How technology is an insurance game changer - but it's all good
While it's exciting to see the opportunities technology is bringing to the insurance industry, Lifetime believes consumer education is key.
Advances in technology have made massive changes in the way we live now. Who’d have thought a few years back that we’d use a website to collectively raise money for a company’s start-up capital or charitable donations via crowdfunding, use Apple’s Siri function as our personal assistant, or do 99% of our banking online. Yet all these things are now part of our everyday lives.
A matter of time
It was only a matter of time before old-fashioned financial and insurance institutions sensed the hot breath of the tech-driven start-up entrepreneurs on their starched collars.
Banking was first. Having showed initial reluctance to technology, it eventually saw the light and went digital. The rest is history. This collaboration between technology and the world’s financial institutions – dubbed FinTech – has enabled us to do our banking on our mobile devices, and the benefits for both banks and consumers are clear, with savings on time, staff and resources.
Now it’s insurance’s turn. In the wake of FinTech over the last few years, the big industry names have been forced to wake up and acknowledge that, after being left undisturbed for decades, the InsurTech revolution has arrived.
And what a massive transformation it’s shaping up to be. It promises to be good for anyone prepared to embrace change.
Complexity no longer?
Insurance has always been a complex business, which is probably why it’s managed to defy change all these years – a behemoth with opaque rules, regulations and laws – no wonder consumers have admitted to being confused by it.
A number of its policies were based on assumptions and theories rather than hard data; they didn’t take into account that we’re all very different, with individual needs and expectations. For example, in the past, older people’s healthcare policies reflected their age, rather than their level of fitness. Data is now king and InsurTech will change all that.
The insurance industry needed to move with the times and start changes on the inside. It was a fast growing outside force that helped do that.
"Clients today want choices that reflect their lives, and they’re the ones driving change – with technology as their vehicle, and data as their fuel, both affecting how fast they go and how much they spend."
Challenge from the tech savvy generation
Enter a generation of tech-savvy movers and shakers, themselves frustrated by the lack of flexibility of policies, who started to question whether the modern customer was being best served by an institution so set in its ways.
Life today doesn’t bear much resemblance to the lives of our grandparents and parents, so the policy-buyers of today and the future, millennials – the largest-living generation today – are demanding and creating ways to challenge the Old Guard.
This group doesn’t have the same purchasing power as previous generations – either because of lesser job security, income or other reasons, so buying a house or a car isn’t a given. However, they do have a variety of other options. They might, for instance, want to borrow a friend’s car for an hour, a day or a week – and want insurance for that period without affecting their friend’s ongoing insurance. Until now, this option hasn’t been available.
Choices bring change
Clients today want choices that reflect their lives, and they’re the ones driving change – with technology as their vehicle, and data as their fuel, both affecting how fast they go and how much they spend.
The Internet of Things (IoT) – the concept of connecting any device with an electronic function to the internet – and the ever-changing devices and wearables, such as FitBits can now track and accumulate information about our lives and feed it back into the system.
This allows the financial services industry to tailor insurance plans to each individual. This is already having significant impact on health insurance, in particular. If people are getting healthier, the money needed to service illness will be less, which, in turn, should save policy-holders money. In addition, if individuals strive to be healthier, why not reward this financially?
It’s all there for the insurance industry to tap into, and two-thirds of the world’s largest insurance companies have already made investments in InsurTech, or forged relationships with innovators to help fine-tune their product offerings. In fact, funding to InsurTech start-ups has increased by 200% since 2014, and looks set to grow even more by 2018, a 2017 report by Canadian tech company Signority revealed.
Bridging the gap
This is very exciting. But, in my opinion, the key to bridging the gap between the old and the new is consumer education.
Until now, clients have been kept at arm’s length and now they want to be cared for. They don’t want jargon; they want plain English. And they don’t want lengthy wait-times and lots of paperwork, either. They want insurance made easy, they want to find savings and subsidies, search the best insurance companies for their needs and compare how plans stack up. They want to be asked “tell us what matters to you and we'll find insurance quotes that fit right away”.
They have that in every other part of their lives, so why not in their dealings with insurance companies? They want access to expert help when they need it and the right technology in place when they don’t. It’s up to them.
It’s worth remembering though, while computers win on efficiency and can speed up the process, they cannot yet reason, they can’t adapt existing policies, and they can’t take into consideration the wider context of a person’s life. They also can’t empathise with people or run around to gather information necessary for claims, which is usually the most stressful part of insurance.
Above all, the more InsurTech grows, the more benefits there will be using what the industry calls an e-Adviser. This breed of financial adviser is particularly tech savvy and is using digital platforms and software systems to enhance their clients’ insurance experience by making policies more transparent and personal, and ultimately putting the power back in the general public’s hands.