The future of insurance industry growth lies in collaboration
Insurance is evolving at an extraordinary rate. Gone are the days of maintaining the status quo while speculating what the future of the industry may or may not look like. In the post-Covid market, proactive innovation and flexibility in line with constantly evolving consumer needs are paramount to success and should remain top-of-mind for industry leaders serious about change.
There are three future-gazing motor insurance insights to consider. The common topic and golden thread linking these together is collaboration. Without it, the industry is doomed to stagnate.
InsurTech is not a threat
The adoption of industry-leading technology is fundamental to future success, as has been evident with the rapid rise of InsurTech over the past year. This shift should not be seen as a threat to the traditional annual motor insurance model. Instead, it should be seen as an opportunity for collaboration to drive meaningful change in line with rapidly evolving consumer demands.
We know that various forms of lockdowns prompted consumers to reconsider whether annual insurance was still right for them, and they increasingly began to explore more flexible options. This overnight shift in consumer behaviour meant that the large annual insurers were encumbered by legacy systems that did not feature the flexibility or agility to respond accordingly.
InsurTech companies, which provide fully digital usage-based insurance (UBI) products such as temporary car insurance, were able to swiftly adapt to market changes and meet new consumer demand instantly. Large insurers generally lack the agility to respond swiftly according to unpredictable market trends, and this is where smaller InsurTech businesses can prove to be invaluable partners, as they are at the heart of the digital UBI product revolution.
They have the proprietary technology and skillset to create bespoke digital products for large insurers, thereby enabling them to keep up with the industry disruptors through collaboration rather than direct competition – all while satisfying ever-evolving customer demand at a competitive cost. This ultimately means that UBI products should be seen as a complementary add-on, rather than an outright replacement to the existing annual model, which still has an important role to play.
Of course, it’s a two-way street, and InsurTechs can also benefit substantially from collaborating with large insurers. By partnering with a widened portfolio of well-established underwriting partners, InsurTechs are able to expand their coverage options and acceptance criteria while ensuring they offer their customers a comprehensive choice of the most competitively priced policies in the market.
Data enrichment will optimise pricing
Greater collaboration with data enrichment service providers is another fundamental aspect of future success. As technology becomes more sophisticated, so do fraudsters. If insurers are not adequately prepared to tackle fraud with the latest real-time data available to them, they run the risk of implementing inefficient pricing models that negatively impact honest customers.
There are a number of ways to overcome fraud through data enrichment, such as accurately ascertaining the link between a bad credit risk and the likelihood to claim or identifying the risk of payment fraud based on credit data. This is especially important for short-term insurers as payment could potentially be rejected after cover has expired.
Another increasingly important aspect for all motor insurers is to use the most accurate data to legitimatise the validity of a customer’s ability to drive and qualify for any restrictions on driving offences. It also serves to dramatically reduce unnecessarily long and complicated question sets for the customer, thereby improving the overall user journey and customer experience.
Expanding partnerships offer greater value
Collaboration within the insurance space is paramount to future success, but the industry should be careful not to insulate itself from new opportunities that reach further and add greater value to the end-user. For example, an existing motor policy offering can be enhanced by partnering with a recovery service provider to add breakdown cover as an option for additional peace of mind.
Another option is for InsurTechs to partner with automotive retailers to offer temporary driveaway insurance policies as part of the purchase experience. This dramatically simplifies the process of how insurance is purchased and consumed as dealerships can offer customers a fixed-price insurance solution that is more transparent and user-friendly, thereby creating a more positive experience of getting a newly purchased car insured.
These insights only scratch the surface of what is potentially achievable through collaboration. One thing is for certain: the opportunities are endless, and so too are the future prospects for insurance.
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