Neosurance is a Virtual Insurance Agent: an insurtech-specific platform that exploits the customer’s context in order to protect him or her by suggesting the right coverage at the right time. It delivers utility and always helps the customer with a simple and tailored offer.
Not only customers are under-insured, they are also unaware of their potential needs for coverage. Neosurance, like an insurance agent, knowledgeable and capable, stimulates the protection need by offering the right coverage at the right time on the customer's smartphone, stimulating an impulse purchase of small-ticket insurance.
The smartphone is not a channel anymore; it is a proxy of the customer. Just like an agent knows its customer, Neosurance's artificial intelligence engine is able to learn and gather in-depth knowledge about the customer through behavior, context and even emotions - all channeled through the smartphone. So, rather than just pushing messages to customer segments (i.e. “women 25 to 35”), our technology can create a continuous cycle of insight-driven and highly personalized contextual interactions.
Neosurance’s job is to identify communities (homogenous groups of people already aggregated by a community owner) and to partner with the insurer able and willing to provide the right insurance cover that fits with each community experience. By integrating Neosurance’s platform the insurer is able to deliver sales proposals that become more and more accurate, based on the single user’s context and behavior. Neosurance delivers the right insurance at the right time: beautifully simple mobile customer experiences that meet customer needs. The insurance sales process is brought to the next level, potentially transforming every old insurance company into an InsurTech.
Andrea Silvello is Founder and Managing Director of Business Support Spa – a Strategy Consulting & Financial Advisory “boutique” which focuses on SME’s in Italy; Co-Founder of InsurTech startups Neosurance and Digital Tech.