If you work in insurance or are a technology entrepreneur looking for the next big thing, Insurance Tech opportunities should be on your mind. The process of buying and selling insurance is one of the most analogue consumer services remaining in existence. The daily grind in commercial and consumer insurance markets still relies on paper documents, a large workforce, and legacy systems.
However, the industry has been investing heavily in innovation. A research report by Celent estimates that insurance IT expenditure topped $175 billion in 2015. But perhaps it is the sheer size of the market that has made the process of business transformation difficult and slow. Insurance as a market in the United States alone is enormous: Premiums from 4 insurance sub-sectors (life, health, property, and casualty) totaled a whopping $1.1 trillion in 2012 (US Dept of the Treasury). That represented an impressive 7% of the US GDP. So as you can imagine, driving this economic engine requires a LOT of manpower. Insurers directly employ approximately 2.3 million people and there are an additional 2.3 million licensed insurance agents and brokers.
The result is a very slow, very costly system that lacks real-time data and insights. The opaqueness of the system means that many opportunities are being missed. And that means that opportunities abound for any innovative companies already within the system or for clever entrepreneurs eyeing the market. In our interviews with industry insiders, we’ve uncovered areas where innovation has progressed and areas that are open to be “won” by those that smartly re-think the process of how we insure against risk.
The Table Stakes
To meet the growing expectations and demands of the digital consumer, the most visible area of spending on innovation and technology has been directed towards mobile applications, enabling a better consumer experience.
Having a well-designed, full-featured app that allows customers to submit claims, track balances, and learn more about the benefits available through their plan should be considered table stakes for any insurer operating today — especially when a great share of your consumers are Millennials. Features that must be considered part of the core functionality include touch ID sign in, photo submission of receipts, real-time account balances, digital card, and direct deposit reimbursement.
Those that have not made the necessary changes to effectively sell into digital natives are losing business. One big example of that is life insurance. In 1960, 59% of US adults owned a life insurance policy. Today, that number has shrunk to 36%. And that is a huge difference.
Insurance Tech Opportunities
Despite the investments that have been made into driving the industry towards innovation, a large portion of current operations remains people and process heavy. Duplicate processes abound throughout most insurance sectors. Group enrollments, policy quotes, and incident reports still involve the slow and costly process of people scanning or manually entering enormous amounts of information.
The following is a list of 7 areas where the insurance tech opportunities are ripe to reduce costs, increase speed, and win more business.
#1 – Simplify Quote to Sale Process
When a company considers changing their employee benefits plan, it kicks off a process that involves significant paperwork for the employer, their insurance broker, and the 4-8 insurance carriers who usually respond with a quote for the opportunity.
The process starts with employees filling out census data (on paper), then the company provides current plan details, claims history, etc. Next, the brokers and advisors collect, scan, and courier documents to carriers. The insurance carrier then bears the internal cost to quote the sales opportunity, all the while struggling to offer great service and quick turnaround times to their brokers. It is a cumbersome and expensive process for all parties involved.
Digitizing this whole process would vastly improve customer service, greatly reduce the internal cost burden and enable companies to compete on a whole new level.
#2 – Increase Quote to Sales Ratio
After going through the process outlined above, many companies often opt to not change health plan providers even though they have received better, more cost-effective options from other carriers. Why? As they contemplate the workload in terms of paperwork and process change required to switch providers, many employers deem the effort simply not worth it — despite the financial and other benefits they might receive.
As a result, the ratio between quotes that carriers work on and the number that actually result in sales is quite low. Digitizing and streamlining this process from quoting to onboarding a new client holds the opportunity to not only save time and expenses, but also to dramatically improve the quote to sale ratio for carriers.
#3 – Sales Through Conversion Privileges
When an employee resigns or is laid off from their job, they are entitled to the option of continuing with their health insurance coverage moving forward. This means that the ex-employee can maintain uninterrupted medical coverage for themselves and their family. This is incredibly important for families that bear the high cost of recurring pharmaceutical needs like, for example, the daily costs to treat diabetes. If the now ex-employee has a hard time landing the next job or decides to go into business on their own and sign up for a family plan, they would have to provide medical evidence and would most certainly be declined.
Sharing information about the conversion privilege is the responsibility of the employer and there is some liability associated with them not doing this. Digitizing this process with proof points showing that the information was delivered would help automate the task and remove liability risks for the employer.
Combining increased awareness of the conversion privilege with a simple opt-in process should eliminate the missed sales opportunity and result in a high conversion rate for insurance carriers.
#4 – Cross-Selling for Insurance Carriers
While cross-selling of products and services is already being done, digital experiences on mobile devices offer a whole world of targeting opportunities for insurance carriers that could be better utilized. Individual travel insurance, house or rental insurance, and auto insurance are obvious areas that would benefit from the targeting options available when mobile, social, and data insights are integrated and analyzed.
#5 – Sourcing Best Prices for Insurable Services
Less paper means access to real time data and insights. The value to be mined from the data held by insurers and the opportunities that would arise if that was accessible in real time are enormous. One area of low hanging fruit is the ability to price shop insurable services. For example, the price per pill can vary by as much as 35% from one drugstore to the next. Dispensing fees also differ, as do rates for physiotherapy and other insurable products and services.
Pacific Blue Cross is one company that has caught onto this idea and launched Pharmacy Compass. Access to data like this can save plan members (as many people don’t receive 100% coverage) and insurance carriers a significant amount of money.
#6 – Streamlining Operations for Adjusters
It’s a no-brainer that the ability to submit an insurance claim as soon as an issue arises will speed up the claims process and provide customers with a vastly improved user experience. Leveraging mobile apps to do so will not only streamline the speed, but it will increase the accuracy and quality of data received by the insurer. Submitting auto claims by mobile app, for example, provides the added benefit of leveraging the device’s native functionality such as location, time, photos and video. With more robust data submitted at the scene of the incident, time and money is saved by reducing the need for adjusters to visit incident sites in person.
#7 – Emerging Opportunities
Insurance is an incredibly data rich industry. The fact that many parts of this industry are still being run on paper means that data opportunities are being missed particularly in the areas of risk management and real time insights.
As technology continues to change how we conduct our lives, it opens new risks thus new opportunities for agile insurance carriers. Those that are armed with the best processes, data, and data scientists will be the ones who gain a competitive advantage with new product lines. Insurance for cyber-attacks, drone deliveries, autonomous vehicles, among others, are opportunities on the near-term horizon. And, there are yet to be discovered opportunities in virtual and augmented reality.
Who Will Win?
While all insurers are aggressively pursuing business transformation initiatives, it will be interesting to see who gains the first mover advantage in some of these and other areas. With the amount of money at play in this industry and the resources being thrown at this endeavour, there will be significant change in the next few years.
Adding fuel to the fire is a flurry of entrepreneurial activity in this space. There is a surge in Insurtech startups hoping to gain their fortunes by being the ones to successfully transform the customer experience, streamline business processes, or mine the vast amounts of data for golden insights. According to Venture Scanner, as of January 2017 there were 1,087 Insurance Technology companies in 14 categories across 54 countries, with a total of $17B in funding.
While the winner remains to be seen, those competing might want to heed Erin Shipley’s advice on pursuing insurance tech opportunities – that “more than simply replicating existing human processes, think in terms of a 360-degree view of social media engagement, mobile app interaction, and even be mindful of geo-awareness from IoT sensors”. The keys to the future are clearly held by those whose innovation investments in the present will surely leave their competition in the past.