When Michael asked me if I’d be willing to write this article we chatted about a wide range of possible topics. I looked back over some of the recent editions of this publication and thought it might be worthwhile stacking the insurance industry against one that has already embraced technology, how they are doing things differently now and the impact that has had on the client.
It is easy for us to dismiss the possibility of disruption ‘because we are so different and complex’, but that won’t prevent us being disrupted. That mind-set will just make it more likely that the disruption will come from outside the industry.
Online / .com era
The dot com bubble came and went and from an insurance perspective didn’t really move the needle on what we do or how we do it. Sure, there were some companies that created web offerings but these were pretty much (as Vaasu Gavarasana says in the title of his book) “Digital Lipstick on a Legacy Pig”. Even today websites offering insurance quotes or ‘online applications’ more often than not reach a point in the process where the digital train is derailed and the process requires human intervention. Unfortunately paper and its digital equivalent, the scan, still dominate as a new business submission medium. Hardly a seamless digital experience.
Other industries embraced what ‘online’ could mean for them and now in many markets, online retail for example is the preferred mode of shopping. From airline tickets (including boarding passes), car hire and accommodation to groceries, banking, books, music, car & household insurance, all are routinely online purchases now – it seems just not life insurance.
Some examples from retail
Retailers were early adopters in the online and data analytics space. Their current capabilities are mind-blowing and even a bit scary but are a clear indication of just how far behind our industry has fallen. Below are a couple of examples – note when these experiences happened.
So being an expat in London, we travelled home at Christmas to spend time with family and friends and to break the long UK winter!
One year (c.2007), we’d forgotten to get the kids new wetsuits and their old ones were now way too small. As is always the case, this realisation came on the Sunday evening 5 days before we were flying out. Mad panic but after taking a long list of measurements we submitted the order online and included a little plea in ‘Special requests’ begging for a speedy delivery given our imminent departure. We then resigned ourselves to leaving for holiday without the wetsuits.
Before I left for work at 06:45 Tuesday morning, there they were – delivered on our doorstep! So that’s:
- Order placed: After 9pm Sunday night,
- Delivery received: Before 06:45 Tuesday morning
Less than 36 hours elapsed for a tailor-made child’s wetsuit!
Even if it was a rack size that doesn’t really matter because they fitted like gloves and the service exceeded all reasonable expectations. We felt like they’d pulled out all the stops for us – we felt valued and it secured them repeat business.
As far back as the very early 2000’s, Pick ‘n Pay (the South African equivalent of Coles) set up their online home delivery shopping service. One thing that’s stuck with me was that the second screen of the sign-up process asked for my bank details. I wasn’t happy with that so skipped it.
At the end of the sign-up, I was shown a search page to begin selecting my shopping list items, but on the same page was another request for bank details. This time I added them and immediately my personalised grocery list appeared. Personalised? I think a combination of: nappies, crisps, soft-drinks & baby formula was pretty unique! I was never entrusted with the ‘proper shopping’.
I then added my wife’s account and the full monthly list appeared as if by magic – right down to what fabric softener scent we usually used!
I admit at first this felt a little creepy (see also the US store Target’s example where analytics indicated a teen was pregnant before her family knew), but then I thought about what this could mean for the company (and me):
- Knowing what items shoppers bought and when: Able to manage stock and costs better.
- Usual store: Location information would allow them to carry product lines in the right quantities at the right stores. If clients began to shop at a different store in numbers, product lines could ‘follow’ them.
- Personalised discounts: Where loyalty cards are used, they send discounts based on (mostly) your actual purchases thus increasing the chance you’ll visit the store.
- Timing: Specials catalogues emailed the day before you do your monthly shop are far more likely to ensure you visit their store.
- Effectiveness: Once discounts or coupons have been issued, again they track which are redeemed, for what and where.
These are just some basic examples of utilising analytics in the retail world.
What has this got to do with insurance?
Globally, churn and the protection gap are constant topics and in my home market at least, the market-wide net new business volume is extremely low.
To put it another way, we find it very hard to find and sell to new clients, then we struggle to keep them.
Advisors and brokers are often singled out as the root of these issues, but is that the whole story? Why do insurers feel so powerless to effect change? Now we are even seeing “InsurTechs” starting to make their presence felt, which will only make our environment even more challenging. We have to change or bear the consequences.
Sometimes I think the adage that ‘insurance is sold and not bought’ is worn as a badge of honour but do we think about the message verbalising this sends both us and our clients? It hardly sets an expectation for an enjoyable sale!
I know I’ll cop some flak for this, but how would we react if when buying a TV the salesperson first had to sit us down and explain how the electronic wizardry worked, before we could understand enough to choose which TV to buy? What if we had to be taken through all the features of each smartphone, even the ones we didn’t need, before we knew enough to select the appropriate model? Sound crazy?
