The digital age has reshaped customer expectations
We have the Big Four to thank for this: Amazon, Apple, Facebook and Google. Four tech giants that have reset the bar when it comes to wealth creation in the digital economy. Their collective aim is to make our mobile lives easier, happier, immediate and connected. (Scott Galloway’s The Four is a must read book).
In so doing, they have reshaped customer expectations. Not just for their own customers, but for everybody else’s customers. There are many reasons how they achieved this titanic shift, but one of them is the use of advanced technology on a massive scale. Specifically data science and AI.
They know who we are, where we are, what we want and why we want it. They are able to predict our preferences and decisions based on the insight they have assembled about us. They don’t need statistics for this because they have real data instead. The digital consumer has traded it (their private data) in return for ease and convenience. Time will tell if this is the road to Utopia or if we are trading with the devil, but for now, most of us enjoy the fruits of the trade-off.
And our digital lives are simpler for it.
But let’s face it, giving away information about our self is nothing new. Clipping coupons for marketing databases predates the Internet era. But in the digital economy, technology has enabled scale and scope on an unprecedented level. The massive use of automation, algorithms and AI helps the digital disruptor to understand all they need to know about us. (If you want to see what Google knows about you, go here and download all the data they have on you.)
With this data driven insight and the power of predictive analytics, they (the digital provider) can second-guess our individual needs and wants. They remove friction from day to day activities and make our lives simpler. Uber didn’t invent cab hire, but they just made it a whole lot easier and frictionless to get one.
Using tech to make our lives simpler, easier, frictionless
Here’s a simple example of the power of tech from one of the Big Four. Google Flights uses AI to predict flight delays. They apply machine learning to historic flight data to flag when there is at least an 80% confidence that a flight will be delayed, even before the airline has informed you of a delay.
Or another one. This time from Google Health who have patented an optical sensor that monitors your cardiovascular health. The device is fitted to a mirror and works by tracking blood flow dynamics in the body. Using AI, the system can detect early signs of health issues before you know yourself.
In the hands of the Big Four, tech makes everyone stop and listen. All Amazon had to do last month was announce a tie-up with Berkshire Hathaway and JP Morgan to provide healthcare for their combined workforces and the insurance sector took a dive. Amazon said boo and the markets jumped out their skin.
InsurTechs have redefined the focus on the insurance customer
So, what does this all mean for the insurance industry?
For decades, the insurance industry focused on products. Siloed products. All the while they talked about single views of the customer and upselling and cross selling to give the impression they were customer focused.
But they weren’t, not really. Not the way that the Big Four (and all the new digital players) define customer focus. This is where the InsurTechs have made their mark across all personal lines of insurance. Now we watch as the insurance industry goes through a rapid technology evolution, making up for lost ground in the iPhone decade.
The rate of this technology evolution is proving to be rapid too! The lines are already blurred between the InsurTech startups and the incumbents launching their own digital startups. (See InsurTech Trend #4).
Such as Haven Life, featured here, a standalone digital life business from incumbent MassMutual. Or German auto insurance from new digital brand Nexible from Ergo and Munich Re. Or Zurich’s new UK Chatbot called Zara based on behavioural economics from Spixii.
And why are the incumbents doing this? Because customer expectations have changed and because the insurance industry is full of friction. ‘Your fat margin is my opportunity’ still applies, although fortunately for the insurance industry, the barrier to entry remains very high.
Making the insurance experience a simpler one
According to The Boston Consulting Group, the three critical dimensions of customer satisfaction in insurance are transparency, quality, and speed.
I’d add a fourth dimension; simplicity. But not price. Making it easier in the digital economy doesn’t automatically mean you have to make it cheaper. The fact that you can is secondary, but IMHO, convenience will always trump price.
Price alone has been/still is the primary buying criteria for the majority of personal lines insurance. The pursuit of the lowest premium has been the inevitable consequence of the commoditisation of insurance. The origins of which go back to the race for massive scale and large numbers in the middle of the last century. This race to the bottom accelerated with the emergence of the aggregators when the Internet made apples for apples comparisons appear possible.
That is changing now because customer behavior is changing. Price will always be important, but so will other factors, such as convenience, personalisation. ease of use, et al.
The three-part, 21st century insurance value-chain
The distinction between brokers, carriers, reinsurers, managing general agents and the like is of little interest to consumers. From a customer’s perspective, insurance falls into three parts:
- Buying it
- Owning it
- Using it
For the digital insurers who make their customer experience simple, they remove friction from the three-part 21st century insurance value chain.
Such as making it significantly easier and/or quicker to buy insurance. They use tech to mitigate, even avoid preventable losses for their customers. Or, they offer added value through engagement and complementary services. And they make the claims process quicker and easier. The big shift in claims is to put the process in the hands of the customer enabled by platforms such as 360Globalnet.
Sadly, the majority of us still have to endure an analogue experience with our insurers. Even me! Recently I came home to find an escape of water from the roof space above my apartment in the UK. Registering the claim required multiple phones calls between the broker, the carrier and the claims handler. There was more than one policy/reference number, a lot of repetition and a paper based claims submission process.
