Innovation and technology have taken hold of the industry and brokers and insurers are urged to keep up as new devices and apps are changing the way customers buy insurance
The modern market
With the connected home, telematics, smartphones and big data set to shake up insurance, brokers will have to keep up to date with new technology and watch out for disruptors to the market
InsurTech, digital innovation and finding new ways of using technology to sell insurance, is changing the industry and experts predict the marketplace will look very different five years from now.
While insurance specialists say the increasing use of customer data will enable brokers and providers to become more efficient in the way that they do business, they also warn of possible disruptors coming in from outside of the sector.
As consumer behaviour changes and customers get used to purchasing things in a simple and quick way, Kevin Roberts, broker and affinity director at Legal & General, advises that the insurance industry has to focus on simplifying the buying process.
“We are working hard on dramatically reducing the amount of questions that we need to ask,” he says. “We can source some of the data from elsewhere so we should work together to make it easier for people to buy insurance through brokers.”
According to Andy Thornley, corporate affairs manager at the British Insurance Brokers’ Association, the trade body is not worried that brokers could be cut out of the market because of technology.
“There’s nothing in history that suggests that brokers will be any different with any new technologies that come out because there’s always a way that different businesses can adapt,” he says.
However, Thornley adds that brokers should “keep an eye on technology to stay ahead of the curve and to ensure that they, when disruptive technology or disruptors are coming into the insurance market, are able to react quickly”.
In addition, using data to answer questions about customers can give the insurance industry more control when it comes to the issue of application fraud, according to Mark Bates, chief executive officer at technology provider RDT.
He adds: “Why ask the question and give people the opportunity to start changing figures and seeing what that does to the quote?”
Some areas of the market have come further than others when it comes to developing devices using technology. In personal lines telematics devices have been used for some years. Many will be familiar with Autoline’s use of it in order to collect data on young drivers with the aim of reducing their premium. Or Aviva’s ‘black box’ which it first launched in 2005 – the insurer has now graduated to using an app to trace telemetric data as part of its Aviva Drive initiative.
And in the connected home, technology is also becoming available. The Hive product can be used to control heating in homes and also alert residents if there is a break in. It was created by the team led by Andrew Brem at British Gas. He is now chief digital officer at Aviva.
This extra security could be something brokers could use to engage with their customers and create opportunities.
However, Roberts notes that the connected home could have a smaller impact on the market than telematics.
“It probably won’t be massive because, ultimately, the connected home can’t prevent you from being affected by a storm or a flood. There are some benefits but I’m not sure that they’ll be as ground-breaking as telematics has been in motor,” he explains.
Roberts adds that extra data needs to be collected and analysed before the connected home technology can be deployed more widely from an insurance perspective.
“You’ll see early potential options around people giving small discounts for early adoption of that technology, but that is potentially a leap of faith,” he says.
Roberts asks: “How many claims will it solve or prevent and how will it limit the damage? We just don’t know yet and we need to work with these emerging technologies to make sure we can effectively utilise them in pricing so that customers get the benefit of that.”
In addition, Steve Reid, business strategy director at software firm Xuber, highlights that InsurTech has not featured as much in the commercial lines space.
“Personal lines is where it’s really started, but I can see, as with everything, those sorts of developments in one part of the market – in personal lines or in the banking sector – start to filter their way through to the more complex marketplaces over time.”
Meanwhile, James York, broker and founder of Worry + Peace, predicts that there are opportunities for innovation in the SME sector going forward. “Personal lines needs to be fixed urgently to be more consumer-centric in its outlook,” he says. “But I think SME will definitely be a very lucrative one for various product types and various operating models.”
But while technology has the potential to make certain processes easier, experts warn that the sector needs to keep up as innovative start-up companies from outside of the industry pose a potential threat to traditional brokers and insurers.
Bates notes there will be some new entrants to the market, as “people who have large amounts of data are well-positioned to sell insurance”.
“People who have the sort of data that tracks the things you’re interested in and what you’re doing, those are the guys that once they start to tie that back to insurance pricing will have a real advantage,” he says. “I’m not sure traditional insurers are necessarily going to be the only ones who are playing in that space.”
In addition, David Hill, founder and managing director of Advent Solutions Management, states that there is a revolutionary potential as technology will make the “current method of distributing insurance obsolete”.
“Insurance buyers of tomorrow are using things like smartphones to run their daily routines and if insurance providers of tomorrow don’t sell their products using that technology then they won’t have those customers,” he says.
“There will be a lot of new entrants in the market. The young and the brave of today will have grown up in five years’ time and they will find different ways of distributing insurance policies to consumers.”
However, according to York there are no signs of what he calls “true disruption” to the sector yet, as there are currently no emerging platforms which could shake up the distribution models insurers and brokers are following.
“A lot of the disruption I see is very targeted, like laser beam disruption rather than the earthquake disruption that we’ve seen in other sectors,” he notes.
In addition, when asked about the future of the broker, experts were unanimous in that they will still have a role to play in the insurance industry. However, intermediaries will need to reinvent themselves and adapt to the changing world.
“Some brokers are going to be pushed out of the market but then again that has been happening for quite a long time already with the consolidation trends that we’ve seen,” York states.
Continuing: “Maybe this technology boom is an opportunity for the broker to be a bit resurgent and consider themselves sort of an innovating platform for the future for customers and insurers to meet.”
Hill adds: “It’s the broker who is intelligent enough to understand that times are changing in the purchase of insurance that will survive.”
He concludes: “If all a broker is doing is going around to an underwriter once a year and asking how much a policy costs they’re going to die.”
Kevin Roberts, broker and affinity director at Legal & General, says there could be a downside to using customer data as there is a danger of developing a data underclass when technology becomes more sophisticated.
