Nick Baker discusses whether protection will catch up with the Insurtech wave.
There's no doubt that adding Fintech or Insurtech to the title of your next event will guarantee a large turnout.
I witnessed this first-hand recently, and there are more and more Insurtech events taking place every week.
Why is there this intense interest? What's driving traditional insurance people and the like to start taking notice of the growing band of start-ups emerging with disruptive propositions and new ways of doing business?
Consumer behaviour has driven changes in many other sectors facilitated by new technology.
The smart phone overtook desktop computers as the device of choice for going online and transacting.
Mobile ecommerce propositions across such diverse segments as betting, travel, fashion, dating, food shopping, banking , entertainment, leisure and gaming, to name but a few, have propelled the mobile to being an important way for companies to engage consumers with their brands.
These sectors recognised it long ago, yet the Insurance industry is still a long way behind.
We saw this trend three years ago when we gave ourselves the challenge of creating a new life cover proposition which offered quote to cover using a mobile phone in under 5 minutes.
These are the six key hurdles we had to overcome, and in some cases will continue to address as the market evolves;
1. We had to simplify the core value proposition.
Many online propositions get hung up with helping users find the optimal level of cover.
Calculators and guides only serve to make it harder to get the quote, so we opted for simple flat rate levels of cover and set terms.
We found three levels of cover set just below, at and above the average level of under-insurance in the UK - £100,000 - helped people to make a straight forward decision. We also addressed the inherent mistrust in consumers' minds by removing all policy exclusions, including the suicide clause, making our policy document under three pages long.
2. Mobile first.
We had to create an engaging user interface optimised for mobile which equally works on tablet and PC.
We analysed many non-insurance journeys. We looked at what data at a minimum to collect and how to get a rapid and fixed quote.
We created a simple and very consumer centric customer experience.
3. We had to simplify the application process.
To apply for cover on a mobile demands a new approach to designing your eligibility question set.
The average bench marked time to complete first line underwriting questions on a PC was in the order of 20 to 28 minutes.
Clearly this wouldn't work on a mobile. We analysed the current aggregator experience and found some 40% of users would be asked more questions and some pay higher premiums than first quoted at the quick quote stage.
Then you have to factor in the applicants who get progressed to tele- underwriting and then fuller more traditional underwriting.
We ask just 4 eligibility questions and deliver real time acceptance with no further underwriting what so ever.
4. We had to be inclusive.
In some quarters the direction of travel is towards more detailed question sets.
This is good news for the super healthy lives, but the concept of risk pooling breaks down if the not so super healthy are a pool apart.
Shorter question sets priced accordingly support our target to cover 90% of applicants and provides a product for consumers looking for speed and convenience rather than pure price (a group who are not well served at the moment).
5. A new approach to distribution. We have tested new ways of distributing the mobile life cover product in a way that reduces anti-selection risk and avoids the costs of medical underwriting that traditional methods would demand.
We have resisted up front commission in favour of promoting improved long term retention.
For non-traditional term life distributors, this creates a steady build-up of value which through good customer management will lead to improved embedded values in their businesses.
6. Being ahead of the market.
We believe that non-conventional life distributors such as General Insurance brokers and credit card providers, online property businesses (estate agents, property aggregators, and conveyancers) will soon look to enhance their customer relationships by promoting a simple life proposition at the end of the core product purchase.
Doing so with a product which addresses the concerns expressed by the FCA over some of the current add-on sales, and which can be bought in less than five minutes, will enhance and lengthen their customer relationships.
What next? While the commercial motivations to promote simplified term cover continue to develop amongst our target distributors, we are transferring learning into the simplification of another important area of insurance need; Buildings and Contents Insurance.
We have designed a proposition which embraces all of the above challenges, plus some new ones and most importantly can be bought in less than five minutes on a mobile phone.
Big data is a topic already under regulatory review; however the use of data to reduce question sets for mobile is a critical success factor.
Applying for Buildings and Contents Insurance through a price comparison site now typically involves completing 40 to 50 questions - our aim is just 8 underwriting questions (around 10 questions in total).
As part of our core values we will address complicated cover levels, impenetrable policy documents and excessive/unfair exclusions and ensure claims processes are straightforward and fair.
We are also looking at the ways of embracing connected homes technology to improve pricing and risk management.
As the wave of clever and innovative ideas flow from the Insurtech movement, it's important that the traditional insurance sector follows the consumer and embraces these new ways of doing business.
The focus on Insurtech is already large and will continue to grow.
Our view is that success will come about not just from clever new technology, but when it is combined with customer centric thinking and genuine new ways of delivering the end to end customer value proposition.
Nick Baker is founding director of SO - Simple and Open Protection Solutions