Digital transformation is currently front of mind for all industries, no more so than the financial and insurance sectors. Although the global pandemic has created a new sense of urgency and need for acceleration, the beginnings of this transformation long pre-date the changes recently forced upon us by the lockdown.
In the last decade a host of new companies have emerged in the B2B insurance sector offering digitally native, insight-driven products that take advantage of new technology. They’ve been flanked by a collection of start-ups that do not underwrite or sell insurance directly, but do offer products, platforms and ecosystems that allow the business customer to buy insurance in a completely new way.
Since 2009 over $31bn has been invested in these Insurtech companies globally, but so far change has been slow. Insurance is an industry that typically takes a long-term view and can be inherently risk-averse or as Jacqueline McNamee, CEO of C-Quence puts it, “The industry lags far behind other industries in using technology to modernise. Whilst it is true that change is happening and some new technologies are being adopted, the pace of change is still little more than tectonic.”
It will be hard for the industry to resists this tech-inspired transformation for much longer though. Poor customer experience is increasingly leading to a lack of trust, which combined with increasing costs and reduced profitability is making the use of automation and scalable insights a necessity.
What challenges can technology solve?
Getting the insights needed to build an accurate risk model is rarely easy, particularly so when it comes to dealing with SMEs, where data can be scarce, and the nature of the business can change quickly. This results in both clients being asked to supply inordinate amounts of information and policies quickly becoming unfit for purpose. Getting these insights in real-time is even more challenging.
David Ball, Pricing Manager at QBE says “Data about what a company does and how it operates is the most difficult to obtain, particularly where a company has multiple activities within its portfolio. Much of the insurance assessment is based on snapshots in time and this may not always give a realistic impression of the company.”
Even when insurers do hold high volumes of data on their clients, due to the way it’s stored and collected it can still be difficult to put to good use. This is where technology like cloud-based storage platforms, A.I. and machine learning can help insurers improve their understanding of risk across a diverse array of businesses. Combining client data that exists within the organisation with third-party sources of rich insights can provide a real-time and accurate picture of how a business operates and the associated risk.
C-Quence are one company that are leveraging this technology to transform underwriting, as CEO Jacqueline McNamee explains “By codifying underwriting rules, we are able to use algorithms to largely automate the process. When a risk falls outside the automated route and is referred to an underwriter, our technology suggests a solution to the underwriter. Artificial Intelligence (“A.I.”) and machine learning use the underwriter’s decisions to further refine solutions or incorporate them into the algorithms thereby reducing the number of referrals over time. This helps underwriters to manage much larger portfolios than is possible using old world procedures.”
How can insurance become more customer-centric?
Selling an intangible product like insurance means building trust and confidence as quickly as possible, but too often insurers provide clients with an experience that is both complex and time-consuming. If the insurance industry is going to change the perception that insurance is a commodity rather than a tool to manage risk, it will need to embrace transformation in the front end, as well as the back.
One area where a lack of reliable insights on SME customers directly affects customer experience is the amount of information that clients must provide when taking out a policy. For small businesses a good customer experience is not a luxury, it’s a necessity. The more time they spend researching and procuring products like bank accounts and insurance policies, the less time they have to focus on running their business.
Richard Thornton, Co-founder and Co-CEO of Insurtech Hokodo describes a typical experience, “The insurance industry has been very slow to embrace the data sources which are now available on SME businesses. For example, we recently renewed our own insurance cover, and had to fill out multiple proposal forms all asking the same questions about our company registration number, our address, our financials, our payroll, our share capital etc.”
By embracing new sources of data, insurers can save time for their clients while also improving the reliability of the information that is gathered. Richard adds - “All this information is available either from public sources, from data providers or from my accounting system and our bank account. I would be very happy to grant read-access to our bank accounts and accounting system if it spared me filling out more forms. And to be honest I'd even be willing to forgo getting the cheapest price for my cover to do so. It blows my mind that insurers can't get their act together to use these information sources when their customers are crying out for them to do so.”
Ultimately what this enhanced customer experience also offers is a more personalised service. Moving away from simply highlighting the features of a policy and conveying the benefits and value that a business gets from being insured. To quote David Ball at QBE – “Insurers can do more in the SME market by using data and technology to segment and better understand their customers’ needs. This ability to differentiate product features for a market that contains a diverse range of companies will enable insurers to provide tailored products and services rather than selling a commodity.”
For more information on how tech is impacting insurance you can download The Next 10 Years in Insurance - a research report by Insurtech Insights in partnership with DueDil or why not check out our webinar - How real-time insights and technology are transforming pricing in commercial insurance.