InsurTech; a consumer revolution waiting to happen02nd December 2016
It is now an accepted fact of life that the digital revolution is rebuilding our lives from the foundations up. The working patterns, lifestyles and behaviours of the Millennials share little in common with their grandparents’ generation. The impact of this revolution is being felt, in varying degrees, across most consumer markets.Look at the way we purchase music and video. In less than a generation, distribution has largely migrated from the high street to highly success digital platforms. As a result, customers pay less for music on i-tunes today than they did in the local branch of Woolworth's 20 years ago. Likewise, thanks to the rapid growth of Uber, taxi drivers are witnessing the same phenomenon with additional market competition, fuelled by digital platforms, exerting downward pressure on prices giving consumers a better deal.
Whilst we may be living in the midst of a digital revolution, the end destination thus far unknown, it seems that the retail insurance market has been slow to adapt. This is true even in comparison to other parts of the retail financial services market. Even on a very limited measure of market disturbance, such as the use of Apps, insurers have a less-than-impressive track record. So whereas 45% of people in the UK currently use a banking app, the figure is just 5% when you look at insurance products. The sector also ranks bottom when consumers were asked to consider the quality of its digital services.Just 4% of people in the UK think that insurers currently offer excellent online products.This compared with 33% who ranked digital retailers such as Amazon as being excellent. Even the banks, a number of whom have had high profile IT systems failures in recent years, were considered to be performing better with 10% of people rating the banks as have excellent digital offerings.
So when it comes to the insurance market, the wait for genuinely revolutionary change – the so-called Uber moment – which results in radically different business operating models with new services and products, goes on. This is clearly a missed opportunity for both insurers and their customers.
That isn’t to say that there is no innovation in the sector. Some insurers are already fully capable of providing online application processes, back up with streamlined claims and complaints procedures. It isn’t a case that the industry is just doing the same old stuff only more efficiently. We are also seeing the emergence of new on-demand insurance which allows people to access insurance only when they need it, rather than being tied into an annual contract. Insurers are also investing more capital in their innovation hubs to look at the consumer application of new technologies in the fields of Artificial Intelligence, driverless vehicles and wearable technology (to name but three examples).
But this approach has been more evolutionary rather than revolutionary and the benefits to consumer have largely failed to materialise so far. Take wearable technologies, already a fast growing consumer market, few insurers currently integrate this technology into their proposition. So while 5% of UK consumers said that their insurer already offers access to wearable tech devices, almost four times as many people said that they would like their insurer to do so. Overall, the wearable tech market looks set to double in 2017 but insurers appear to be taking a back seat in this market – even though it is increasingly considered to a central ‘add on’ among the future generations of potential insurance customers. Insurance is no longer simply about having a passive relationship between insurer and insured: you pay a premium in return for peace of mind. In future, big data will help drive a more engaged and proactive relationship which allows the insurer to develop new propositions which are an essential part in securing and enhancing people’s lifestyles, informing their lifestyle choices, helping to secure their wealth, but also their health and well-being. Commercially, there is a big prize for those insurers who act on this quickly.