Version française ici.
An example given by Alexandre Lebrun of Facebook at the Insurection event
brought up a subject that I wanted to discuss here. This is the need for insurers to start thinking about insurance products redefinition.
The example quoted is the following:
- Alexandre Lebrun consulted the patent plans for the first washing machines.
- It was then a question of proposing a technical tooling which made possible to reproduce by the machine the manual action carried out in the antique laundry
- It was only afterwards that the industry modified the plans to adapt the washing process to what the technology could do more efficiently (the inside rotation that we know nowadays).
Technological change or innovation brings new solutions.
As a first step, it is a question of using the new technology to make more efficient the actions carried out previously. In other words, it is about consuming fewer resources (time, money, people) to achieve the expected objectives. For example, technologies such as RPA open up horizons for automating recurring tasks. So it’s about doing the same thing as before, but doing it better.
Another level of analysis is open with the surge of new solutions coming to the market. Like the washing machine, it becomes necessary to reinvent the insurance business and the way to realize it to adapt to the technical possibilities.
Attention, it is often said in IT projects that we must be careful not to be too influenced by the tools to not constrain the framework of expression of business needs. But the current business teams are themselves often constrained by a historical framework of thought that is not always relevant. Business need is therefore as this watermelon, constrained in its mold.
The arrival of new tools, or new technologies must therefore be a pretext for an opening of borders, the extension of the horizon of possibilities.
Focus on the impact on supply: towards an insurance products redefinition
The assumption expressed above may have impacts in many aspects across the entire insurance value chain or business processes. However, I want to treat it under the axis that seems to me the most striking: the products!
A Standardized Offer Policy
Insurance has always been very product-oriented: a car product, a home product, a health product, an additional health supplement, a borrower insurance, etc.
In each of these products, the offer has become standardized, sometimes subject to regulations, sometimes under the influence of the market which is stabilizing and becoming standardized.
So we see products appear, all very close in terms of covers and exclusions, the comparison is not easy. Although initiatives here and there exist to simplify the terms and conditions, we still see exclusions against the fission of the atomic nucleus or this kind of thing (in French sorry, but the same examples may exist in english):
It is not useful to say who are the insurers concerned, everyone, in his own terms & conditions, can find this kind of fomulation.
First impact of innovation
As we have seen above, innovation aims first and foremost to improve the current way of doing things.
The companies then call on insurtechs considered as “enablers”. These are intended to enable better management by reducing irritants, streamlining processes or improving operations.
Take the example of auto products, and claims management. All insurers have long sought to improve their process.
In that objective, they were able to deploy:
- Process Improvement
- Implementation of dedicated management tools with complete workflows
- Deployment of solutions for teleexpertise
- Opening of selfcare services
At this stage, it is not a question of modifying the products, but of adapting the context that goes around!
2 nd impact of innovation
Where the exercise goes further is that innovation imposes a new way of thinking.
On the claims management, to go further, it was necessary to automate the settlement of claims.
The first option was to speed up all operations, but that was not enough. For some time now, automatic payment solutions have appeared because of modified products. I am thinking here of parametric insurance, for example:
- Weather insurance: if it rains more than a certain number of mm of water over a certain period of time ( as in this SwissRe contract in HongKong ), the conditions are met for an automatic claims settlement.
- Cancellation Insurance / Flight Delay: Several solutions have recently been deployed. If a cancellation is announced, it is possible to adjust the loss automatically.
This involves two new elements:
- A data feed, which is not structured today: Meteo France does not yet allow a systematic provision of forecast information or weather observations, companies or airports do not publish all the time via interfaces / API flight data.
- The structuring conditions of the products must be adapted to these new rules.
Products as they exist today leave too much room for interpretation and therefore require human intermediation to be treated. Who says human, says subjectivity. When we add terms & conditions and very numerous exclusions, we get a lassitude of the customers and the famous phrase: “the insurers are all thieves! “. At this level, there is no question of a lack of security, just an offer that does not voluntarily cover the complexity of the needs of insured, to achieve controlled price levels, on the one hand and profitability, on the other hand.
Policies to cover needs
Thus, three progressive consequences are to be expected from the innovation on the offers of the insurers.
- A simplification of the products,
- An objectification of the products,
- A coverage of needs, rather than standardized products.
Gradually, the general conditions of 30 to 60 pages should tend to disappear. The goal is not only to express the same thing more clearly ( as we saw in Cardif ), but above all to remove the rules that pollute the customer experience. So it’s not so much the writing that has to be simple, but the product. Thus, there should be no question of looking for dressings in technology , but rather make confidence in the insured by a better understanding of what he is obliged to make sure!
Once the simplification is in place, it is a question of objectifying! It must then make the contract dependent on objective rules, supported by recognized third parties or formal findings! At this stage, it will be necessary to consider that a home insurance is activable as soon as a water damage has taken place, and this, whatever the reasons which triggered it (check therefore in your contracts if the overflows are covered ). A borrower insurance will be acquired, as soon as the incapacity is noted, without playing on the terms (check if your contract covers you in case of incapacity to realize “any profession” or “your profession”, just a term which changes a lot things).
In short, it will obviously cost more to cover, but the price will be offset by customer satisfaction and the reduction of churn on the one hand, and the reduction of management costs on the other hand. Moreover, technology now allows the application of anti-fraud controls a posteriori and thus remove doubts on that side.
A last level of maturity appears, via the two previous points, as well as by the new uses that appear on the market. Thus, when you are insured by car, you are insured for you as the driver of your vehicle. What about collaborative uses (you rent your vehicle on Drivy or rent another vehicle).
These needs are now covered by other insurance products. The insurance of tomorrow will surely have to cover “mobility”, and will include all your travel operations. This can be by driving your vehicle or rental vehicle, driving a bike or scooter self-service or by taking the train or plane, etc.
Home insurance will cover tomorrow the need for housing. Thus, there will be both a minimum insurance when you do not occupy places, and full insurance for where you are at the time you are there. With this in mind, Wilov’s proposal for auto insurance is interesting: you are insured all the time and only pay when you drive.
And you, what do you think of this necessary insurance products redefinition ?
PS: For atypical vegetable gardeners, molds for fruits can be found on the CoolGadget website !