He warns that there might be a need for “more [solutions like] Flood Re in the future because we move away from the basic premise of insurance – the premiums of the many funding the unfortunate losses of the few”.
Roberts says: “One of the dangers of technology could be that we get that sophisticated that some people become uninsurable or can’t afford the insurance because of their lifestyle or characteristics.”
Insurance on the go
Brokers are well placed to benefit from mobile phone apps, but there are pitfalls for anyone looking into app development
Most people carry their mobile phones with them at all times and insurance specialists say mobile phone apps are one of the best channels available to communicate with customers.
Some experts credit brokers with being more innovative than insurers and praise their ability to move fast in this field, but with new technology come new challenges. Brokers have been warned not to waste time creating apps that no one will use.
“Very clearly there are enough trends that show that mobile apps are becoming an increasingly important and significant way for companies to engage with their customers,” says Vivek Banga, chief digital officer at Arthur J Gallagher.
“However people are equally ruthless when it comes to deleting apps. If the experience is not intuitive enough nobody wants to read an instruction manual on how to operate an app.”
In October 2015 Gallagher launched TravelCert, an app aimed at making group travel easier to administer for large organisations such as universities.
According to Banga about 2,000 trips were logged in the app in its first three months. He points to the danger of comparing the numbers to some of the “mega-apps” that customers use, adding that it is important to keep in mind what goals the app is expected to meet.
James Sharp, director at Ten Insurance, does not see a bright future for broker apps.
He says: “The idea of a specialist broker app being deployed in such a way as to replace or to enhance the experience of your average commercial client dealing with his/her broker when said broker would be acting in a broking capacity is, frankly, absurd.”
Sharp further notes that a typical client only deals with its broker at time of renewal or if there is a change to report.
“Assuming the broker wants to become re-acquainted with the client on at least a yearly basis, then a renewal app is probably a non-starter,” he adds.
“So, unfortunately, a fairly negative outlook for broker apps. A universal claims app might be useful on the other hand.”
The difficulty and cost of creating an app depend largely on what the app will be used for. Bob Skerret, managing director of the insurance division at telematics technology business Trakglobal and broker Carrot Insurance, explains that there are a lot of specific skills needed to create an app.
“Just to get it built on Apple and Android you need a developer in both of those languages. Then you’ve got to maintain it and update it in both operating systems quite regularly. It’s quite a big deal for your average broker to have all those skills in house,” he adds.
“If I was a broker I wouldn’t build this skill in house I’d partner with people who have those skills.”
Meanwhile, Banga states that there are plenty of “good, modern technology companies who have been born in the digital world” to team up with and that the key challenge when building an app is about having a clearly defined goal.
“Even before the actual development starts we should be able to say ‘this is what we are expecting a user to be able to accomplish within our app, these are the goals we should be able to realise in our app, and the reason why we are building this app is because these goals are important to our customer’,” Banga notes.
Paul Stacy, founder and research and development director at Wunelli, adds that creating a good user interface is another challenge.
“The apps that we are building now are going to look more like games than they look like an insurance utility type thing,” he says.
“Gamification is very important. Building in a sense of achievement and people getting rewarded, getting them to interact with it – building a good user interface is quite tricky.”
In addition to apps created by brokers, some insurers have developed apps designed to help the broker market do business. One example is the Fast Trade app from Aviva, which was launched in January 2013.
David Hockey, head of small business and digital trading at the insurer, says the app is particularly useful when brokers are out of the office or visiting a client.
“The app means we can provide brokers with full cycle functionality from quote to renewal, instant access to documentation and a fast-tracked referral process,” he states. “It is absolutely designed to be an enabling tool for brokers.”
Another initiative where Aviva has been involved is the Meeting Recorder app, developed by consultancy firm RWA and funded by the insurer.
Tom Wood, director at RWA Business Consultancy, explains that the app allows brokers to create a record of when they have been to see a client, using their GPS. They can also add notes on what has been said in the meeting.
“So if there is a claim they can say they have evidence that they went to see the client on that day and show a copy of the notes they made,” he says, adding that a copy of the record can also be sent to the client.
When asked about potential pitfalls, experts reiterated the point that there has to be a demand in the market for an app to be successful.
“It is not enough to simply create an app, the key is to make sure it continues to evolve and be current,” Hockey adds.
Banga points to the importance of listening to customer feedback and coming up with new versions of the app, adding that while it is better to release an app sooner rather than later there is one area where shortcuts are prohibited – regulation.
“We are in a regulated industry and an app also has to meet all the standards that are required of us when it comes to regulatory principles and data protection,” he says.
While some insurance companies have developed apps which are aimed directly at consumers, market experts do not see them as a way of cutting brokers out of the equation.
The reason given is that customers are unlikely to download an app before they buy an insurance policy, which means that the stage where the buyer would ask for a broker’s advice is not impacted.
“Once the relationship has been established and you know what coverage the customer has got then you can provide some relevant content for them via a mobile app,” says Banga.
He concludes: “That is an area where insurers and brokers can actually work quite closely together.”
According to experts most of the most successful apps in the insurance market come from brokers.
“They tend to bring innovation to the market faster because they don’t have the corporate structure or a big brand to deal with,” explains Paul Stacy, founder and research and development director at Wunelli.
He continues: “Brokers are very good at trying things and if it doesn’t work killing it and moving on. If it does work, ramping it up. They’re just much faster than insurers.”
Bob Skerret, MD of the insurance division at Trakglobal and Carrot Insurance, adds: “The environment now is better for smaller businesses and brokers than the insurer sector.
“It’s easier for them to compete effectively than large insurers and apps are relatively low cost to build if you build them well in the first place.”
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