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Insurance Disruption: InsurTech Leads the Way

Insurance companies and InsurTech recently gathered at the SVIA Fusion conference to talk about the future of insurance in the age of digital disruption. According to KPMG, VC’s invested over $2.5 billion[1] in InsurTech in 2015. With the number forecasted to grow over the next several years, many insurance companies that have taken a 'wait and see' approach are now being forced to reckon with the sea of change ahead.

So what are some of the key themes that are emerging?

Innovation is a 'Must Have', Not a 'Nice to Have'

With the high level of investment in InsurTech, new entrants have started to disrupt every aspect of the insurance value chain from Sales and Marketing to Renewal. Fortunately, customers are ready for these new simplified and improved experiences.

According to Majesco, Net Promoter Score (NPS) ratings for insurance companies are 40-60 points behind other industries. Companies can see a significant positive swing in NPS when they focus on customer experience. They can do this by  modernizing their tech stack, by offering delightful and engaging front-end experiences, and by connecting to the overall ecosystem through strategic partnerships.

Mind Shift from Protect to Prevent

The emergence of IoT, sensors and predictive analytics, combined with gamification techniques have precipitated the ability for insurers to encourage positive behaviors among their customers in order to prevent negative outcomes.

Take Vitality, a company that rewards customers for living healthy lives and monitors their activity through the use of smart wearables. Vitality’s partnership with Apple is a perfect example. Their customers are able to purchase an Apple Watch at a discount and pay for the remaining balance by tracking their physical activity. A customer’s monthly payment would either be £0 or £12.50 depending on the level of activity of the previous month. In encouraging physical activity through these gamification mechanisms, Vitality is helping to prevent health issues such as heart disease and diabetes.

Apply Data Strategically Across the Lifecycle

Similar to fintech lending startups, new InsurTech entrants are looking beyond traditional data to inform insurance decisions about the customer. Insights from social media and online activities as well as data from IoT devices such as smart wearables and smart home devices are being collected, bundled, and analyzed in new ways. This provides a more holistic picture of the customer, setting the insurance company up for success as it tries to offer more focused, specialized, tailored experiences for its customers.

According to Geoffrey Andrews of Carpe Data, this combination of historic and real time data isn’t just for underwriting – it’s used for every aspect of the life cycle. Consider using new and existing sources of data in the following ways[2]:

New Business Models + Digital Technology = Delightful Experiences

MetroMile is a 6 year veteran of the industry that introduced a new pay-per-mile alternative to traditional auto insurance. Since then, new companies have started to re-think business models while also incorporating new technology to provide seamless experiences that make interacting with insurance an enjoyable experience. Two recent standouts are Lemonade for renters/homeowners insurance and FIGO for pet insurance.

Lemonade is a mobile-based insurance provider that leverages behavioral science and artificial intelligence, eliciting a “I love Lemonade” feeling among its customers.  According to CEO and founder Daniel Schreiber, three elements come together to influence this brand affinity:
  • The seamless customer experience - Lemonade leverages digital capabilities to expedite both the on-boarding and claims process
  • The customer sees value – Lemonade claims they are less expensive than traditional insurance
  • The customer derives value through altruistic actions, with Lemonade donating a portion of its revenue to customer-selected charities
FIGO is another startup that seems to make the experience of pet insurance … fun. FIGO’s CEO, Rusty Sproat, takes a no stack, modular approach to developing the FIGO experience allowing for future extensibility. The part that makes FIGO’s experience fun is its clever use of APIs, social and mobile capabilities that come together and create a cohesive experience for the pet owner.

In both of these InsurTech instances, insurance is re-imagined as a part of the daily lives of customers. This is in stark contrast to the typical interactions customers have with insurance providers – buy at the beginning, and then, years later, submit a claim.  In fact, what makes these 2 startups compelling will be a consistent theme that future InsureTechs will perpetuate. In summary, the key things to keep in mind in this space are:
  • Keep the customer at the center of the insurance experience and consider ways to weave your brand experience throughout the customer journey in a manner that makes sense
  • Imbue positive emotion into the experience through a combination of behavioral science mechanisms and delightful, simple technology interactions
  • Don’t just protect, but prevent negative outcomes to demonstrate that you are truly advocating for the customer


[1] https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/08/the-pulse-of-fintech-q2-report.pdf
[2] Geoffrey Andrews, Carpe Data

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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