Setting the pace for change
Speed is of the essence when delivering these products. Insurers need to be able to change existing products within a matter of hours and launch new ones in days. Yet the corporate culture and regulatory pressure that prevail at larger insurers mean, while some in the business want to move forward and innovate swiftly, they are held back by the time taken to resolve diary clashes and internal compliance requirements.
To overcome this and massively reduce the time taken, insurers need to build everything just once. By defining the rating and pricing as part of a hub that every channel to market can connect to, insurers can reduce both the cost and the time to market.
But even doing all that is not enough. As we have discussed previously, with insurtech companies having raised $3.71bn (£2.99bn) in 2016, the insurance industry is ripe for disruption. Such companies are taking full advantage of not only the technology drivers for change, but also consumer demands for a revitalised insurance experience with products that match their lifestyles.
With students requiring car insurance only when they drive their parents' vehicle during the holidays, a number of the larger insurers now offer short-term car insurance cover. Others have taken the on-demand principle one step further in the personal lines space, with AXA and Trov partnering up to provide on-demand individual cover for the chosen items uploaded by consumers through the mobile app.
It isn't just the limitations of annual insurance contracts that need to be tackled. Insurers have traditionally pre-packaged coverages together based on their view of customer requirements. This has led to car insurance being bundled with hire car and third party cover, and customers potentially buying policies they neither need nor want. Innovation is all about unbundling these coverages, so while two coverages may be mandatory, customers can select their own profile from the remaining elements.
Taking a step further into the future, Gartner estimates the booming Internet of Things (IoT) market will lead to there being nearly 21 billion connected objects in use by 2020. While 13.5 billion of these will be consumer items, the enterprise IoT spend will be close to that of consumers, proving the technology drive is not just limited to personal lines.
Already in the African market we are seeing innovation in the use of sensors in fields to detect drought for individuals with crop insurance. If there is no rain for more than 60 days, there is no need for them to make a claim, as the individual is automatically sent new seeds and money to an automated account.
In the future, we will see drones being used within commercial lines insurance, making it quicker and cheaper to survey a building, either when checking application details or following a flood. According to a report released by the Federal Aviation Administration earlier this year, business sales of drones are set to triple from 600,000 to 2.7 million by 2020.
It's not just the products themselves that are evolving. We're also set to see increased use of chatbots for insurance product purchases as millennials look to engage with insurers via automated chat rather than through call centres or online.
Facebook opened up its Messenger service to businesses at the end of last year, meaning insurers can now communicate with customers on its platform. The next stage would be for third-parties to build apps that integrate with Messenger, enabling insurers to offer quote-and-buy facilities in this way.
We have already seen PayPal become one of the payment options within Messenger, which means consumers who shop via chatbots will be able to transact on Messenger using PayPal. This trend is only set to continue, with Gartner predicting that 30% of web browsing will take place via chatbots by 2020.
In the face of these technology drivers and evolving customer demands for insurance their way, insurers need to have a system in place that enables them to develop innovative products that continue to address customer needs. As these products are tested, deployed and refined, innovation becomes an ongoing journey that enables insurers to keep pace with the changing world around them.
SSP has the unique expert insight to help insurers on their journey so, to find out more, please contact us.
Upcoming issues of ‘Digital Insurance Pioneers’ will continue to discuss the key benefits of SSP’s digital solution.