Here comes InsurTech
These are interesting times. The insurance business is the next frontier for FinTech, the tidal wave of digital businesses that’s already remaking (and hollowing out) the big banks all over the world. As mobile smartphone apps on the one hand and online banking at home on the other disintermediate—blow out of business—all manner of middleman functions, banks are poised to lose the money-spinners they’ve had for decades.
In a remarkable presentation in London, England a few weeks ago, InsurTech (FinTech meets the insurance world) experts from the European Union (EU) and North America spent an hour looking at how insurance companies are even more vulnerable in some respects than the banks themselves.
- Personalization to the point that your insurance app will practically be a lifestyle app, like MapMyRun or Sleep Cycle. The insurance product cycle will be far shorter than it is presently, with customization driving far more specific premium strategies.
- Customer-centric service design—user experience—will rule. Convenience and speed are already remaking what InsurTech specialists call “inside out” product design, where value is more important than price; and engagement, more critical than transaction. This is contrary to traditional financial services thinking, which focuses on designing the product that delivers the transaction with “outside in” thinking.
- Here come the robo-brokers, on-demand, on your mobile phone app, from Germany to the United Kingdom to the United States to Canada and Australia. Self-service and video claims processes are setting new standards for customer satisfaction.
- Direct-to-consumer apps are already in-market, selling policies based on digital profiles. The Silicon Valley startup, Sure, is utterly focused on mobile service of the customer on his or her journey, which is “phone-only and instantly and completely individualized,” says Sure CEO, Wayne Slavin. “We want to marry technology to the customer user experience, frictionlessly.”
Since the dawn of insurance circa 1750, periodic payments of self-owned insurance have been the norm. On-demand services, Slavin says, mean consumers won’t “own” their insurance: they’ll “rent” insurance, just as they rent an AirBnB or an Uber cab. High-frequency, always available, personalized insurance will replace “life moments” insurance (marriage, birth of kids, first house), just as rental housing is becoming far more socially acceptable to millennials than ever it was to older folk.
“Tap and be insured” is the ultimate goal, even though InsurTech is still barely a toddler. That mantra applies because the new purchasers of insurance don’t focus on what the insurers want to sell them: they want their insurance provider to embrace technology and customer data for better underwriting and better customer relationships.
And switched-on customers want to be sold insurance right before they need it—and know, like iTunes® and month-to-month mobile phone plans, what the next month will bring.
Sure and other startups like Ireland’s Trov and Germany’s GetSafe are applying artificial intelligence and machine learning to reimagine customer risk profiles and the behaviours that underpin those profiles in order to insure a particular behaviour or new purchase. (Think: why be insured for a sports injury when you’re at the office and your mountain bike is at home in the garage?) Claims are already being settled by “compassionate chat bots” in pilots in Ireland.
In five years, insurance is going to be a very different beast from what it is today, with entirely new customer-facing platforms.
FinTech geeks will revel in the technological changes, but for consumers, InsurTech is going to get really, truly interesting, and in short order.