Insurance is being transformed by new digital technologies that benefit both customers and insurance companies.
Traditional insurance companies are known for the cumbersome customer registration process. And while technological innovations can offer an optimized customer experience, there is often skepticism about “insurtech” and the role technology plays in the industry.
Ross Sinclair, CEO and Founder of EIP Ltd, believes Insurtech can deliver a simple, efficient, reliable and hassle-free customer experience while delivering higher margins and more efficient operations for insurance companies.
The insurance industry has changed a lot over the past decade. Companies offer their customers a much wider range of financial services. However, the physical retail channels are disappearing, which was made worse by the pandemic. This means that they often do not have the platforms to effectively offer these new products to their end users.
A big problem for the insurance industry is that many customers are suspicious of insurers, who often hide behind small print and slow bureaucratic processes. But the insurance companies are not to blame here alone. The increased regulation to protect customers has made it more difficult to buy insurance and, in some cases, to process claims.
Often there is enough leeway within the regulations to find a customer-friendly solution for a given regulatory requirement. Unfortunately, compliance experts in large companies are often very cautious.
In addition, the quality of claims processing varies greatly in the industry. Inevitably, people remember the bad experiences – and share them on social media. Over time, the public has perceived, perhaps wrongly, that insurers are often trying to avoid claims settlement.
Overall, many consumers feel that when designing insurance, the interests of insurance companies rather than customers are the focus.
Traditional insurance companies are further damaging consumer confidence with their approach to risk assessment. Take insurance premiums on mobile devices. These are often very imprecise due to a traditional pricing approach in which underwriters simply charge a higher premium on more expensive phones, assuming these devices pose a higher risk.
In reality, the make and model of the handset do matter (although, interestingly, not the costs handset), the main risk factors are the behavior and demographics of the user. A little old lady may be at a very different risk of damaging her phone than a 22-year-old scaffolding worker. Nobody has taken that into account yet.
Since insurance products have a high volume of customers and thus a high volume of claims, it is possible to get an idea of the types of customers who cause damage: age, place of residence, occupation, gender, etc. This data can be fed into pricing engines in real time. The customer then receives a tailor-made offer based on current claims data.
Pricing can be used to encourage lower risk customers to take out insurance, while higher risk customers can be discouraged by higher premiums. This approach gives insurers margin stability and significantly higher profitability.
Insurtech companies like EIP have developed software and solutions that help companies like cellular network operators, banks, retailers and insurance companies offer their customers insurance products at lower cost.
Contextual pricing offers consumers the best price for their individual circumstances. For example, an insurance provider might choose to introduce a “safe location” discount that lowers premiums when a customer is in a lower risk environment, such as their home.
Using this intelligent pricing technology increases customer satisfaction and increases overall profitability by more than 40 percent.
Technology can also strengthen the claims side of insurance. One example is the automated claims processing by EIP, which makes it much faster and easier for the customer to file a claim and make a decision. This is now used successfully in many countries.
However, it is possible to go further. EIP has developed an “autoclaim” feature for mobile device insurance that anticipates customer needs. Autoclaim analyzes the gyroscope and accelerometer in the device to automatically detect when a device has been dropped and possibly damaged.
If a device is dropped, the data is immediately used to automatically create a draft application. The software then checks with the customer whether the complaint is needed. If the policyholder says “yes,” the claim is submitted, approved and the repair initiated. The whole process takes less than 10 seconds and two keystrokes from the time of the damage.
Of course, some insurers see the risk that this type of automation will increase the number of claims submitted. But it is important to look at these innovations “as a group” and not in isolation.
On the one hand, the demands will inevitably increase slightly as the customer experience is massively improved. But to make up for it are the very substantial improvements in program profitability and administrative costs that make up for a softer damage setting. The customer gets an extraordinary experience and the insurer higher margins – win / win!
The principle is to start designing insurance with the customer at the top and not at the bottom.
Insurtech is transforming the traditional insurance industry, empowering insurance companies with a mature vision to deliver highly efficient, lightweight and affordable digital travel that is extremely attractive to consumers and profitable for the business.
Insurance companies that design products and create user journeys that focus on the customer, not the insurance company, will not only create a competitive advantage in pricing, but also build a range of services so compelling that it will crush the competition.
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Originally published on Business Reporter