I know insurance is more complicated with much greater consequences if not done correctly, but is that how we’ve allowed it to become or was that truly a necessity?
Ripe for disruption
Disruption will occur when a client need exists which is not met by the incumbents’ offerings.
If we had products that clients wanted, could easily be understood, valued and that were delivered to them via an engaging, efficient, painless process, do you think churn and the protection gap would be such big issues? Clients are telling us they don’t want what we’re selling and/or how we’re engaging with them. They may well need our products but their clear message is they don’t want them!
Digital insurance – another bubble?
Digital insurance is here, it’s a current reality not a future possibility.
I haven’t seen a definitive definition for digital insurance but to my mind that isn’t an issue. If we use the lack of a neat definition as an excuse not to confront the digital insurance wave head-on, it could well prove fatal.
We’ve had the tech / dot-com bubble and arguably even the social bubble, where businesses and products have achieved valuations far above reasonable traditional calculations. Some succeeded but many crashed spectacularly. It would be fair to say the same might be happening again now, except I believe there is a fundamental difference in this shift towards the digital world.
In the past it was those who had invented or developed the technology that were driving adoption which needed a pretty hard sell before mass adoption occurred. The difference this time round is that the clients have already embraced the concept and delivery mechanisms on a global scale, in other words clients are instigating and driving the shift.
Many of us have been around a while and have lived and survived previous bubbles. We’ve heard the prophets of doom predicting the end of our industry if we didn’t embrace them, yet here we still are. Thriving may be too strong a word at a macro level, but still there with little sign of mass collapse. So shouldn’t we just do what we did last time – nothing fast – and we’ll all see it will be OK?
In the past the industry dictated the pace of change. As an industry we refused to fundamentally change and the world just had to live with it. Now, with clients demanding the change and plenty of people outside the industry happy to develop new business models to deliver services clients find attractive, we are no longer in control of what happens next.
This time there are already solutions delivered by non-traditional suppliers and most importantly, clients are already embracing them.
So what does this mean for insurers
Change. If nothing else, our industry is changing and the only real negotiable is how. Technology exists to support new and different ways of doing things in just about every facet of our business.
So if change is coming whether we like it or not, how could this play out?
Uber happened TO the taxi industry because they chose not to engage or embrace it but rather tried to defeat it as a threat. How different would it have been if the taxi industry hadn’t tried to shut out Uber, but rather adopt it? You see, digital disruption is usually not what you see on the outside. Uber’s business provides analytics, location matching and routing tools, not taxis. Uber isn’t a taxi company, it is a technology solution delivered conveniently via a smartphone for on-demand requesting of a taxi ride. Their product to the client is cheaper fares and more convenience (simple process, ability to track incoming cab, (usually) shorter waiting time & cashless fare settlement). In a nutshell, they add value to the client in a way the client understands and values, delivered via an engaging and relevant delivery mechanism. The service provider isn’t really the focus.
So what do we need to be doing?
Young people enter the workplace without the financial or insurance education they really need. It’s an abstract and vague world and Mr G. Oogle might be able to deliver loads of information, but we haven’t made that information customer friendly, so for them it is all very technical and difficult to understand.
We need to invest in educating young people long before they start working. We need to find ways to engage with them so they understand the concepts around sound financial planning and what will mean for them in reality. Gamification is probably a good way to ensure the messages are interactive and engaging. Using artificial intelligence and chat-bots could help deliver personalised experiences that have impact.
Minecraft Insure anyone?
Disability Income cover is usually seen as complex, but FMI in South Africa have simplified it to some degree by including a list of 200 ‘Defined Events’ which pay out a stipulated amount whether you stop working or not – no interpretation needed. The overall product is traditional, but they’ve found a way to simplify a portion and thereby making it much clearer to the client what benefit they would receive.
Sure. is an app-based offering whose initial product was a personal accidental death or disability policy just covering you whilst you are on a scheduled flight operated by an airline. They met a perceived need and clients bought the product. A short time on, they are now offering a range of on-demand products for a range of risks.
go cover by Sanlam is another app-based product which covers accidental death and injury, targeting outdoors activities including bungee jumping, aviation and other activities that would traditionally attract quite a forensic assessment before terms could be offered (often an exclusion of said activity).
Both these products require little more than the insured’s, beneficiary and banking details. Quick, slick and all saved so the next time is dead simple.
