Not very long ago companies were happy to call the customer ‘king’, for instance because of fast delivery or good service, but the specs of the product were determined by the supplier. As a customer, you either purchased the insurance…or you did not. This is changing radically. A good example of this is on demand insurance.
The customer determines exactly what insurance he wants and when. Suppliers facilitate the demand based on advanced technology. An example is music services: the user decides when he wants to hear particular music and compiles his own collections. The provider assists by making suggestions based on previously-made choices.
The same principle applies to news: do people still read a morning newspaper for the news? News is spread virtually in real time and is available whenever it is convenient for the reader. The same applies to films and series by Netflix, HBO and other services. Large numbers of consumers and businesses are switching to Software as a Service. Clothing, electronics, groceries: the king decides when he wants to shop, when he wants to receive his order and has unprecedented online choices at his disposal. Technology makes this all possible.
Advances in technology also mean that the insurance sector is rapidly developing its services. This is called ‘Insurtech’. The rise of on demand insurance allows the customer to really become the king.
Insurance companies and particularly technology start-ups have come up with initiatives in this area. During DIA Amsterdam in May 2017, a 2-day insurtech and innovation event, around one hundred companies demonstrated the developments they are working on and that are already deployed in the market. Often ‘traditional’ insurance companies are involved in the cover. The entire front office is provided by technology providers such as TROV, Insureapp or Metromile, which are growing rapidly in size and scope.
On Demand insurance
These and other providers develop the technology that enables on demand cover. Currently the focus is on specific goods that are traditionally included in household contents insurance, travel insurance or car insurance. The object to be insured, for instance a camera, is offered via an app. Based on available cloud databases, the system determines the value and risk and the owner of the object immediately receives a premium proposal, after which he simply ‘starts’ the insurance. Do you only want to insure a camera for a weekend in the Ardennes and then put it back in your cupboard? This is possible and the premium and cover are adjusted and the insurance ends at the agreed time. The possibilities are infinite and development is still in the initial stages. The system is linked to a smartphone and, by becoming familiar with the consumer’s lifestyle, it makes offers and determines the risk based on this lifestyle. The app can remind the consumer when he is at Schiphol that his expensive camera is not yet insured, when getting into his car it can send him a message to remind him to activate the ‘cover per kilometre’ and when he is travelling by metro in Rome it can send him a warning that pickpockets are active, while the premium and cover may be temporarily adjusted at the same time.
Combat insurance fraud
In the meantime, various insurtech providers are offering insurance products under their own name in association with underwriters. On the other hand, insurers are seeking cooperation with these providers to develop this market segment – 80% of which consists of millennials born after 1980 – under their own name.
There are many changes taking place. What is not changing is the risk of misuse. Fraud prevention and detection are still needed. In this regard, technology is also a key element. For example, how do you determine whether the camera referred to in the example above actually did disappear last week? How do you determine whether the underwritten object is actually owned by the person using the app and how do you know enough about him to determine the risk and the premium?
A lot of steps have been taken to provide adequate answers to these questions. But developments are proceeding at a faster pace than ever before. Not only developments in the technology itself, but also in the way consumers deal with the technology offered and how they make their choice of products. The king claims his throne. Insurers and technology providers must think, develop and market together to make this new reality profitable.