On 13th
November, 2016, Mr. Sunny Bindra wrote an article in one of the dailies that
echoed my thoughts. In his article, he illustrated how the recent developments
in global technology that might disrupt the insurance industry and find the
conventional players unaware. Before you think it’s farfetched, recall the
disruption caused by Uber and Air BnB. Both are global companies that
identified a gap that transcends countries and cultures. Startups are leap
frogging the archaic claims processes, static premiums and poor customer
service and inventing in dynamic premium computation methods, numerous customer
service channels, seamless onboarding and easy to follow claim procedures. In
the current market, products are difficult to explain and covered in legal
jargon that is too complex for customers to understand.
The risk of customers is treated equally, without
considering the different attributes of individual customers, corporates or
assets. A reckless driver is more risky in comparison to a careful driver, a
moving vehicle is more risky in comparison to a stationary vehicle in a garage,
goods stored at a warehouse in a war torn country as at a higher risk in
comparison to goods stored in a peaceful country. These elements of risk are
not captured in the product of most insurance firms. Most Kenyans are unaware of the merits of insurance and only
take insurance that is required by law, namely motor vehicle insurance and
national hospital insurance fund. In fact, based on the Association of Kenya
Insurers report for 2015, the insurance penetration in the local market had
worsened for the three years in a row, dropping to 2.79 per cent in the year
2015 from 2.94 per cent in 2014. What global technology trends in the insurance
industry that could change this trend?
Use of location awareness of property and assets is a
unique value proposition that would appeal to corporates. If the premium for an
asset, fixed or mobile, is based on location then corporates can observe
caution and prudence on how they place assets with an aim of controlling costs.
In essence, this would lead to reduced claims hence improved profits for
insurance firms. Most companies in the insurance industry shoot in the dark
when looking for sales. There would be better rewards if companies would engage
in customer intelligence and analytics. Gathering demographic data and
understanding customer behavior is key in customizing products for various
market segments. Social media platforms provide an opportunity to understand
customer behavior in a dynamic way. Insurance firms can invest in social miners
to gather trends and mentions from which needs in certain market segments can
be identified and solutions created.
Brick and mortar presence has been overtaken by
events. However, most insurance firms still require you to walk to a branch to
sign up for policy and lodge a claim. Soon, there will start ups that would
allow you to sign up remotely and policy deliver at your door step. Mobile
applications can be used for viewing policies, policy inquiries, paying bills,
filing claims, finding agents, quick notifications and updates. How about covers that are less than 12 months
and dynamic? Pay as you drive for instance, would make economic sense. Why
should I pay for insurance for the car in the garage while am on holiday? Using
Internet of Things, insurance firms can monitor assets and only charge a
premium while they are in use. Imagine the savings that would be made if a firm
leasing heavy machinery only pays a premium when the machinery is in use. As
long as the machinery idle, no premium would be charged hence reducing the
fixed costs.
Insurance firms need to contemplate investing in core
business systems that allow integration to government agencies and partners
that are stakeholders of the insurance industry. Wouldn’t it be great if your
insurance firm had access to police records of reported accidents? Once you
report and accident, the firm would pick out your number plate and process
claims, repairs, courtesy car and all the value adds without you intervention. A
seamless customer experience is a possibility that would give a competitive
advantage to the firm the offers it first. The penetration of the insurance
service in Kenya does not interpret to lack of need for it in the market. It’s
an opportunity lingering for next innovator, a solution provider that will meet
the needs of the 97 per cent.
