By tackling pain points around existing and new data, both carriers and InsurTechs, alike, are bound to see significant opportunities arise from their efforts. Our experts agree that the same capabilities developed while breaking up data silos and addressing the challenges of the Internet of Things (IoT) will also result in generating highly personalized marketing campaigns and on-demand insurance products that could offer substantial growth opportunities. Read the last blog in the series to learn more on this topic.
PERSONALIZING MARKETING TO DIFFERENT CUSTOMER SEGMENTS
While the use of data for underwriting decisions is regulated, there is an opportunity to personalize marketing for different customer segments.
“Insurance is heavily regulated, and certain states limit the type of data you can use, such as gender, to make underwriting decisions. Data informs products and pricing, and creates an opportunity to improve customer marketing. How can insurers bundle products to make insurance more appealing to different target markets? Data will tell us what people actually want, removing assumptions from the equation. Do consumers want on-demand insurance so they have the option to turn their policy on and off? Or should we provide them with different payment options, such as monthly payments versus one large annual payment? All these are considerations carriers need to think about when targeting different customer segments.”
- BETI CUNG, HEAD OF INNOVATION LABS, CSAA INSURANCE GROUP
WHERE INSURTECHS CAN INNOVATE
Quesnay surveyed Female Founders in InsurTech 2019 Applicants and found that 41% of them believe digital tools to improve the customer experience in insurance will see the greatest adoption over the next two years, followed by usage based insurance products.
ON-DEMAND INSURANCE AND TRADITIONAL INSURANCE BOTH HAVE A FUTURE IN THE INDUSTRY
On-demand insurance represents a growth opportunity in the industry.
“I think on-demand insurance really represents a growth opportunity for insurance carriers but it needs to be balanced with holistic coverage where the constituents are protected at all times. On-demand insurance for auto will look totally different from on-demand for home where the risk exists whether you are at home or not. Growth in data, IoT and advances in AI/ML have enabled the development of on-demand products that provide a better customer experience while providing adequate coverage of underlying risk. We have our own telematics app, and we have a partnership with BMW which leverages the Advanced Driver Assisted Systems in their cars to better assess risk and potentially reduce premium costs for customers. We are also leaders in the parametric insurance space. We have an on-demand insurance product for flight delay called Stork that automatically pays out claims for flight delays that reach pre-specified thresholds.”
- JERRY GUPTA, SVP DIGITAL CATALYST, SWISS RE
EXPERTS BELIEVE THAT CAR/MOTORCYCLE, TRAVELERS, AND HOME/RENTRS' INSURANCE REPRESENT THE LARGEST OPPORTUNITY FOR ON-DEMAND INSURANCE PRODUCTS
However, there is a need for both on-demand and traditional insurance products, so carriers will need to carefully balance their resources, in order to address both.
“I don't think on-demand insurance will replace traditional insurance products, but it certainly could extend, adapt or change what people do today. Traditionally, a buyer's journey would start with a financial advisor who suggests a specific policy. In the future, this journey could be more mobile. For example, when a person has their first child, they could go to a trusted app on their phone to buy a life insurance policy. On-demand will change a user’s entry point, but in terms of overall processing, it will be some time before we see significant changes.”
- MITCH OCAMPO, CHAIR OF RGAX DISTRIBUTED LEDGER TEAM
Other experts we interviewed agreed with Mitch “In many cases customers aren't necessarily looking for on-demand insurance products—they want to be insured at all times. For example, we see that with homeowners insurance, at no point in time do customers want to “shut down” their homeowner's insurance policy. They may want on-demand insurance for renting out their home, but an on-demand insurance product changes the pricing model. The insurance policy will be more expensive the moment the customer needs it. For the right set of conditions and risks on-demand insurance makes sense, but it addresses a very specific set of issues.”
- BETH MAERZ, SVP, CUSTOMER, STRATEGY AND INNOVATION, TRAVELERS
THE INTERSECTION OF BIG DATA, AI AND DISTRIBUTED LEDGER IS THE NEW HOLY GRAIL
Carriers can't overlook solutions leveraging big data, AI, and distributed ledger. “Things like benchmarking, following policy holders from cradle to grave, looking at pools of risk, running analytics on specific groups of people (such as smokers), etc. All of these will be possible once these new technologies mature. Big data analytics will continue to evolve so people can make better and better decisions.”
- MITCH OCAMPO, CHAIR OF RGAX DISTRIBUTED LEDGER TEAM
Thank you for reading our three-part blog series on Data and Insurance. If you are
interested in learning more about Quesnay's services please contact us.
Sources:
- How traditional insurance carriers can disrupt through personalized marketing, McKinsey 2018
- IUA publishes On-demand insurance report, International Underwriting Association 2019
INSIGHTS HOME
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