As the world prepares for a post-COVID recovery, Insurtech Insights’ Kristoffer Lundberg and Bradley Collins lay out their vision for the future of the industry
What’s the future of insurance? A big question with multiple answers that we at Insurtech Insights constantly seek. While I’m no industry veteran, I have been hosting weekly webinars with global insurance leaders and innovators and have picked up a few ideas of what to expect. The consensus among those who have shared their time with me is that collaboration will be a crucial component of the industry.
There are myriad reasons for this. A key issue is that great customer experience is still lacking. I’m far from the first person to say this and doubtless won’t be the last. The insurance experience was already fairly frustrating for customers pre-pandemic. However, as consumers became more used to ordering Amazon packages from their sofas, their expectations have changed dramatically.
I’ve spoken with enough executives from the traditional carriers to know the desire to improve customer interactions is there in abundance. The question, however, is whether they can innovate quickly enough to offer products and services that keep up with the pace of change. Partnerships of all shapes and sizes will be key to enabling that great experience. But what does this look like?
Insurers will no longer be able to solely rely on their promise to pay out a claim. In fact, this is one of the biggest reasons the industry’s reputation has suffered of late: the perceived failure to live up to those promises.
The insurance of the future will be very different. It will be more engaging, more interactive and more like a consultant as opposed to the current widespread model. In essence, insurers across all lines and sectors will have to follow a Vitality-style approach where customers actively benefit from their insurance.
Health insurers will have to find a way to make customers healthier, auto insurers will reduce the risk of crashes and so on. In short, we will move from the promise to pay to a promise to help, which is a seismic industry shift.
While there is huge appetite from incumbents to achieve this experience, they will still struggle to enable it with tech if they go about it on their own. This is where widespread collaboration will come in. Without the faster, more nimble, more innovative players, it will take insurers far longer to adopt new tools and engage with the customer of the future. By which time it may be too late.
Last month Zego, a commercial motor insurer, became the first British insurtech unicorn with a valuation of $1.1 billion in its latest funding round. Founded just five years ago, the rise of Zego is the latest example of why insurance has become one of the hottest sectors in venture capital.
As with every insurtech, Zego exists because its founders spotted a gap in the market, a problem that technology could overcome. Commercial motor insurance is prohibitively expensive for “gig economy” drivers who work part time. Insurtechs such as Zego and Cuvva solve this problem by offering affordable pay-as-you-go insurance, powered by sophisticated telematics that reduce the cost of underwriting and cover.
Innovative startups now exist in every type of insurance, making buying and claiming easier and opening up new markets in doing so.
In 2019 Zego acquired an insurance licence. Many insurtechs, however, exist as pure platform plays, choosing to maintain no actual insurance capacity, but instead partnering with established carriers. This allows them to bring disruptive propositions to market at speed and sidestep the cost and complexity of being a full-stack insurer.
These firms are the insurance equivalent of Airbnb; they develop products and manage customers, but hold no actual inventory. Some trade under their own brand, while others provide white-label services for partners.
Zego works with the likes of Uber, Just Eat and Deliveroo, with access to a vast pool of drivers who are potential customers. Skyscanner.co.uk and Booking.com customers can purchase COVID-19 travel-interruption insurance powered by Cover Genius underwritten by third-party carriers. “Embedded insurance” radically boosts insurers’ reach and puts insurance in front of customers when they are most ready to buy.
Established insurers are also getting in on the act. Bancassurance, insurance sold to banking customers, is enjoying a resurgence. Insurers large and small and across every line are looking to build ecosystems of partners that create value for themselves and for customers.
An Insurtech Insights survey of insurance professionals, published last October, revealed 66 per cent are already partnering with non-insurance businesses and a further 26 per cent are planning to do so. The top reasons for partnership are cross-selling opportunities (cited by 92 per cent of those surveyed) and access to new customers (90 per cent).
These are inspiring times in insurance. Whether you’re a five-year-old unicorn or a long-established business, data-powered platforms and partnerships are unlocking growth opportunities and are providing the fuel for immense innovation.