How Insurance Companies are Becoming Customer-Centric Through Emerging Technology

Traditionally a laggard in the race towards digital transformation, insurance companies are cottoning on to the importance of using emerging technologies and UX design to make their offerings more customer-centric and less of a “necessary evil.”

“With radical changes in customer expectations and low tolerance for long, drawn-out processes, what becomes the turning point for an insurance business is the experience it consistently delivers,” Vikram Singh, a practice leader in insurance at NIIT Technologies, writes in the company blog.

Insurtech refers to the use of technology innovations designed to squeeze savings and efficiency for customers and insurers from the current insurance industry model. In smoothing the customer journey, insurers must make a complicated financial product grounded in actuarial science easy to sign up for, understand and use.

They must capture and sustain customer attention, gather critical customer data to calculate risk profiles and premiums, propose attractive and personalized insurance quotes, and make it easier for customers to file claims and receive payment.

Don’t be afraid to ask for more data

Insurers have unique access to rich datasets, given their prerogative to ask customers invasive questions like, “What are the walls of your home made of?” (for calculating fire safety ratings), “When was the last time you saw a doctor and why?” as well as wrangle details on their travel plans, net worth and dietary habits. While this data is normally siphoned by the insurance company to calculate risk, they can also use it to provide more personalized products and experiences for their customers.

However, before you ask for more data, you have to be transparent about what you’re using it for. Most insurance companies are hesitant to reveal why they ask certain questions because they don’t want to give away too much information about how their pricing is calculated, but the most advanced insurtech companies have learned that the best way to cajole more data out of their customers is to show that it’s a mutual benefit to them as well as the insurer - particularly for those on pay-as-you-live plans whose premiums are commensurate with positive and negative lifestyle habits.

Experiment with pay-as-you-live pricing

Early adopters for digitally enhanced customer centricity have even toyed with new business models that give customers more control over their premiums, so that they are charged commensurate with their risk profile and needs rather than paying into a policy they rarely make claims on. For instance, traditional car insurance policies require customers to pay for coverage even when a vehicle sits idle at work or at home. People only drive 3-5 percent of the day, but they’re charged for 24/7 coverage.

Furthermore, insurers discriminate against younger drivers because they’re perceived as higher-risk, thereby forcing even the most cautious motorists under age 25 to pay industry-adjusted premiums. One UK insurer provides a usage-based policy that monitors driving through a tracker installed in the user’s car, provides consistent feedback and offers reduced premiums for safe driving, backing four million drivers ages 17-25. US auto insurance company Progressive grants customers a 25 percent discount simply for agreeing to install a tracker on their car.

The pay-as-you-live model is especially popular among health insurance providers, which is aimed at improving controllable behaviors to lower insurance premiums and reward customers for living healthier lifestyles by tracking their behavior using wearable technologies. Google-supported company Oscar rewards users for every step they take when tracked on a Misfit wearable band, while a Singaporean insurer collects data on heart rate and blood sugar levels for diabetics to adjust their risk profile while providing coverage.

Win-win-win outcomes are rare, but the pay-as-you-live model is a stroke of creative genius that reduces premiums for customers while saving insurance companies expensive claims for chronic illnesses, and also decreasing the burden on health care providers and reducing illness within a given society.

Aside from being a brilliant nudge incentive and turning insurance from a necessary nuisance into a lifestyle product, it also serves to gamify the insurance product, where customers are motivated to use it continuously and get better at living healthy while using an insurer-provided mobile app and/or wearable technology to do so.

Turn the whole thing into a game - and offer perks and rewards along the way

A simple example of gamification is when you fill out a form and notice a progress bar indicating the remaining number of questions. In other industries, we take these features for granted, but for insurance companies, it represents a leap down a rabbit hole into the world of user experience design and gamification.

Gamification can lay out information clearly for customers to they choose an appropriate product at the the lowest premium. That might entail having them answer a few basic questions or select statements that are most applicable to them. The pay-as-you-live model is a form of gamification, because customers are galvanized to “compete” for lower premiums and rewards by changing their habits and lifestyle.

You should also keep gamification in mind when designing self-service portals for policyholders to manage and pay bills, make policy changes or contact their agents. To be effective, games must give users a sense of being charge, motivate them with rewards, and encourage users to build their competence so they keep playing.

Use AI and UX design best practices to make things easier for you and the customer

The biggest pain point when shopping around for insurance is combing through policies riddled with legalese and deciphering fine print written in hieroglyphics. Companies like New York Life offer a robust knowledge base that helps explain the purpose of life insurance and the types of coverage to those making a purchase decision for the very first time. The site also provides an insurance needs and retirement needs calculator, while prominently featuring a call-to-action on every page to connect with a financial professional.

Meanwhile, Millennial-targeted home and renters insurance provider Lemonade deploys an AI bot named Maya who can help you find the best coverage through web chat. The company alleges that its mobile app allows customers to get insured in 90 seconds and paid in three minutes.

Meanwhile, health insurance provider Oscar throws in additional perks such as a concierge care team of doctors on-call 24/7. If you have a rash you want diagnosed, simply take a photo and upload it to the app. The mobile app also allows you to schedule appointments with doctors in your network directly from your smartphone.

Offering digitally literate insurance products also helps legacy companies attract Millennials, who shows the least interest in life insurance, drive less, delay home purchases and save less for retirement. “Gamification can help mitigate these trends and help insurers engage a younger generation of potential customers,” claims a report by EY, Winning the Game: the Importance of Implementing a Gamification Strategy in Insurance.

AI also changes the process of payout decision-making. Take the case of agro insurance, which potentially covers thousands of acres of land. In the event that a drought strikes and  the landholder files a claim, the insurance company needs to verify the extent of the damage. Rather than deploying claims officers on-site to comb thousands of acres on foot, the insurer uses satellite imaging or drones to assess the damage.

State of the industry - share statistics from Novarica report

Data shows that early adopters are finding success. One in four insurers has experience with emerging technology like mobile, predictive analytics, big data technology, telematics, drones and AI/machine learning, according to a Novarica report on Emerging Technology in Insurance: AI, Big Data, Chatbots, IoT, RPA and More. About half of insurers have deployed predictive analytics in multiple areas, the report goes on, and pilot activity in big data and machine learning remains high.

But legacy companies are struggling with emerging technologies because of organizational inertia. According to McKinsey, nine out of ten insurers identified legacy software and infrastructure as barriers to digitization - that’s why some of the first insurance companies to introduce mobile apps engineered by UX designers were startups.

As a “subscription”-based business model, insurers should maintain ongoing relationships with customers, but the typical insurer-customer relationship is one of radio silence and begrudgingly-paid monthly bills punctuated only by catastrophe: a customer lands in the emergency room after a skiing accident, gets rear-ended by another car in heavy traffic, or loses a loved one.

According to EY research, 44 percent of customers have had no interactions with their insurers over the last 18 months. Insurance providers that want to add value to their customers lives need to keep them engaged so they feel reassured that when they do need to make a claim, it will be fair, easy and fast.