Digital Insurance – Quick Insights
Traditionally, insurance has been sold through direct and intermediated networks for decades. With emergence of ecommerce paradigms over internet, the Insurance industry has also gradually evolved to exploit and explore these. However, in recent years, Internet is exerting a much more defining influence over how insurance products are being structured and offered to the market. Below, we will take a quick look at what is shaping the future of insurance industry practices across the globe.
Digital Insurance is an often standout term referring to insurance products that are natively designed to be sold over the internet. The Digital Insurance has a few key attributes that sets it apart from any other traditional insurance. Many traditional insurances are also sold over the internet, or through its partner network while facilitated by internet, however traditional insurance is somewhat distinctively different to the Digital Insurance.
Sales Channel Explosion, Internet has brought thousand new ways to sell insurance
As the reach of insurance industry expands to all the new ways that individuals and companies are using to purchase goods and services, it provides insurance organisations access to many more distribution and reselling mechanisms than ever before. Some examples of these Internet specific sales channels are:
- Influencers and bloggers, vloggers – their recommendations trigger a sales cycle for medium complexity insurance products.
- Online retailers, and ecommerce websites – these online traders are constantly expanding their suite of complementary services to add to the merchandise they sell.
- Aggregators, comparison sites, and exchanges – these are internet only means of adding value to the process of customers finding the right insurance.
An insurance organsiation can now tap into all these channels and offer same (or similar) insurance product through all of these channels at once. This diversity of distributable market exposes insurance industry to a very attractive proposition. There is a great deal of momentum inside the industry in achieving a capability that allows any insurance organisation to tap into thousands of these channels all at once.
Emergence of embedded, Bite sized, and Pay as you go insurance offerings
There are many new insurance offerings that have become popular solely due to the ever increasing appetite for buying insurance over the internet. Typical example of internet driven Insurance offerings are:
- Extended warranty Digital Insurance products embedded into the purchase of other merchandise.
- Put away little bit of contribution for insurance purposes during any purchase process. This is also referred to as Bite Sized Insurance, where a consumer puts away a little bit of contribution towards an insurance cover during the purchase of the regular items. Periodically, the consumer can review its current cover and use the accumulated contributions made during that week or month to purchase adequate insurance cover.
- Pay as you go insurance – where an insurance cover is purchased in smaller incremental periodical chunks (such as monthly or weekly renewable policy).
The above types of products address many key market opportunities but require certain level of technical capability. Digital Insurance due to its design and Internet focus naturally addresses these technical needs.
Key attributes of digital insurance
Digital Insurance can be identified by a few key mechanisms and attributes that differ from any other insurance that may be sold over the internet:
Digital Insurance attribute – Connectivity
Digital Insurance permits many different industry players, resellers, and online sales channels to connect into an Insurer’s offerings. There are many disparate technologies and systems that all internet operators use. Hence the key is to support a variety of mechanisms through which a reseller can access the insurance offering and offer it via its own portal/app/website. The ability to provide cost effective means of connecting to an insurance offering is fundamental to the notion of Digital Insurance. In technical terms, providing insurance APIs, to allow for these online partners to trigger and execute policy issuance and servicing processes from within their own systems and apps easily is fast becoming a preferred way of offering connectivity to the channels. This is the reason InsureMO offers product specific and fully documented APIs for any Digital Insurance product that is distributed, and simplifies the process of multiple external entities connecting into these APIs.
Digital Insurance attribute – Focus On Automation
This a key attribute of Digital Insurance, all Digital Insurance offerings are highly automated, and can therefore cope with large volumes and unpredictable transactional fluctuations. Especially, if an offering is micro insurance, or incurs small premiums for offering a relatively limited cover, the level of automation that creates a highly scalable zero touch policy servicing model is a must. A lot of these micro insurances are only profitable at very low end of operating expenses for an insurance organisation, hence the need for highly automatable insurance offering becomes foundational to Digital Insurance. By automation, it is implied that:
- A Digital Insurance offering allows a buyer to enter information relating to the Insurance needs, risk profile, and can guide them through the processing steps to achieve a full self-service model
- A Digital Insurance offering can fully price and assess the risk based on built in models and does not need expert human intervention
- A Digital Insurance offering allows various different user journeys, and policy processes to work at the same time, allowing many different channels to connect into the Digital Insurance with low technical complexity
Digital Insurance attribute – Flexibility of Packaging
Digital Insurance while can be sold as a main product to its target market, is also equally frequently offered as part of another product being sold. Therefore, packaging flexibility that can address mainly the following aspects are highly desirable:
- Ability to package an insurance offering with non-insurance merchandize
- Ability to package popular variations of an Insurance offering depending on target market, customer demographic, or sales channels
- Ability to customise, and vary Insurance offering
The above requirements for flexibility in packaging creates the need for a product design capability that can handle large number of product variations being offered to various participating channels. InsureMO Digital Insurance Products support large number of SKU (product variations) being offered to any subscribing channels, and handles these requirements in a flexible manner.
Digital Insurance attribute – Rate of Change
As more and more channels are connected into an existing Digital Insurance product, the needs to vary and package an Insurance offering increases. Also, seasonal changes to these offerings (for example, to offer discounts for special cover during festive or holiday seasons) need to be supported by the Digital Insurance offerings. Therefore, an insurance organisation needs the ability to manage its Insurance product structure in a way that it can quickly create these additional variations, cheaply in a timely manner.
InsureMO team takeaway
In InsureMO terms, the above attributes that define Digital Insurance are best characterised as “Velocity, Variation, and Volume”. InsureMO supports these to meet all aspects of the future of Digital Insurance, namely:
- Velocity – Support for rapid rate of change, to reduce cost and technical burden on participating channels and create high degree of market / channel inclusivity. InsureMO provides widely used tools to modify, and augment Digital Insurance products and their APIs in hours and days as opposed to weeks and months.
- Variation – Support for vast variability, to cater for multiple channels connectivity, and packaging needs all out of the box.
- Volume – the ability to handle large volumes from disparate participating channels with a very high degree of automation. InsureMO has been proven to handle extraordinary single day transaction load.