So you thought Amazon would disrupt insurance?
The current Covid-19 crisis is forcing the insurance industry to adapt like never before, and the lessons learnt now must be applied far into the future. After all, insurance is just another channel in the global digital ecommerce ecosystem, says Quotall CEO Simon Ball
PREFACE NOTE: This is quite a forthright article, precipitated by my belief that getting my thoughts down is a healthy response to the crisis we find ourselves in. I want to get stuck into the debate and see our industry change for the better, but please don’t for one second think I am belittling the crisis that we are all facing. Stay safe all.
Hindsight is a wonderful thing.
A benchmark 2018 survey of thousands of global consumers by data analytics company Consumer Intelligence and The Digital Insurer made for depressing reading for the insurance industry, highlighting time and again that consumers perceive this sector as making very poor use of technology despite growing demand for buying and servicing policies online.
Key findings included the widespread belief from consumers that insurance providers are more interested in selling rather than engaging with their customers, and that there are poor digital services across the industry, with the result UK consumers have ranked the insurance industry almost last for innovation.
Why am I dredging this up now? Well, at the time the fear was that these failings were creating opportunities for new players to fulfil untapped needs. If the industry didn’t jump to it, others would – with retail behemoths like Amazon cited as one of the key challengers launching insurance as part and parcel of their ecommerce offering.
What changed between now and then?
And yet if we fast forward to the end of 2019, just before the awful Covid-19 pandemic took hold globally, we had seen very little, if any, real change. Lets face it, there has been no wholesale digital transformation from an insurance sector apparently nonplussed by the ‘threat’ that non-insurance companies like Amazon pose.
In fact, an – admittedly far smaller – market snapshot survey of MGAs and brokers undertaken by Quotall at the end of 2019 revealed, among other findings, that over 60% of market respondents do not provide their customers with any form of online self-service facilities e.g. quote and buy, or personal account.
One respondent to our survey even commented:
“It’s not part of our business model. We don’t want to be part of the aggregation of insurance, a broker only adds value when they help the client with their insurance purchase.”
To say we were astonished by this is an understatement. The assumption alone that digitising an insurance offering somehow contributes to the aggregation of insurance and detracts from the value offering is gobsmacking. It’s simply not true.
Surely now, more than at any point in the past, the insurance industry can appreciate clearly how much value having a digital, online offering is bringing to customers. This accessibility, efficiency and relevance is part of the value that customers are looking for – and it does not equate to aggregation, or detract in any way whatsoever from the specialist advice and risk management support that brokers and intermediaries can provide.
Forced to adapt
And here we find ourselves, facing down one of the biggest catastrophes in recent history, and a resulting crisis which is forcing the industry to adapt not only to remote working but also to digital selling and processing at a rate never seen before.
There is no avoiding the fact that this is a huge challenge for those insurance businesses which have dragged their heels when it comes to digital transformation, still relying on manual processes, legacy technology and with little or no online insurance offering.
What this crisis is demonstrating for all to see, is that as much as we place value on face to face interactions and support from brokers and intermediaries to get the right coverage in place, the actual insurance product is at its heart and now must proudly present itself through other channels in the global digital ecommerce ecosystem.
And those insurance platforms using the low-code, software-as-a-service, open API model slot into that global ecosystem far easier than any others. In contrast, those insurance businesses dominated by outdated closed-box legacy technology, high costs, complexity, inertia and opaqueness are looking far less agile.
A high margin sector
The insurance industry also continues to present a tantalising opportunity to other sectors where the high margins that participants enjoy are the stuff of legends. And this crisis is also demonstrating that it is not as complicated as people think to launch insurance propositions.
Deals such as leading office supplies provider Office Depot Europe launching an insurance offering are demonstrating the possibilities.
At the same time, we’re seeing in our discussions with prospective customers that it is becoming easier to answer questions about perceived barriers to entry such as regulatory compliance, as we explain how simple launching such an offering can really be.
And with just 5% of insurance currently distributed through non-insurance channels, there is an enormous 95% latent opportunity for savvy non-insurance brands to add a high margin, highly targeted and relevant insurance proposition to their customers.