How technology is changing the face of insurance as we know it
Understanding the evolutionary state of insurance is important and creates a tailored approach for all industry stakeholders.
The term “InsurTech” is becoming as common as insurance itself. In fact, InsurTech deal values have increased 32% YoY as investors and insurers alike look to revolutionize the industry and profit from it, according to EY’s “Global Insurance Trends Analysis 2018.” And these investments impact everyone in the insurance supply chain including insurers, brokers, agents, vendors and customers.
Tech differentiates insurers
Today insurers are being tasked with either developing the right technology or partnering with the right start-ups to stay ahead. AXA Venture Partners was established with that explicit goal in mind: Invest in tech start-ups that can redefine the insurance value proposition. At the same time, AXA Venture Partner’s start-up firms get the benefit of being in the AXA network and tapping into industry knowledge and risk management offerings.
Similarly, Lemonade was built on a fairly simple premise: Renters and homeowners insurance can be bought instantly, even from a mobile phone. This is all made possible through automated technology and applications that meet the expectations of today’s customers.
Agents and brokers get a leg up
When technology first started to impact the insurance industry, some viewed the development as dire for insurance agents. These naysayers saw technology as a mode of displacing the need for a middleman.
But in fact, the value of the broker is being redefined. Today’s insurance professionals are shifting away from simply providing a list of options to becoming risk specialists who understand the diverse needs of their customers and where the best coverage options exist. Technology helps today’s agents get to the facts quicker, allowing them to free up time to add value to existing customers and grow their book of business.
McKinsey predicts that the agent of the future can sell nearly all types of coverage and add value by advising clients holistically. Agents will use smart personal assistants to optimize their tasks and AI-enabled bots to find potential deals for clients, according to McKinsey’s “Digital insurance in 2018: Driving real impact with digital and analytics.”
Customer demands push innovations
Consumer expectations are increasingly shaped by the interactions they have with leading tech companies like Apple or Google. Interactions are seamless, interconnected and, of course, supported by digital technology. This means it is also a bit harder to wow today’s insurance buyer.
Offering digital solutions may seem like the easy answer but there’s more to the insurance innovation story. Engine Insights recently conducted an online survey among insurance decision-makers. Here’s what we learned:
- When thinking about the most important aspects of the insurance coverage purchase decision, price came out on top at 40%, followed by having adequate coverage at 18%.
- Having the ability to manage through a mobile application fell to the bottom at 3%.
- When looking only at younger consumers, ages 18-34, this figure increases only slightly to 5%.
These trends may signal the fact that digital has changed the way people interact with products and services. But for insurance, there is a need to create adequate coverage, and at the right price, before digital enhancements.
When looking at how consumers are buying insurance today, and this includes both health and P&C lines, we see that most still rely on some form of consultation, whether it is through an agent or broker (44%) or an employer (34%).
When looking at young consumers, ages 18-34, we see a slightly different picture emerge. Young consumers also are largely buying from agents or brokers (29%) or through an employer (35%).
However, when considering how they would like to buy insurance, we see a growing preference for web (21%) and mobile-based options (18%).
The reason this group wants to purchase insurance through a mobile app boils down to simply making their lives easier. Fifty-two percent noted that it is convenient, and 38% favored mobile apps because they are quick.
As this younger generation continues to move through adulthood, their impact on the industry will likely be heightened. So keeping a keen eye on young consumers is key for insurers.
So… What does it all mean?
Understanding the evolutionary state of insurance is important and creates a tailored approach for all industry stakeholders. It is also important to keep a close eye on competitor movements as well as the broader macro trends that will ultimately impact the way that insurance products are designed, sold and serviced.
Insurers can work to highlight ease and convenience, while ensuring that coverage is not compromised, and the price range is still obtainable.
And agents and brokers will continue to be tasked with refining their value proposition in an increasingly digital world and enhancing what they can offer consumers in terms of guidance and industry knowledge.
Amber McCullough (Amber.McCullough@enginegroup.com) is vice president of client solutions within the Financial Services Practice at New York City marketing and advertising firm Engine. These opinions are her own.
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