It’s time incumbents face the digital reality of preventative risk management
Helping consumers manage risk: Is this the next frontier in tech-enhanced insurance services?
Insurance is, by its very nature, a reactive product. Think about it: consumers only ever interact with their insurance company in one of two ways — their regular bill or a claim, neither of which are a particularly positive customer experience.
According to the 2019 J.D. Power Digital Experience Study, about 10% of consumers have never interacted with their insurance company at all. The result is that the insurance carriers are often viewed as purely transactional sellers of policies, rather than partners who can help their customers better protect their assets and manage risk.
There are some obvious downside risks to being seen as purely transactional; consumers can become price sensitive and shop policies more often when there’s no relationship, and they may also see insurance providers as a “necessary evil” — a requirement of their mortgage or auto lender, and one where the value isn’t always clear.
It’s time for incumbent and modern insurance carriers to realize the value in moving beyond traditional models and offering customers value-add, risk-mitigating services. We’re seeing some variety of this already in the form of information portals for consumers — these are mostly in-house initiatives like State Farm’s “Simple Insights” site, Allstate’s the Allstate blog, and Progressive’s Progressive Answers. These content-driven offerings are well-intentioned … but fall short on helping customers actionably manage their risk.
So why aren’t carriers going a step further to provide consumers with active risk prevention services? In a nutshell, it’s expensive. Both incumbent and modern insurance companies don’t have internal appetite or resources to develop fully-fledged risk prevention services for their customers. The sheer volume of resources associated with keeping the existing business functioning (acquire customers, service policies, process claims, etc), plus the costs associated with developing and launching new programs — not to mention the potential liability associated with running a risk prevention effort — all work against the consumer benefit such services can provide.
Preventative risk services coupled with innovative carriers are a win/win for insurers and customers
That said, innovative carriers are beginning to work with a new generation of partners who offer a range of services and products that can help proactively and preventatively manage risk — a winning proposition for both insurer and customer.
Connected devices and on-demand services are increasingly a touch point for how we operate, and not only does this make our personal lives easier, it makes it easier for insurers and brokers to mitigate claims. Examples include smart home water-detection sensors and valves, AI-powered roof inspections, and routine maintenance services aimed at identifying issues before they become costly claims.
Not only can these preventative initiatives help mitigate risk and potentially improve loss ratios, but they can also drive other critical business metrics. The same J.D. Power study notes that 34% of consumers would be willing to switch to a carrier that offered preventative loss and protection services.
Disruption is happening, so what’s next?
It’s clear that consumer expectations around insurance are changing and digital technology is creating new opportunities to prevent and mitigate risk. What’s less clear is if carriers will be able to adapt to the change and offer their customers the services they’re increasingly expecting — either with their own offerings or by partnering with new companies in the insurance ecosystem.
In the future, managed home services and connected devices will allow insurers to move from a reactive model to a proactive one so that they could detect problems before they pop up and result in preventable claims. If this approach is implemented, insurers could meaningfully manage risk as well as deliver a more engaging and positive customer experience — helping bring one of the last major antiquated industries into the modern world.
Andrew Wynn (andrew@getsheltr.com) is co-founder & CEO of Sheltr, a subscription service that helps homeowners proactively care for their homes to catch and mitigate issues before they become costly repairs.
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