Insurance startup Brolly hits the headlines last week by raising £1m from investors. The personal lines broker said the seed investment was one of the largest in the UK Insurtech sector to date.
The news heaps more pressure onto established personal lines brands. A report published in June revealed that 86% of incumbent players fear losing revenue to emerging Insurtech companies.
So what does the strengthening of players like Brolly mean for the sector?
Three major insurance pain points
Brolly is an artificial intelligence-powered insurance wallet app, or concierge, which aggregates and scans users’ policies to optimise cover.
It says it aims to solve not one, but three major insurance pain points: Ease of policy management, adequate advice, and decision-making tools. It provides this by housing three products under one roof.
First, the ‘Locker’, where all policies are collected and can be managed. Second, the ‘Adviser’, for analysing the cover and making recommendations. Third is the ‘Shop’, which acts as an aggregrator, offering the customer the best coverage and value for money depending on their needs.
Betting on emerging trends in consumer behaviour
Brolly is not the only one playing in this space. It is one of dozens of Insurtech distribution plays focusing on customer experience, using artificial intelligence and innovative product design to either simplify or speed up the insurance buying and management process.
They are betting on emerging but still largely unproven trends in consumer behaviour that prioritise convenience and personalisation (right cover, in the right place, at the right time) over price.
Other examples include Trov – a digital ‘asset vault’ and marketplace for all the user’s insurable household items. It allows users to ‘turn on’ their cover, at the individual item level, with a simple swipe of their phone. And Lemonade – a digital-only home insurer that can process claims in a matter of seconds. It gives back some of its profits to charities chosen by its customers.
Lemonade, which launched in New York, has already captured 28% of the State market for renters buying insurance for the first time, which suggests the potential challenge to the status quo is very real.
Equally evident is the consumer need. Undoubtedly there are enduring concerns, not least from the regulator, over lack of advice.
A challenge to the dominance of PCW's
A piece of research we undertook last year showed there is a clear need for consumers to limit their insurer relationships. 84% of UK consumers said they would place all their policies with one company if it was able to offer consistently good prices and service for all their insurance needs.
Brolly could certainly offer part of the solution.
UK consumers have an average of 2.8 policies. 35% have more than four.
For price comparison websites, the emergence of new distribution plays could challenge their dominance of the past decade, while highlighting the limitations of focusing on price alone.
Brolly is collecting details in the same way price comparison websites do, but in a more comprehensive way. As a result, price comparison websites could be compelled to move toward more tailored and proactive provision for their customers.
For insurers, companies like Brolly offer not only a new distribution channel, but opportunities to learn more about and excite their customers – especially if they can pass their anonymised data to insurer partners to help with risk management and pricing.
The regulator has welcomed the development of new players with new customer-centred solutions by creating a sandbox for product testing. Last year, there was one Insurtech in the cohort. In the latest June intake, there are five. The media, meanwhile, has responded with overwhelming positivity to the likes of Lemonade, whose positioning is also based on a return to the peer-to-peer model and the notion that sharing of profits will reduce fraud and build trust – an issue that has dogged the industry for decades.
Will they switch to a new challenger brand?
However, it is still early days. While no one doubts that all consumers would appreciate convenience and ease of use with their financial products, the question remains over what extent they would be willing to pay more for such a service.
In the case of a concierge, they will surely compare their rates with those of aggregators. At what price point will they switch to a new challenger brand?
If these kinds of propositions ultimately appeal to time-poor customers, who are willing to make concessions on price, then it could – at least in the short term – be more mid net worth than mass market.
Perhaps the greatest challenge of all is for many of these propositions to work, and to provide the consumer with a truly personalised experience, consent to share data is required. In the case of Brolly, this could involve granting direct access to the customer’s email inbox to scan for relevant documents. This a significant step beyond giving a name and email.
As our research has shown, the majority of consumers are cagey about sharing their personal data.
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