The term “InsurTech” is becoming as common as insurance itself. Digital integration, automation and connectivity have allowed an industry often seen as stale or static to become more customized, engaging and modern. In fact, InsurTech deal values have increased by 32% YoY as investors and insurers alike look to revolutionize the industry and profit from it. And the impact of these investments is being felt across all stakeholder groups – from insurers to agents/brokers and customers themselves.
Insurers Differentiate Based on Tech
Today insurers are being tasked with either developing the right level of technology or partnering with the right startups to stay ahead. The partnership approach had allowed insurers to serve the more “traditional” market while also testing and innovating new product and service options via partnerships with startups. AXA Venture Partners was established with that explicit goal in mind – invest in tech startups that can redefine the insurance offer. At the same time, AXA Venture Partner’s start-up firms get the benefit of being in the AXA network and tapping into industry knowledge and risk management offerings. InsurTech offerings are not only changing the face of the traditional players – they are also creating a new breed of digitally enabled offerings that are using the perceived difficulties of the industry to their advantage. Lemonade is built on a fairly simple presence – renters and homeowners insurance that can be bought instantly, even from a mobile phone. Lemonade also helps to facilitate coverage change from a traditional insurer – all done through a smartphone and with no paperwork needed. This is all made possible through automated technology and applications and also meets customers right where they are.
Agents and Brokers Also Get a Leg Up
When the dawn of technology started to impact the insurance industry some viewed this as a dire warning of the future of the insurance agent or broker. For some, the assumption was that technology could easily displace the need for a middleman. And perhaps this could be the case for some insured, as they look to optimize direct channels and options but for the most part the agent and broker does still have value; however it is being redefined.
Insurance agents and brokers are being tasked with shifting away from just providing a list of options to really understanding the diverse needs of their customers and where the best coverage options exist. This enhanced value offered by insurance agents is being supported by comparative raters and pricing aggregators. Technology is helping agents get to the facts quicker, allowing them to free up their time to add value to existing customers and grow their book of business.
Consumer expectations are increasingly being shaped by the interactions that they have with leading tech companies like Apple or Google. Interactions are seamless, interconnected and of course, supported by digital technology. This means it is also a bit harder to wow today’s insurance buyer.
Offering digital solutions may seem like the easy answer but does not tell the whole story. Engine Insights recently conducted a study among an online survey among insurance decision-makers (n=897) that indicates there may be much more to the overall value equation. When thinking about the most important aspects of the insurance coverage purchase decision, price came out on top at 40%, followed by having adequate coverage at 18%. And having the ability to manage through a mobile application fell to the bottom at 3%. When looking only at younger consumers, ages 18-34, this figure increases only slightly to 5%.
This may signal the fact that digital has changed the way people interact with products and services but for insurance, there is a need to create adequate coverage, and at the right price before digital enhancements.
When looking at how consumers are buying insurance today (this includes both health and P&C lines) we see that most are still relying on some form of consultation – whether it is through an agent or broker (44%) or through and employer (34%). Interestingly this mostly lines up with how they would also like to buy insurance as well. If you only had one option – where would you like to buy insurance (Total survey population):
When looking at young consumers, ages 18-34 we see a slightly different picture emerge – pointing to the value of digital enhancements. The current state for these young consumers is similar in that they are also largely buying from agents or brokers (29%) or through an employer (35%).
However, when considering how they would like to buy insurance we see a growing preference for web (21%) and mobile based options (18%).
And for this group the reason for wanting to purchase insurance through a mobile app boils down to simply making their lives easier – with 52% noting that it is convenient and 38% calling out that it is quick.
As this younger generation continued to move through adulthood, their impact on the industry will likely be heightened – and therefore keeping a keen eye on this group is so important.
All in all, we see a clear picture emerging that prioritizing cost and coverage first, with the options for digital enhancements to really make a brand or offering stand out.
What does this mean for the entire insurance industry?
Understanding the evolutionary state of insurance is important and creates a tailored approach for all industry stakeholders. It is also important to keep a close eye on competitor movements as well as the broader macro trends that will ultimately impact the way that insurance products are designed, sold and serviced.
- Insurers: Can work to highlight ease and convenience, while ensuring that coverage is not compromised, and the price range is still obtainable.
- Agents and Brokers: In an increasingly digital age, they will be tasked with refining their value proposition and enhance what they can offer consumers in terms of guidance and industry knowledge.
- Consumers: With more options than ever, it will be a matter of really understanding coverage needs and ensuring that service options meet their personal needs (digital or otherwise).
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 “Global Insurance Trends Analysis 2018.” EY. June 2018.