30 Sep Making a Claim: Insurance needs to change with the times
As Pay-per-mile insurance startup Metromile raises $191.5M, and plans to acquire Mosaic Insurance, it becomes clear the insurance industry is on the verge of disruption. At Claro we believe one of the drivers of this disruption is a new customer and a new generation, who expect and demand more relevant offers.
Digital Natives and Millenials* – people born between the start of the 1980’s and the turn of the millennium – have a vastly different attitude and approach to managing their careers and financial lives than previous generations. They were brought up in a fast-paced technology-filled world and are a global generation that is already in the workforce. In the US alone, Millennials surpassed Gen X in 2015 as the largest generation. No industry, including insurance, can ignore them: not only will they eventually make and spend a lot of the money, but they also influence the behaviours of previous generations.
How has their different attitude and approach – in all aspects of their lives – changed the way consumers think about insurance? All of us insure our things: homes, cars, travels, liability, health, incomes and even our pets. How have the values of Digital Natives influenced what we all really need from the insurance industry? What do they (and consumers in general) care about? Does the traditional concept of an ‘insurance policy’ still work for everyone and everything? How has technology changed the possibilities, allowed for new capabilities, and now altered consumer expectations?
At Claro we have learned that Digital Natives want to keep their options open. Their attitude and approach to a fast changing world – not knowing what can happen in the future – is to develop their skill sets and their capabilities, which enables them to be able to respond to any unforeseen challenges and opportunities. If you think of it, an insurance policy is quite the opposite.
The traditional insurance policy is aimed at keeping everything the same – or at least to insure a certain acceptable level. It is not aimed to adapt with life’s turns, to optimise itself for the challenges that come your way. The current concept is a contract with a promise to maintain a situation.
In many cases this makes sense. Consumers will not stop caring about healthcare for example, so health insurance – even though the industry might want to rethink the system and the service design – still makes sense as a concept.
But let’s think about the fact that this new generation cares more about experiences than owning things, cares about growth over status, and more about the emotional value than monetary value of the things they own. If they don´t “own” things, what is the industry going to insure? If the things consumers care about aren’t fungible, what will be the insurance business´ value proposition? If consumers don’t want to be locked in to contracts, how will the insurance industry make sustainable revenue?
With these challenges comes a clear opportunity to innovate. We need new concepts, new ideas and new models to calculate risk; and new technologies to enable new capabilities and to provide people with insurance products and services that fit their actual needs. Products and services that make sense and help them achieve their goals, and are fair and beneficial to them. Luckily, Claro are not the first ones to spot this gap and many new and seasoned entrepreneurs have created new value propositions for the insurance industry. We have been looking into many of these new products and services and it’s worth highlighting a few that are especially inspiring.
Metromile – Pay-per-mile insurance
Metromile sells car insurance charging its user based on the actual miles they drive. If they doesn´t drive much, they can safe a good amount per year, up to $500 according to Metromile. This startup, founded by Steve Pretre and David Friedberg in 2011, just this week announced raising an impressive $191.5M in funding and planning to acquire Mosaic Insurance, incorporating the ability to underwrite their own policies as well as expanding its platform to new states.
Brolly – UK’s first AI insurance advisory app
This EF & Innovate Finance backed London startup believes that ‘the insurance market is ancient’. Brolly, founded in 2016, takes on the industry with strong UX and artificial intelligence to keep its users from being over or under-insured and helps them find the best price. Although this is not a new insurance concept, it’s a new technology enabled tool that empowers users and allows them to DIY with confidence.
Kasko – Insurance as a service
The right insurance in the right place, at the right time. This 2015 London startup, founded by Nikolaus Suehr and Matthew Wardly and having received investment from several insurance and startup business angels from UK and Europe, allows websites and apps to instantly offer relevant insurance services to their customers within their workflows. It´s available in online marketplaces and booking platforms and the end-customer only pays for what they need when they need it at the right time through the process.
Trov – On-demand insurance for the things you love
To stay on the on-demand path, Trov allows you to protect just the things you love, as long as they have a monetary value. In total the US based startup, founded by Scott Walchek and Mark Dowds in 2012, has raised $46.27M. Consumers may own less, but they always have a few things they care about and want to keep safe. Trov makes it simple, flexible and transparent to protect just the things people want whether they´re at home or on the go. A member can simply report a claim with a few taps on their phone and have it processed in minutes.
It is not just startups. Have a look at Progressive Snapshot and Habit@tat, the home insurance product launched by BNP Paribas Cardif in 2014 (!). Nobody has really cracked the nut yet though. They might not have perfected their offer, but they do push the boundaries for everyone and prepare customers for new possibilities.
Have a look at your own insurance needs, personally and professionally; can you find ways for insurance to be relevant to this “new customer”?
*Two labels, Digital Natives and Millennials, with largely overlapping definitions and interchangeable for the purpose of this blog post.