Technology, driven by insurtechs, will help restore trust in the insurance industry and improve customer experience.

“If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today,” suggests Dan Ariely of the Center for Advanced Hindsight.

Ouch. Centuries ago, the insurance industry began with cooperation, trust, and help in times of need, but somewhere along the way, customers became wary of companies avoiding claims payouts and insurers became wary of customers committing fraud. Too often, insurance is seen as a necessary evil full of paperwork, payments, more paperwork, and more payments, without certainty claims will be paid.

The current relationship between insurers and customers is shaky, but a new generation of startups is hoping to turn that around. They’re leveraging digital technology to streamline efficiency, improve customer experience, and ultimately restore this lost trust.

“If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today.” – Dan Ariely, Center for Advanced Hindsight

Insurtech is Big, Broad, and Growing

We were just in Las Vegas where InsureTech Connect wrapped up its biggest event ever – doubling in size compared to last year. Aluance is now headed to the inaugural InsurTech North conference in Gatineau, Quebec.

Running back-to-back with the National Insurance Conference of Canada, the forum promises to bring incumbents, entrepreneurs, venture capitalists, incubators, regulators and advisors together to talk about innovation, opportunity and learning focused on the Life & Health and Property & Casualty sectors.

Insurtech innovation is happening around the world, from Europe and North America to emerging markets like Africa and Asia, across personal and commercial lines, health insurance and new products like cyber insurance. It’s leveraging connected devices to gather data, using big data analytics to assess risk, training machine learning models to automate claims processing, and reimagining an insurance ecosystem built on blockchain technology.

No aspect of insurance is untouched by this digital revolution.

Improving Customer Experience

Because of internet giants like Amazon and Google, customers expect to get what they want right away. With Amazon expressing an interest in the insurance industry, the threat of major disruption is real: a GlobalData survey discovered 18 percent of consumers would be willing to buy home or car insurance from Amazon.

“Right now, total loss claims handling is an awkward phone call-led process, expensive for the insurer to sustain and frustrating for the insured. Documents are shared by post, and the process leads to drawn-out negotiation on settlements, claims leakage and dissatisfied customers. It also finishes with a cheque, leaving the policyholder to deal with replacing the car by themselves,” says Sabine VanderLinden of Startupbootcamp.

In fact, about half of auto insurance customers who have had a total loss immediately switch insurers because of this poor experience. One way to improve customer experience is by speeding up claims, which also improves efficiency within the organization.

“Companies are looking to reduce costs by allowing customers to self-serve and use digital tools to inspect property without having to send out an adjuster,” says Kirsten Marr of Valen Analytics. This data-driven company uses advanced analytics to assist pricing and risk selection and to reduce claims fraud.

Omni:US is helping the paper-heavy insurance industry digitize their documents, improving efficiency along the way. According to founder Sofie Quidenus, “We see customers improving their claims turn around time by 80% and all of that at 75% of the original costs . . . manual interventions can be reduced to a minimum, due to the supervised machine learning approach.”

Companies like Next Insurance are improving other aspects of customer experience, not only streamlining onboarding but also creating products tailored to small business owners’ needs. “Insurance is supposed to be something inherently good. When you take that perspective as your starting point, you can ask basic questions like; why does it take so long to sign up? Why are policies so lacking the very basics you’d expect for a given industry? Why aren’t they tailored to specific industries in any real way? Once you begin with those questions, you can channel real technological innovation to create a significantly faster, cheaper and ultimately better process. This isn’t about incremental improvement, but a massive leap forward in what business owners can expect from insurance,” says CEO Guy Goldstein.

Similarly, Hamilton Group’s Attune is using available data to streamline how small businesses sign up for insurance coverage. “It asks customers a minimal number of questions but supplements these with public information that can be found to arrive at the best underwriting decision possible. That is such a great example of the power of data and technology in the risk space,” says CEO Pina Albo.

“Blockchain technology has the potential to transform the whole insurance business processes.” – Koichi Narasaki, Chief Digital Officer, Sompo Holdings

Restoring Trust in Insurance

American startup Lemonade and South Africa’s Naked Insurance are regaining customer trust by avoiding the traditional insurance company model. As Lemonade Co-founder and CEO Daniel Schreiber explains, “Insurance companies make money by disappointing their consumers. It’s difficult to think of another sector where that’s true. But if they delighted all of their consumers, they’d go out of business, because the way insurance providers make money is by denying your claim.”

Instead, both Lemonade and Naked Insurance take a set fee from premiums to cover expenses. Any money left in the claims pool at the end of the year goes to a charity of the customer’s choice. Because insurers make the same amount of money either way, there is no incentive for them to deny a claim. On the flipside, customers may be less inclined to submit a fraudulent claim when they are taking money from charity.

Another technical innovation set to restore trust in the insurance industry is blockchain. Some see blockchain as overhyped, but as Koichi Narasaki, Chief Digital Officer at Sompo Holdings, maintains, “Blockchain technology has the potential to transform the whole insurance business processes.”

Buzzvault, for example, uses blockchain to store information about a customer’s possessions and provides the option to insure important items. This keeps information both private and secure, creating an immutable record of the insured possessions.

“The future of our industry, and of commerce, belongs to those who innovate.” – Tony Kuczinski, CEO, Munich Reinsurance America

Insurtech is Leaving Slow-Adopters Behind

“As smart objects, smart contracts, and blockchain technology take hold over the coming five to ten years, we could see things like claims submissions, diagnosis, reporting, and service provider coordination become fully automated. This would result in speedier processing, payments, and recovery, not to mention increased transparency and customer satisfaction,” suggests Nick Bilodeau, Head of Insurance Marketing at American Express Canada.

Insurers like China’s Ping An are combining their own in-house technologies and expertise with investments in startups to drive growth. Meanwhile, other insurers are simply dabbling in chatbots for small changes in user experience.

“In just three years we have seen three clear market shifts from customer engagement and apps to core system innovation, from personal lines to other insurance lines from pure insurtechs to beyond,” observes Sabine VanderLinden, CEO at Startupbootcamp. “While we knew these collaborative connections were clearly on their way, we did not realise how fast they would become embedded within the very fabric of fast moving ventures.”

“Ultimately, our industry has two choices: We can put our heads in the sand, which I believe will lead to our demise; or we can jump into the fray and leverage the transformations around us to create new products that meet customers’ changing needs and address more complex risks while tackling fundamental changes to insurance pricing and operating models . . . the future of our industry, and of commerce, belongs to those who innovate,” maintains Tony Kuczinski, CEO at Munich Reinsurance America.