I was delighted to participate in a recent panel session at the Digital Insurance World conference organised by Post Magazine.
The industry talks a lot about ‘digital’ and what became clear throughout the day is that the word and its use has been split into two somewhat competing camps.
In one corner incumbent providers are using digital capabilities to improve their customers’ experience through slicker purchasing and quicker claims settlements.
In the other are tech start ups who are turning insurance on its head and coming up with something totally different, like So Sure and Lemonade.
Disruptors address the real problem with the way insurance is set up
Digital isn’t new to insurance. And it hasn’t always made things easy for providers. The advent of price comparison sites ushered in an era of unprecedented transparency which actually showed how broken some parts of personal lines had become. For the first time dual pricing was laid bare and industry took a reputational body blow for being more expensive for loyal customers, something it has not yet recovered from. As our survey showed, people trust their hairdresser more than their insurance company.
The disruptors are trying to address the real problem with the way insurance is set up – it’s very difficult to trust someone if you think their driving force directly opposes yours.
When we asked nearly 2,000 consumers about their experience of insurance, most said it was either good or mixed. The conversations I have everyday with people in the industry tells me that good insurance companies like paying claims.
And yet the most common perception of insurance companies was that they are a necessary evil. I think what underlines this is the consumer understanding that an insurance company exists to make money, and the perception that not paying out in claims helps them achieve that goal.
Most customers are open to placing their policies with a new company
Where start-ups like So Sure are clever is that they charge via a monthly subscription model – something comfortably familiar to a generation of Netflix and Spotify users – and refund some money if its customers don’t make a claim.
While a sizeable minority of insurance customers would always prefer to trust an established brand with something so important, most are open to placing their policies with a new company.
This doesn’t threaten insurers in the way that Uber poses an existential threat to traditional taxi firms. Becoming a regulated insurer is incredibly capital intensive and the tech start-ups have little interest in using their seed funding for banking reserves. In other words, they still need to work with insurance companies to pool risk in the traditional sense.
Disruptors and insurers need each other
Where digital innovation can majorly disrupt is the relationship that traditional brands have with their customers, relegating underwriters to risk carriers without personality.
Aviva is one brand hedging its bets in this regard. Recognising that incumbents can prosper by working with newcomers it is investing millions in start-ups based at its digital garage in Shoreditch.
Disruptors and insurers need each other. Those who design their products with customers front and centre, leveraging new technology to their benefit, will still be around when digital is an old a concept as a video box set.
Uncovering exciting insights for over 12 years
At Consumer Intelligence we believe that companies who fixate on customer satisfaction will survive and grow. Over the long term they will have lower costs, better staff engagement, greater regulatory compliance and higher profit.
Because we have been uncovering exciting insights for over 12 years from our price benchmarking, mystery shopping and consumer research, insurers often ask us to work with them to develop and test new propositions, measure how well they are delivering their brand promise or help map out improved customer journeys.
If this is something you think we could help you with contact us.
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