Last week I had the privilege to attend the Australian Insurance Summit 2016 hosted by RFI and AB+F at Pier One, Sydney.
While one could have easily been distracted by the harbour views and Luna Park backdrop, there was no clowning around at this event. The topics were relevant and timely, only days after the ASIC examination and the Financial Services Council’s (FSC’s) Life Insurance Code of Conduct.
Chaired by Andrew Stabback, CEO of AB+F, the day was packed with solid presenters and industry expert panels who explored the changing world of insurance. With a theme of “moments of truth,” the audience was taken on a journey of self-discovery and explored different perspectives on how to participate in re-shaping the industry and leading it into a new era.
John Throwbridge kick-started the event by going back in time to 1998 and 2011, when floods and their definitions became a moment of truth for the industry. Community needs were not met, and something had to be done. In addition to uncovering the need to articulate clearer definitions and redefine policies and covers, it also highlighted the importance of communication and collaboration with local governments.
While technology has been bringing tremendous benefits to the industry, John also pointed out that it can be an issue. The Internet of Things (IoT), big data and analytics all represent a two-edge sword. Balancing the benefits of more customer intimacy, preventive and predictive capabilities with risk selection, affordability and even creepiness is challenging and testing the social licence.
Jim Minto, from ASFA, reminded the audience that “we are here to pay all legitimate claims,” and to earn the trust of the community, the industry needs to take a strong stance against players who endeavour to avoid fulfiling their roles.
Unlike banking, the insurance sector has limited touchpoints with its customer base. Buying insurance isn’t exciting, and we were reminded that “insurance is sold, not bought.” The industry has been plagued with criticism from the community and has been providing plenty of controversial content to the media. The extensive use of intermediaries, along with that low-perceived value, are the perfect elements that are setting up the industry for disruption.
However, all is not gloom and doom. As Brian Wallace, Global CTO – Insurance at CSC explained, the industry and technology vendors are mobilising and changing, but the secret is not so much the ideas; it’s more about the execution. There is no shortage of technology that can open the doors to a better customer experience with persona-based UX, through personalised products and services, improved efficiencies and increased efficiencies. As much as 60% of what’s spent on innovation is actually spent on insurance. Yet, despite all of the innovations, the industry seems to be lagging.
However, with the use of technology, there also are vast opportunities to broaden insurance access to the wider community.
Machine-learning, persona-based user experiences and leveraging big data from IoT and devices can not only allow insurers to provide products that are unique to the individual, timely, relevant and available when needed, they also provide a means to prevent events from happening. For example, technologies in cars that monitor the vehicle and can predict when certain parts need replacing. Analytics not only provide valuable intelligence about consumer needs, they also identify fraudulent claims – the latter having a significant impact on premiums.
We now know of a number of insurers that use behaviour and usage data captured by wearable devices to offer competitive premiums based on that intimate knowledge of the customer. However, we equally run the risk of losing that “pool” of funds for the “less perfect” amongst us who also might end up with premiums outside of our affordability bracket. So far, the industry has encouraged consumers to opt-in to those schemes by waving incentives. But at what point do incentives for some become a premium loading for others?
Overall, despite the benefits of technology, there is no possibility of removing the human face from the equation; people still rather deal with people.
The more complex issue of trust, or current lack of, was also a recurring discussion point. Trust has been eroded if not lost in some cases. The ASIC report is about trust, but there is also a disconnect between the levels of discord and actual actions despite the code being released, as pointed out by Scott Ferguson from PwC.
New, agile start-ups are entering the sector with innovative products and services that focus on the customer experience. They leverage technology to the fullest and do not carry the burden of legacies. We were introduced to start-ups such as on-demand insurance provider, Trov. One thing they all seem to have in common is simplification – simple products, simple PDS, simple processes, easy to buy from, easy to lodge a claim. The focus on the customer experience and simplification is very evident. At a time of low levels of confidence, consumers will find these alternatives attractive.
A number of industry players are looking at those start-ups no longer as a threat, but as possible partners. Sydney’s Stone and Chalk is gaining momentum and providing a good platform to facilitate that process.
The industry is recognising that to win back the trust of the community, they need to simplify their products, services, processes and communications. Leveraging big data, analytics, etc. will help in guiding agents and engaging consumers in tailoring the best-fitting products mix.
Insurers want to embrace customer centricity and earn back our trust. While the journey ahead is most likely to be bumpy, there is a clear willingness to leverage and partner with technology vendors, bring changes and reclaim their “social license.”