Figure 1:Overview of go cover offering
Product design needs a complete re-think if we want to reach and engage with young folk just starting their careers. We need to help them protect themselves at a time when they don’t have families, mortgages or estate duty issues. They are generally going to be healthy for 10 – 20 years, so life cover seems to be a waste of money, so how would they feel about simply buying guaranteed future insurability – on its own. Small premium, maybe even single premium for the right to buy a policy say 5 – 10 years from now when they start a family? Accidental disability is a reality for them and accidental death or injury products would be affordable, but how would they like the product to look?
We need to rethink the product design process, spend real time understanding what the target market wants and needs, then provide products that meet those requirements. It is highly likely that the new products will look very different to our traditional ones (see above as examples).
When mentioning client engagement the usual response is: “We’ll do an app”, the suggested content of which is usually the ability to manage their portfolio, change details such as bank accounts, get quotes and access forms and documents and sometimes submit claims. Rather not! How long would you keep an app like that on your device?
The crux of engagement is to provide value on a frequent (daily) continual basis and that just isn’t going to happen if the app’s focus is life insurance. It needs to be useful and relevant – far better the app helps them find parking, closest petrol filling station or the pharmacy “brought to you by ABC Insurance”. It must be useful or at least interesting in order to engage.
Artificial intelligence, machine learning, chatbots and robo-advisors are all tools we can exploit to engage in a meaningful way. The Google Assistant is an artificial intelligence driven bot that learns about you as you use it, thus being able to offer smarter suggestions to your requests over time. The short clip below is well worth a look.
Figure 2: Take a look at this short video on how the Google assistant could be helping your customers!
Sure there’s work to be done to bring this into insurance, but it’s happening with or without us – there are plenty of people working on that right now!
I have to admit getting a bit irritated when insurance people wax lyrical about the virtues of ‘big data’. We haven’t even begun to understand insurance ‘little data’! We have so much data at our disposal but we struggle to exploit it. Advances in computing power and data analytics technologies over the past few years have been breath-taking. Sentiment analysis, amalgamating in-house and external data sources (yes, I don’t really hate big data!) to build a richer picture of the people who make up our current and target clientele.
Imagine what we might discover if we have the full policy life-cycle in data …. Then added big data?
Figure 3: Policy life-cycle data view
We’d be able to see all the usual demographics and process metrics, but in addition, whether people who disclose cardiac risk factors all claim for cardiac causes or something we never considered. Whether any of them stay clients long enough to claim. Create predictive models to identify those applicants who are most likely to lapse their policies early and devise cost mitigation strategies or better still, use this new knowledge to find ways to engage them so they don’t leave in the first place!
Having a deep understanding of the risk demographics and client behaviours will then enhance whatever we add through big data sources or applying behavioural economics strategies.
Where does all this tech leave me? – I’m just an underwriter / assessor!
Even ‘silver surfers’ have embraced technology and just about everyone uses a smartphone or tablet at work these days, especially advisors, so the excuse that people only like paper is simply no longer true. How engaging can you get with a static sheet of A4?
As underwriters and claims assessors you have a vital role to play and I believe you can only ignore technology if you don’t have much more than 5 years before retirement. If you’re planning on being and underwriter for longer than that, you need to start thinking about how technology can be employed to improve your customer’s insurance journey.
I don’t mean you need to become a developer or even a major data guru, but you certainly need to be thinking about how you could be working with people in those areas to bring your products and processes to a level that attracts those you want to secure and retain as clients.
If you want somewhere to start that will really challenge current thinking, take a look at this article from InsuranceThoughtLeadership which with the help of some video clips describes Lemonade, a US-based homeowners and renters insurance startup that has combined a number of technologies (AI, bots, mobile-first, video streaming) to build a complete, starkly unique insurance model. Enjoy.
In this piece I have only touched on a few topics, there are many more. I haven’t mentioned ‘quantified self’, wearables, IoT (internet of things), peer to peer, blockchain, robotics, aggregators or the host of others.
Get involved in projects that explore the use of technology in insurance, get involved in acquiring a working knowledge of at least one area facilitated by InsurTech, get involved in understanding customer behaviour better through data, get involved in learning how medical technology can be harnessed to improve underwriting and claims assessments.
Just get involved!
To find out more about what others are doing in the Digital Insurance space, please visit us at The Digital Insurer where you will find reports, case studies, videos, interviews and articles on all things digital insurance.
I’d love to continue the discussion – If you’d like to, please get in touch.
As the MD of 4Thawt Consulting and Head of Africa at The Digital Insurer, Andrew is an underwriter with a passion for utilising technology to make the life insurance industry relevant and meaningful to its clients. He is convinced that digitally based business models are a prerequisite to making insurance benefits accessible to all in both the developed and developing markets.
He has experience across Africa, Asia, Europe and North America as both a consultant and as Global Head for Swiss Re’s underwriting automation product, Magnum.
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