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Special Report: The future of personal lines insurance: Expert view

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The insurance industry needs to understand the demands of its future customers if it is to satisfy their expectations. EXL’s head of UK and Europe and SVP Insurance, Nigel Edwards explains how smarter insurers will adopt personalisation and a frictionless purchasing and servicing experience to win out

Nigel Edwards EXL
Nigel Edwards, head of UK and Europe and SVP Insurance, EXL

UK insurers are all aware that they need to prepare for the future, taking a digital-centric approach and meeting shifting customer demands. However, less than less than 25% of insurers feel well prepared to meet the needs of future insurance customers in 2030. To prepare for this future, insurance companies must first know what the industry will look like in the coming years.

That’s why EXL and Post conducted a joint survey into how insurance leaders believe the business will change by 2030, and how companies can begin adjusting to that future reality today. Based on our findings, there are several areas savvy insurers are exploring to future proof their businesses.

From insuring events and objects to insuring individuals

According to the survey results, the most important factor for succeeding in the coming years will be moving from insuring individual items or events to insuring the individual as a whole. A person born in the year 2000 will want the peace of mind knowing that everything important to them – their family, home, and business – are protected under one policy. 

This will take a shift to a more modular approach to providing insurance coverage, with companies offering a modular set of coverages that can be combined and dynamically modified in real time. Doing so lets companies move from selling individual policies to providing a spectrum of protection. Rather than selling individual policies like life insurance, insurers would be providing protection for their customer’s whole lives.

From an annual cover to paying for what you use

The need for personalisation doesn’t end with the mass customisation of insurance policies. People in 2030 will want to pay only the insurance they use, rather than the current one-size-fits-all pricing. Some companies are already taking advantage of this trend, offering innovative products like pay-per-mile motor insurance. This same model can be applied to other types of insurance, ensuring that customers pay only for what they use at rates according to their risk.

This was seen as another huge factor for future success according to our survey respondents, ranking as the second-most important factor.

Reward good behaviour

Insurance companies have been offering lower rates for safer drivers for a long time now. The burgeoning amount of data now available the company can deepen and extend this practice to other areas. For instance, companies could combine telematics data on driving behaviour with information on prevailing traffic and weather conditions, frequency of servicing their vehicle, and other factors that put the customer’s driving into context and influence the likelihood of filing a claim.

This same approach could be used in other areas. For example, if a customer begins regularly exercising, their life insurance premium should go down. If they install smart devices in the home that can keep track of and prevent accidents such as a burst water heater, they should be rewarded for that as well. Again, personalisation rules the day.

Seamless transactions

Tomorrow’s insurance customers will do most of their shopping online. That makes the visibility of an insurance company of paramount importance.

The customer of the future will demand a frictionless purchasing and servicing experience. Almost every survey respondent stated that websites, mobile experience, and apps were where they expected customers to purchase insurance in the future – a marked movement away from third party intermediation. Similarly, about one-third of insurers stated that over half their insurance was currently sold online. Over half of insurers stated that they believe they will eventually sell over half of their insurance online. 

Insurers must be prepared to offer end-to-end digital experiences and make sure both underwriting and claims servicing side of transactions are almost completely automated. This will take analytics, automation, and artificial intelligence to provide this seamless experience.  They must also be prepared to reach customers through an omni-channel model, engaging them on social media, websites, and whatever their preferred communication style may be.

Making use of data – safely

Achieving next-generation mass personalisation for insurance policies and pricing will require next-generation amounts of data. Luckily, consumers are generating more useful data than ever before. Smartphones, telematics, smart homes and wearables all create data that insurers can use alongside internet of things and third-party data sources to gain an in-depth view of their customers.

However, convincing consumers to share their data with insurers can be a tricky proposition. If consumers don’t feel the insurer has their best interest at heart, or that their data may be at risk, it’s unlikely that they will be comfortable sharing any of their data. Additionally, new regulations such as the General Data Protection Regulation can make data breaches or other privacy violations a costly risk for companies.

Organisations need to ensure that they offer a safe harbor for consumer data. Their use of data must be necessary and beneficial for the customer, and they must keep that data safe from potential breaches or other misuse. Preparing for the future will take examining the current ways insurers collect, store, and use data with an eye towards improving privacy and protections.  

Update the operating model

Meeting the needs of future customers will require updated organisational models, shifting away from being structured – and sometimes siloed – by the different lines of business such as auto, home, and life. Moving to an approach enabling a whole customer view requires addressing challenges in organisational structures, traditional underwriting mindsets, and employee/management pay and incentive systems.

At present, siloed structures where data isn’t shared can result in companies losing profitable customers. For instance, if a customer became unprofitable in one area – say they recently had a car crash, or filed another sort of claim – their policy might not be renewed. If the customer had other forms of insurance with the company, they might cancel them after such an event, causing the insurer to lose profitable revenue. By shifting to a model where data is shared between departments and implementing reward systems that reflect the overall profitability of the customer, insurers can prevent this situation from occurring.

Update the technology

The technology side of preparing for the future is potentially another important aspect. Many companies are acutely aware that their legacy systems are increasingly unable to meet the needs of the current market, much less the needs of tomorrow. However, insurers will continue doing what they are already doing – adapting, adjusting, and finding bolt-on solutions that allow them to meet existing older customer needs without necessarily having to undergo a lengthy, and pricey legacy system replacement.

More fundamental change may be required to meet the needs of the customer in 2030. This might entail brand new systems, but will definitely require robotic process automation and automation solutions to power straight-through underwriting and make filing a claim fast, easy, and simple for customers. Companies will need analytics that generate customer insights and personalise policies for individual customer needs. Finally, in order to provide real-time insurance, systems will need to process and store huge amounts of data.

Preparing for tomorrow, today

The insurance market is changing, and smart insurance companies are changing with it. By shifting from insuring objects or events to insuring a whole customer, adopting an organisational structure that lets the company view the whole customer, and implementing the latest technology to power personalisation and straight-through processing, insurers will be well prepared to remain competitive in 2030 and beyond. n

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Special Report: The future of personal lines insurance

Retail insurance customers are changing, with a growing opinion that those born after 2000 will have very different expectations than those over twice their age because they are digital natives. Sam Barrett explores what the industry needs to do to future proof themselves and how they are going to meet these evolving demands

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