Disruption caused by new technology in the insurance sector is likely to mirror that in the travel sector, according to research by Altus Consulting.
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In 2006, 57% of people in the UK booked their holidays on the high street. By 2016, this figure has dropped to 19%.
Today, brokers on the high street have been replaced by websites such as Expedia.com and Lastminute.com, which offer online and app-based travel booking services. Through these, and combining different parts of their holidays – such as accommodation, flights, hotels and car hire – from a range of companies..
Another change in the industry has been the personalisation of travel. Fully packaged holidays have become unnecessary, with with today’s consumers having so much choice at their fingertips and tech platforms that can bundle their choices.
How technology is disrupting insurance
The insurance sector is set for an even bigger disruption. While technology has already transformed the way insurance policies are purchased, with services such as Compare The Market, Go Compare, Confused.com and Money Supermarket becoming the go-to places for insurance, there is more to be done.
Insurance companies are often hindered by legacy mainframe systems, as well as strict government regulations, but insurance technology (insurtech) startups in the sector have revealed some of the possibilities.
Price comparison companies were the early tech pioneers in insurance, and have largely replaced traditional insurance brokers. The top four combined generated revenue of £800m in 2013. Furthermore, a third of the 26.6 million motor insurance policies sold in 2013 went through aggregators – and two-thirds in 2015.
According to Altus’s research, even the 10% of younger people who do their own research about insurance products did not want to buy through traditional high street brokers. Meanwhile, only 36% of 18 to 25-year-olds could name a traditional high street brokerage.
Mark Andrews, domain director general for insurance at Altus, said the established insurance providers are engaged in digital transformation, re-platforming and legacy IT modernisation, but “they are still behind other industries in building truly customer engaging propositions that customers look forward to getting involved in”.
He said research of the top 20 motor and home insurance brands’ websites found most IT investment has thus far been made around quoting engines. He said that while 90% could offer a fully self-service quoting experience, there was little post-sale service.
A lot more can be done in the insurance sector and the insurtech revolution is driving change. This subset of the financial technology (fintech) sector is creating apps that are transforming the financial insurance industry, and companies know this all too well. They are open to new players, which is driving the insurtech sector.
Adopting enterprise-wide strategies
Research firm Pierre Audoin Consultants (PAC) recently asked 200 large and medium-sized insurance companies in Europe about their innovation strategies. It found they are moving from having pockets of initiatives around digital to adopting formal enterprise-wide strategies.
In fact, PAC said 70% of Europe’s largest insurance companies had appointed new CEOs in the past 18 months, and it was these leaders who were implementing IT innovation strategies.
In October 2016, Gartner said 64% of the world’s largest insurance companies had invested in insurtechs and predicted that 80% of life and property/casualty insurers would partner with these startups by the end of 2018.
But the analyst warned that most insurance CIOs were not familiar with these companies or their value propositions. He said this needed to change, and insurers should identify which of these startups could complement their offerings.
The insurtech startups
A rich startup sector is developing in the insurance sector. These new companies are using technologies to offer insurance that suits individuals and enabling them to access it on their smartphones.
One example is So-sure, which is offering mobile phone insurance using what it describes as social insurance. Dylan Bourguignon, CEO at the company, said people dislike traditional insurance because “it is expensive and when you make a claim it is a horrible experience”.
According to Bourguignon, So-sure is returning to the culture of shipping companies and merchants all knowing and trusting each other. “We are taking insurance back to how it all started, but with 21st century technology to make it scalable,” he said.
The company has launched its mobile phone insurance product in the UK, offering upfront pricing and claiming to be 40% cheaper than insurance offered by mobile network operators. The So-sure mobile phone cover promises customers will have a new phone in their hands the next working day if theirs gets damaged, and if no claim is made in a year they get up to 80% of their premium back.
The So-sure app enables customers to get insurance quickly, and they can invite friends to join and build up rewards as a result, which are then paid back to them at the end of the insurance period.
Bourguignon said the terms and conditions are written in plain English and “there is no need to have a law degree to understand them”.
More established but always developing
Startups are not the only companies investing in insurtech, however. More established companies are changing how they develop products to enable the introduction of new services.
One company that has found itself between the startups and established insurance companies in terms of size is Compare The Market. Larger players can learn from the company’s development ethos.
Alex Shaw, head of labs at Compare The Market, said all parts of the company were encouraged to innovate all of the time.
The company has recently been looking at its innovation strategy, which is vital, he said. “It is very easy to start an innovation because everybody has loads of ideas, but it is important to understand the prioritisation criteria so you pick the good ones and reject the bad ones.”
He said there is best practice available to help, but warned that innovation is usually sidelined at businesses with growth targets to hit.
“If you don’t have an innovation strategy in your organisation and are trying to innovate, you should probably think about what you are trying to achieve and what your metrics for success are,” said Shaw.
Compare The Market is currently identifying technological innovation and analysing where it could fit into the business, as well as innovation of its business model through tech.
For the past 18 months, it has been running a project known as Simples, which is aimed at improving trust between consumers and insurers. It is currently in public beta.
Shaw said this development was an acknowledgement that the company could do much more to create a good customer experience. “Where Compare The Market has been successful is in driving a good price, which has been beneficial for customers and generated a lot of interest over the years,” he said.
“But there is a new level of expectation today, which factors in this trust issue and a lot more,” said Shaw. “Customers today feel they should be looked after a lot better.”
Improving customer service
The company realised more could be done, because although it does not actually provide the insurance policies itself, it does receive many requests from customers about policies. “One of the things we have been looking at is how to better serve customers,” said Shaw.
This is where the new Simples tool comes in. It will allow customers to manage all their policies from all providers in one place. This will provide information to the customers to help them keep up with insurance. “They can upload and monitor their policies and, for example, we will let them know when things are coming up for expiry and add things like informing you when your car tax is due,” he said.
“Everybody has a pile of paperwork somewhere in their house that they never get around to. We are dealing with some of this and managing it for customers.”
Shaw said more established players should not see innovation as impossible and should instead look at how startups operate. “Startups get it right from the start. It is far harder in a larger organisation, but it can be done.”