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Redesigning From the Customer Up: How to Transform Insurance With Digital Technology

EIP is a Business Reporter client.

Insurance is being transformed through new digital technologies, benefiting both customers and insurance companies.

Traditional insurance companies have a reputation for cumbersome customer sign-up processes. And while innovations in technology can provide a more streamlined customer experience, there is often skepticism around “insurtech” and the role that technology plays in the sector.

Ross Sinclair, founder and CEO of EIP Ltd., believes that insurtech can deliver a customer experience that is simple, efficient, dependable and hassle-free, while at the same time driving higher margins and more efficient operations for insurance companies.

The insurance industry has undergone major change over the past decade. Companies are offering a far broader range of financial services to their customers. However, physical retail channels are disappearing, accelerated by the pandemic. This means that they often don’t have the platforms to effectively offer new products to their end users.

Negative consumer perceptions

A major problem for the insurance industry is that many customers are suspicious of insurers, whom they often see as hiding behind small print and having slow bureaucratic processes. But insurance companies are not uniquely at fault here; increased regulation, intended to protect customers, has complicated insurance purchase and claim processes.

There is often sufficient latitude to find a customer-friendly solution within a given regulatory requirement. Unfortunately, compliance professionals in large corporations often take a very cautious approach.

In addition, the quality of claims processing varies wildly across the industry. Inevitably, people remember—and share on social media—the bad experiences. Over time, the public perception has grown—perhaps unfairly—that insurers often try to avoid claim settlements.

All in all, many consumers feel that insurance is designed with the interests of insurance companies, rather than customers, at the center.

A failure to understand risk

Traditional insurance companies often further damage consumer confidence with their approach to assessing risk. Take the insurance premiums on mobile devices: These are often wildly inaccurate because of a traditional approach to pricing, where underwriters simply apply a higher premium on more expensive devices, with the assumption being that these devices present a higher risk.

In reality, while the brand and model of the handset are risk factors (although not the cost of the handset),[This contradicts previous sentence about more expensive devices presenting higher risk] the biggest risk factors are the behavior and demographics of the user. A little old lady potentially presents a very different risk of damaging her phone than a 22-year-old scaffolder. No one has been taking that into account, until now.

Because insurance products involve high customer volumes, and therefore high claim volumes, it’s possible to build a picture of the types of customers that are filing claims, including age, location, occupation, gender and so on. This data can be fed into pricing engines in real time. The customer then receives a quotation specific to them and based on up-to-the-minute claims data.

Favorable pricing can be used to encourage lower-risk customers to take out insurance, while high-risk customers can be discouraged with higher premiums. This approach gives insurers stability of margins as well as significantly increased profitability.

New solutions for old problems

Insurtech companies such as EIP have developed software and solutions that help businesses, such as mobile network operators, banks, retailers and insurers, offer insurance products to their customers in more cost-effective ways.

Contextual pricing gives consumers the best price for their individual circumstances. For example, an insurance provider might choose to introduce a “safe location” discount where premiums are reduced when a customer is in a lower-risk environment, such as at home.

By applying this intelligent pricing technology, customer satisfaction is enhanced, while overall profitability can be increased by more than 40%.

The claims side of insurance can also be strengthened through technology. One example is EIP’s automated claims processing that makes it far quicker and easier for the customer to make a claim and get a decision; this is now being successfully used in many countries.

However, it is possible to go further. EIP has developed an “Autoclaim” feature for mobile-device insurance that anticipates the customer’s needs; Autoclaim mines the gyroscope and accelerometer in the device to detect automatically when a device has been dropped and potentially damaged.

If a device is dropped, then the data is immediately used to create a draft claim automatically. The software then checks with the customer whether the claim is needed. If the policy holder says “yes,” then the claim is submitted, approved and the repair arranged. The whole process takes less than 10 seconds and two button presses from the time of damage.

Designing from the customer up

Of course, some insurers will feel that there is a danger that this type of automation might increase the number of claims submitted. But it is important to look at these innovations in the big picture rather than in isolation.

On one side, claims will inevitably increase slightly as the customer experience is massively enhanced. But balancing that are very material improvements in program profitability and management costs, which offset a softer claims attitude. The customer gets an exceptional experience, and the insurer gets higher margins—win-win.

The principle is to start designing insurance from the customer up, rather than insurer down.

Insurtech is transforming the traditional insurance industry, enabling insurance companies with a maturity of vision to provide highly efficient, light-touch, low-cost digital journeys that are super-attractive to consumers and profitable for the business.

Insurance companies that design products and create user journeys centered on the customer, rather than the insurance company, will not only create competitive advantage in pricing, but also build such a compelling service offer that it will crush the competition.

—Industry view from EIP

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This article originally appeared on Business Reporter. Image credit: iStock id1281297414