Ciara Izuchukwu looks at how insurers are innovating to provide more personalised products to customers – and why this is so important
The insurance industry is more than 300 years old and has traditionally been seen as slow to adapt to change and embrace new ideas. For insurance companies, the question is not just whether we need to innovate more, but how we define and deliver innovation. Insurers should encourage innovation in all parts of their operations, while keeping customer needs at the forefront of developments.
When customers tell insurance companies that they need to innovate more, what they want is for us to anticipate and respond to their needs more effectively. Let’s take cyber liability as an example.
This class of risk has been around for nearly 20 years, following societies’ growing use of, and dependency on, technology – and high-profile breaches keep pushing it into the spotlight. Insurers have been quick to react to this new area with new products, in many cases bundling existing products and services together, but there is still plenty of scope for further developments.
Two hindrances to innovation on the part of established companies are lack of data and lack of expertise concerning a key technology. Many smaller start-ups, meanwhile, have the expertise or the data but lack the financial and administrative resources to make an impact. Insurers are increasingly bridging this gap by partnering with third parties and insurtech companies. A good example is Allianz, the world’s largest aviation insurer, which has partnered up with Flock – an insurtech company building a big-data-driven risk intelligence platform for insuring drones. Flock provides an alternative on-demand insurance that is used only for the specific period that the user needs it – in other words, when they are actually flying their drone.
As well as partnering with insurtechs, the insurance industry is investing in new technologies that could make them more customer-oriented and cost-effective, in turn leading to a greater return on investment. Chatbots are becoming commonplace on insurance companies’ websites, saving hundreds of hours in the decision-making process for the agents supporting policyholders. Telematics is another innovation used by car insurers to give more personalised insurance cover. Telematics devices record real-time driving data, such as speed, location and accidents, allowing the insurer to provide cover that is reflective of the customer’s driving habits.
Endpoint devices such as smartwatches and social media also provide large amounts of personal data that may be used for risk assessment. This helps both customers and insurers: customers get highly personalised services and products, while a business gets a more accurate risk assessment, less volatility in their margins and more satisfied clients. A study done by Accenture demonstrates that such a model is viable – more than three quarters of customers are ready to share personal data to get cheaper risk coverage and personalised financial and insurance offers.
As well as observing the marketplace and investing in new technologies, effective innovation means asking the right questions of the right people. If insurers are not engaged in direct dialogue with customers, innovation risks getting stuck between what insurers think the customer wants and what brokers think the customer wants. Insurers can now use various tools to engage more effectively with customers on a real-time basis. Many companies outside the insurance industry are using customer intelligence platforms and leveraging the data they produce to understand customer habits and motivations, and this is something insurers could also do to understand policyholders better.
Insurers have valuable insights to share with technology firms, which could help them access a larger market and derive more value from their products. If we can become trusted partners in the development process, we can influence emerging tools and products so they more closely match the needs of our customers. No industry can resist technological advancement, and every company needs to adapt to digital trends if it is to survive and grow. The insurance industry is no exception, and needs to be agile in its response to change.
Ciara Izuchukwu is student editor.