The Future of Risk: A Customer-Centric View
The business model of risk as we know it is changing, driven by a number of immutable forces including the rise of the connected, empowered consumer, who amongst a number of other factors, is presenting challenges to the insurance industry where managing and minimizing risk is the core of their business model but these challenges can present potential opportunities for growth and differentiation.
The empowered consumer
Smartphones give you access to insights about anything, and services to help you do almost every task, are literally right at your fingertips. And it can all be personalized. I can order my pizza my way, tailor my vacation and get my work done without ever having to speak to a person if that’s what I choose. So is it any wonder that a consumer’s expectation for convenience, fairness, cost-effectiveness and transparency might start to influence their insurance experience too?
Rise of the Insurtechs
With the rise of the empowered, expectant consumer, there’s a gaggle of creatively minded, consumer-centric start-ups and insurtechs ready to respond. Policyholders can now be more demanding of a transparent, rewarding relationship with their insurer. But the question is, does this new age of the empowered policyholder put the insurer at a disadvantage when it comes to managing a profitable relationship?
The short answer is no. This new era of connectivity and personalization of relationships hands insurers opportunities like they’ve never had before to engage with policyholders.
The Smartphone Era
In our case at The Floow, we are convinced of the power of the smartphone in this dynamic. By using a smartphone app not only to monitor trips, you can also put a utility app into the hands of your policyholders with the opportunity to create value and relevance like never before.
The potential penetration of this engagement tool is incredibly high - in the US, Pew Research and Statista both put smartphone penetration in the adult population at 77%, with Pew estimating that 94% of 18-29 year olds own a smartphone. In younger demographics, the smartphone is now the primary device used for all search and web productivity, overtaking desktop by quite some distance.
March of the Bots
There’s also evidence that this younger demographic want self service and prefer to do most tasks on the smartphone without ever having to speak to a person. This is a major reason for the adoption of chatbot based technology in customer service businesses, including insurance. This is a colossal shift but one that offers considerable margin gains for insurers if they are able to adopt the technology in the right way to facilitate those ‘moments of truth’ during the policy lifecycle when policyholders need help most.
Price Me Happy
If the rise of the empowered consumer has created anything, it’s a degree of challenge to traditional business models that have ‘always been that way’ in favor of new ways of doing things that are inherently ‘fairer’ and more convenient to the consumer.
And it’s certainly true that the promise of fairness - of being priced for your behavior rather than your demographic profile - is a psychological benefit in an industry which is often accused of not being fair to the consumer.
So where could all this be going?
If you accept the thesis that the connected consumer’s life is centering around the smartphone and that it presents many benefits for safety, fairer pricing and brand engagement, the big question is where could all this be going for the insurer?
Setting aside the complex enabling business models and scoring standardization challenges for a second, I don’t think it’s unimaginable to contemplate a future where telematics could help to identify a unique driving ‘fingerprint’ for each policyholder - your own unique driving DNA. This would enable insurers to price with confidence, and drivers to consider their auto insurance policy as something that’s both fair and useful.
Whatever the future holds, the winners in this marketplace will be those who effectively embrace the valuable benefits of insurance and can at the same time knit together strategies for customer engagement and relevance. The Floow is excited to be working with our insurance partners to help to make that happen.
A longer version of this article first appeared in Driven Issue #1, The Floow’s US Business Updates Publication. You can read the full piece on Issuu.