How to distribute insurances in this digital decade
The beginning of 2020 is a good moment to reflect on the future of the insurance sector: where will we be ten years from now? In a sequel of three blogs, we’ll talk about distribution, underwriting and claims. This first episode is about how insurers will interact with their customers a decade from now.
From omni-channel to opti-channel
The digital revolution since many years has already brought many changes, but not all predictions came through, not everything changed. Although the end of brokers had been announced several decades ago, they are still very much alive and kicking.
Old insurance companies have tried to sell direct insurance and new InsurTech-startups have launched several new business models. But the success of both is limited. The Belgian customer still likes the personal contact with his broker or agent, for information and advice.
This doesn’t mean every step has to go via the broker. Much can be done directly, with digital means. A lot of the administration doesn’t require the client to come to the office of the insurance broker, it’s much easier and faster to use a computer.
Because it’s not ‘this or that’, but ‘this and that’, most insurers in recent years switched from multi-distribution to omni-channel. All sorts of customers can use all sorts of distribution channels to get all sorts of insurance products. This is not necessary and not efficient.
Therefore, companies are searching for the opti-channel-approach: which channels are the best in the different stages of the customer journey? When is physical contact with a broker or agent preferable? Which digital tools are best suited for payments, for providing different types of information, …
The opti-channel distribution model is a symbiosis of the old and new possibilities. Brokers, agents and insurers are assisted by new technologies and new communication channels to offer the client the best customer journey. For the different steps (offer, underwriting, claims, ..) different options are available (pc, mobile, phone, face-to-face).
Insurers, brokers and Insurtech will all have to look for the ways that are most appreciated by clients. How can you make it as simple and reliable as possible? The customer will go there where he gets a personalized service to make the right choices, and with as little administrative burden as possible. The companies that give the best guidance in an ever more complex world will be the winners.
New products need new distribution models
In today’s digital world, not only the distribution channels change, but also the insurance products. And often a different kind of product needs a different kind of distribution.
New technologies generate new risks, and these new risks tend to be more complex. Today, insurances against the risks with cybersecurity are a hot topic. Just as risks related to the sharing economy. What if you use the power of the solar panels from your neighbor to load your electrical car, but something goes wrong? Or what about accidents with self-driving cars: who’s responsible? What if a robot fails and a production company is paralyzed?
‘Use-based insurance products’ (UBI) know a rapid growth and development. The insurers adapt quickly to the behavior of individual clients. There’s no longer a fixed product, with a contract that is automatically renewed every year. Instead, the offering is adapted to the changing behavior of the client.
Other new product types with new distribution models are instant insurance and micro-coverage. Instant insurance is for example an insurance for your luggage just before you take off for a trip. Or the insurance for your expensive photo camera during that trip. Micro-coverage is the insurance of individual, small risks, for example insurance against a flight delay or a failing phone battery. Customers can pick and choose what they deem important, what they want to insure. Every client has his own basket of insurance products.
Very small, very fast, … some insurance products require very little direct participation from the insurer or the broker. Humans take care of the systems, but the daily operations will be digital. Based on data, on artificial intelligence, on blockchain technology, …
A blog article that predicts the coming years has to mention to role of (big) data. Insurers will adapt their distribution channels and their products to the information they get from data collection. What does the consumer want, how much is he prepared to pay, what are the risks today, … With modern technology a personalized service/offer can be combined with a pooling of risk. Of course this has to be conceived in a way that is compatible with the privacy concerns and regulations.
Data are the instrument that will make providers ‘hyper-relevant’: making sure the provider proposes the right product via the right channel to each potential client, in a way that makes the life of that client as easy and secure as possible.