It wasn’t long ago that the figurative tools of InsurTech were being sharpened against imperious legacy insurance. In contrast to plans however, effecting insurance change has been found to be significantly more nuanced an effort than that which was foretold to occur within the Roman Senate on the Ides of March. And, as with the limited effects of the Ides on the crowds in the Forum, InsurTech change to date has been primarily a focus within the inner sanctum of insurance that has remained transparent to its customers- and their perception of the industry.
As noted in my last column, InsurTech has proven its worth in theory, and in many ways in practice – developing innovative methods that allow more efficient operations, devising effective methods to underwrite, distribute, engage, sell, service and retain customers and staff. Very cool – but have the innovation efforts had an effect where they need to, customer satisfaction? And, are there indications that InsurTech-founded carriers are economically viable?
There are two primary lines of insurance business to consider regarding customers’ response to InsurTech’s effects:
- New business lines, ostensibly where new business methods are simply the only business methods the customers know. Innovation is simply part of the customers’ experience.
- Incumbent/legacy business that has in some part been changed in the service provided to the customers. This could be back office changes, underwriting, distribution, sales, claims, after-sale service, etc.
New business lines
There have been many entrants to multiple lines of insurance since the advent of the ‘InsurTech’ initiative, in essentially all major markets around the globe. There are carriers with explosive growth involving tens to hundreds of millions of customers such as Zhong An , a China market startup whose customers have voted their initial satisfaction with their overwhelming participation in the carrier’s ecosystem approach. Other markets have seen the advent of online auto (motor), renters’ and homeowners’ options, including owner usage-based auto provider Root Insurance , behavioral economics/charitable giveback player Lemonade, proactive homeowners carrier Hippo, and German health insurance ‘hybrid’ start up, DFV_AG (incumbent with a clever tech solution for claims). In each case the firms’ primary customers are in majority digital ‘natives’ whose expectations for performance are not colored by legacy operations’ processes. In great part these firms’ customer experiences comprise not much more than a few written premium/earned premium cycles. Considering that, traditional financial success has been a difficult measure (see assessment work by Adrian Jones and Matteo Carbone, e.g., mo-premium-losses-insurtech-start-ups-get-big ) and service satisfaction is in great part solely the success of getting customers to pay the premiums. Niche carriers such as Dinghy Insurance (cover for freelancers), or Pineapple (peer to peer personal effects cover) are endorsed by participants as being just the right unique item for the respective policyholders. Satisfaction by default.
Incumbent/Legacy Business
Global insurance companies have been present in some form for three hundred years (and certainly risk management has been a principle since the days of Hammurabi, and since things have changed a least a little since 1750 B.C.); it can be said that societal innovation carried risk management along for the ride and insurance customers have at least begrudgingly maintained satisfaction with the purpose of the industry during the ensuing 3750 years.
So what about innovation/InsurTech being the dramatic industry change since 2015-16? Have customers embraced and celebrated all the wondrous technical and process improvements that have burst forth from the slide decks of very smart InsurTech folks? It sure is hard to tell.
Not all markets and lines of business solicit and/or maintain customer service responses from their insurance customers, so customer satisfaction changes due to InsurTech advances are not much easier to gauge for incumbents as would be for new entrants. Certainly the P&C markets within the U.S. have more than one authority capturing customer service tendencies: J.D. Power is a recognized provider of service data, and Clearsurance (an InsurTech firm in its own right) is an online aggregater of customer service responses. But can survey tendencies be attributed to tech innovation?
A review of J.D.Power auto insurance customer survey data from 2016 and 2018 find the top players remain at or near the top, that the industry average satisfaction has increased a little, and that the 2018 customers voice approval of having multi-channel access to their policies/carriers. No overt celebration of tech advances but some tech mention is worth something. There has not been a wholesale abandonment of incumbent carriers within the US as the top-ten carriers’ market share in 2016 (71%) and 2018 (72%) has changed little (http://www.naic.org).
Continuing the discussion to Homeowners carriers, J.D. Power data for 2016 and 2018 find some customer tendencies being noted across the two year period, but no actionable changes that can be attributed in the majority to innovation/InsurTech.
As for customer satisfaction data for other global markets- it’s difficult to obtain comprehensive results for insurance lines across national borders, and unified markets such as in India and China do not yet have the tradition of longitudinal study of customer survey data. It can be suggested as those markets ‘homogenize’ with influx of firms that are outside the domestic current growth there may be cross-pollination of survey habits. And in terms of health insurance surveys, the mix of national health programs, private programs, national programs for select portions of populations, it’s an apples and pomegranates situation for customer sat information. As for life products, annuities, etc.- efforts to collect those tendencies mirror the efforts the industry has held for a while – a little underwhelming from the customers’ perspective.
After a lot of blah, blah, blah, it’s difficult to say that InsurTech is a concept that insurance customers embrace as a reason to buy insurance, change who they buy from, or give warm, fuzzy feelings about the product, any more than the change from cuneiform text to Roman/Greek to Arabic writing changed the industry. The overarching point- InsurTech has awakened initiatives that are blending many digital and tech methodologies with finance and insurance, e.g., API integration (thanks, Karl Heinz Passler) but not on a seismic, customer based level- yet. Give the industry a generation and the customers will force the issue by default acceptance of societal tendencies.
Until that wave of change occurs, insurance innovators can better effect change through sharpening skills in understanding what customers indicate they need, innovating from the needs of the figurative forum-first- and helping the firms that hold the bulk of the public’s business- the legacy players- avoid the need to be warned of an Ides of March initiative. InsurTechs might even find that in collaboration there are profits to be made.
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
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