Even in today’s connected world, insurance agents and brokers remain the most prevalent means to sell non-compulsory insurance coverage to potential customers. “Insurance is sold, not bought!”, a sentence commonly heard in the InsurTech arena, is (and will remain) to my mind imperative for insurers to acquire and retain customers.

Due to contractual complexities and blurred understanding of claims terms, insurance buyers often find it difficult to grasp fully the value offered by the insurance products they purchase. The lack of customized offers that fit with new market realities and the needs of changing customer segments mean that many buyers end up underinsured or unaware that their requirements are not covered.

What is Expected of Insurers When it Comes to Creating an Effective Digital Customer Experience?

Many financial services institutions, including banks, have already developed complex applications supported by great user experiences that guide clients with their day-to-day banking needs. The best examples are the very popular online-only banks that have managed to attract clients without having physical agencies: a characteristic that is prized by younger generations (millennials and Generation Z), who are not so keen to deal with the inconvenience of traditional bank counters. Not to mention the retail industry, which was one of the first to meet the requirements of connected generations for real-time buying, meaning geo-location supported apps to promote personalized offers.

The key question is: why is the insurance sector so much slower at adopting digital capabilities, which can bring enormous benefits to the industry and to their clients? It is well known that insurers have encountered delays with their digital innovation programs due to the complexity of legacy systems. However, shifting customers’ expectations together with an increased usage of digital channels are both forcing insurance players to focus on their innovation strategies.

Users today do not just go online, they live online. To be more precise, they experience an endless series of moments, hopping between the nonlinear sequencing of the offline and online worlds. These are competitive threats insurers must understand and overcome.

Clients want personalized solutions aligned to their needs, and they want those quickly. The most appropriate customer-centric marketing approach begins by acknowledging that there is no such thing as an “average” customer. Each customer has different habits, preferences, and behaviours and this should be recognized as an opportunity to move past the “one-size-fits-all” style marketing approaches. Incumbent insurers should start looking at their customer base as their greatest and long-term asset. They must also make customer centricity a core tenet of their overall market strategy. Google gave some basic, but essential, pieces of advice destined for retailers in an article on micro-moments.¹ It highlighted that, to offer memorable experiences to customers, a retail brand must develop and cultivate three qualities:

1. They must “Be There” for their customers, meaning that they must show up when and where the customer has a need or desire.
2. They must then “Be Useful” and come up with valuable and relevant content.
3. They must “Be Quick”, which means think and act fast or lose market opportunities and potential clients.

To avoid losing a large portion of the digital generation, insurers must address these issues when reshaping their proposition and value chain.

The lack of a coherent and encompassing vision regarding online and offline sales channels and the integration among them should not even exist anymore but is a major handicap that customers can still experience when engaging with organizations. Insurance for the masses is becoming outdated, while newcomers are clearly moving towards offering context and utility.

These newcomers must not be overlooked. According to Venture Scanner, these InsurTech startups have received over US$18 billion of investment since 2004.² Bringing with them new business models and a breath of fresh “technological” air, they might be just what the doctor prescribes for keeping with the pace of change within a highly-connected world.

In this context, artificial intelligence (AI) and the Internet of Things (IoT) represent major trends that will impact the evolution of the insurance industry as we see it. And a number of InsurTech startups are already building solutions that enable carriers to propose innovative and customized insurance to their final clients.

Micro-policies or Short Duration Insurance: Approaches to Sell Timely and Distribute the Right Coverage at an Affordable Price

One of the first micro-policies purchasable through a cellular phone was made available in 2010 by Tokio Marine in partnership with NTT Docomo,³ a mobile network operator, and remains an often-cited case study for insurance innovation regarding in particular the customer experience. Since then, a series of startups that offer micro-policies have appeared and they operate according to certain sales approaches and distribution models.

Some startups like Trov,⁴ Cuvva,⁵ or Back Me Up⁶ are based on stand-alone solutions, which means that their solution does not rely on another party to make their insurance services available to customers. Each of these players has its own mobile app or website,⁷ which is used to propose different types of micro-policies to customers, from gadget and home insurance to wedding and pet insurance. The opposite approach to the stand-alone distribution model is the plug & play approach, meaning that integration is needed with a third-party customer-facing website or app. This model will include examples such as Simplesurance,⁸ Pablow,⁹ and BIMA.¹⁰

The distribution model has a great impact on the potential reach and exposure of the new solution to final customers. Stand-alone solutions need to be researched by the potential clients directly, while plug & play solutions already benefit from a customer base supported by a partner. The sales approach instead could have direct impact on the challenge of adverse selection¹¹ and on delivering unique customer experiences.

From our research, we can assert that there are InsurTech players that are deploying a “pull-based” sales approach. This is the equivalent of the customer having to ask for a specific insurance cover that he or she can access on a timely basis. The Trov app is one such example of how one can insure valuable objects at any point in time, at a reduced cost, and without paperwork. The app also works as a digital inventory, offering users the option to store and categorize items, while at the same time displaying the market value and description of each object.

The downside of the “pull-based” sales approach in general is that preventing fraud becomes difficult and foul play is not easily detectable. At the opposite end of the spectrum sits the “push” approach, meaning that the solution provider proposes insurance to the customer of its own initiative. A downfall of this approach is that insurance propositions could be overlooked by customers because they fail to arrive at the right time and within an appropriate and meaningful context for the customer.

I personally believe the two criteria that I mentioned earlier (sales approach and distribution model) are particularly relevant on the insurance market today in determining the success of selling micro-policies. I would also suggest that selling insurance via push notifications (compared to a “pull” approach) could be a better and more effective way of approaching customers who are not otherwise inclined to purchase non-compulsory insurance. This can help overcome the obstacle highlighted previously that “Insurance is sold, not bought”. A challenge remains when sending insurance information: to approach a user in an intelligent non-invasive way. Intelligent in this context refers to having a system capable of understanding the customer’s physical context, emotions, and preferences and even predicting his or her future actions to offer the right insurance products and services at the right time.

This is what Neosurance is trying to do. Neosurance uses artificial intelligence to enable insurance companies to sell limited-duration insurance covers via push notifications through a smartphone app used by a community of users (e.g. a runner’s community app, or an amateur soccer player’s community app).

The smartphone becomes a medium to push insurance propositions and to address existing challenges relating to closing the underinsurance and insurance protection gap, ¹² as it has become the preferred research means, when searching for information, comparing products, finding best deals, and connecting with market brands.

As the sharing economy becomes more widespread, the market will not be lenient with those market participants that deny technological progress, especially when it comes to evolving future customer experiences. The market will demand niche products that are relevant for specific customers and ecosystem partners, digitally accessible at any moment. Then you’ll be able to give them the right insurance coverage from their smartphones.

Micro-policies are at the beginning of their journey, particularly in industrialized markets. There are still uncharted territories for us to explore, and the potential to raise the industry’s profitability level through those is seen by some as significant. Investing in a digital sales force able to sell insurance in a smart way using AI and machine learning capabilities would be a good investment to reach these connected generations through their smart devices.

I am certain that micro-insurance policies will increase in the near future, because of the nascent needs of their buyers. The protection gap is reducing, because of the development of a more intimate customer-insurer relationship.

The huge amount of data out there combined with the ability to analyse it in such a way as to bring value to both customer and insurer leads me to believe that investments in this type of innovative solution will rise, taking advantage of the still emerging talents.