And the constant overtone of mistrust was ever present through the dialogue. I lost count of the amount of times I was reminded of the consequences of not telling the truth, the whole truth and nothing but the truth. And this was in between the handler telling me what was not covered in my buildings policy. “We cover the repair of damage from the leak but not the repair of the leak itself”.
Remind me who the customer is here? Oh, that’ll be me! It was the story of the ski cover that doesn’t cover the skis all over again!
One of the best examples of the digitally enlightened incumbents is Aviva. I love the humour in the new ad called “Get a quote, not a quiz”.
Buying it – making the buying experience simpler with Cuvva
The Cuvva app is a thing of beauty.
In a matter of minutes I had signed-up, on-boarded and bought an hour of fully comprehensive cover to drive my wife’s car. Cuvva built a smartphone app that made the process of buying insurance as simple as simple could be. Freddy explained how they had been frustrated by existing insurance infrastructure and so had decided (wisely IMHO) to build their own platform from the bottom up.
The beauty is in the simplicity of the customer experience. To minimise the effort, Cuvva collects data that already exists somewhere in the ether. They minimise the amount of effort required by the customer and are still able to quote a price instantly. They understand the value of convenience and simplicity to the user, whether that is the son borrowing dad’s car, or the occasional taxi driver in a gig economy. Cuvva is a not a price driven purchase and, as I said earlier, convenience trumps price.
Having it – now you’ve got your insurance, Trov show you what to do with it
The best ideas are always the simplest ones (even when there’s a lot of work behind the scenes to make them appear simple). That’s what first attracted me to Trov with their on-demand enterprise scale insurance platform. Trov is like one of those pictures of an iceberg that show you the mass that sits below the surface. My first of many discussions with CEO and co-founder Scott Walcheck was three years ago and you can read my first article here.
Like Cuvva, the Trov app is also a thing of beauty – simple, intuitive and easy to use. The simplicity in the Trov app is their use of the swipe-right/swipe–left motion to perform actions. With the power of an index finger, customers can turn insurance cover on and off instantly. They can also make a claim in exactly the same way with a swipe of their index finger.
But this is just the start of it. Because over time, it’s inevitable that on-demand insurance will become automated. As I drive into my golf club, GPS trackers will signal my golf insurance to turn on automatically. And will turn it off as I leave the course several hours later. Or my Tripit or AirBnB accounts will signal the start of a journey and travel insurance cover will kick in.
Using it – RightIndem handle the moment of truth for insurance – settling the claim!
David Stubbs is the CEO and co-founder of RightIndem. He and I met some years ago when we mentored tech entrepreneurs together before he went off and became one. Last year we talked about RightIndem for InsurTech Insights and there was one quote that stood out for me.
Dave said: “The thing about customers is that they all want to feel like they are being treated as individual (claim) cases. Which immediately clashes with insurers who up to now need to treat them as units in a repeatable process. The platform we’ve built at RightIndem allows us to satisfy both sides of the equation.”
This is what I mean by the shift in focus onto the customer. What Dave and the team at RightIndem have done is build an AI digital platform that enables customers to manage the claims process themselves. In this self-service approach to claims, Rightindem have made it simple and easy for customers to describe how the incident happened. They can add supporting evidence from photos and videos to help them submit and manage their claim in a faster, more transparent way.
The real test of any innovative new approach is what the customer thinks about it. For RightIndem the customer adoption rate is 82%. And these customers should be happy too with a 3x faster turnaround rate for paying claims (7 days against a UK average of 21 days).
InsurTech 2.0 – disruption happens when you bring all the pieces together, the Lemonade way
Regular readers know that I’m a massive fan of Lemonade. This is because I believe that Lemonade represent all that’s good about the digital transformation of insurance.
Their customer experience is simple, transparent and fair. They also happen to price significantly lower than the established competition. The thing about Lemonade is that they are a tech platform first, one that is designed to remove the friction from the insurance value-chain.
From buying cover to paying out, Lemonade have built an automated platform to make it easy, simple and quick for customers (including the now famous 3 second claim). They achieve this using data and AI (sound familiar?). They are more data scientist than actuary. They use behavioural economics to understand their customers and provide an equitable trade between the insured and the insurer.
By separating the cost of operations from the insurance pool they have removed the conflict of interest that has fundamentally undermined trust. (And in so doing, have also raised the bar on cost of operations that is a challenge for any incumbent to match).
Don’t underestimate the value in the mundane
When Jeff Bezos decided to take on retail distribution, it was because he saw that it was riddled with inefficiency, intermediaries and cost, mostly in delivery. Online orders used to take a week and carry a charge. Now, order anything from Amazon and get it delivered within a day or two for free. In the US, over half of all households have a Prime account. Delivery may have been mundane, but that has to hurt the likes of UPS and FedEx.
Retail distribution is a mundane business. But it touches the customer and Amazon have shown how this focus on the customer (deliver it quicker and cheaper/free) can disrupt the incumbents. Here we see the parallels with insurance. Insurance is a mundane business too. And the InsurTech phenomenon is showing the incumbents the disruptive power of technology to simplify the customer experience.
Rick Huckstep is Chairman of The Digital Insurer, Keynote Speaker, a Top10 InsurTech social media influencer and Investor.
Disclaimer: Rick is an investor in RightIndem.