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Can Insurers Break Through to a New Plane of Digital Engagement with UBI?

Reports indicate that insurers have hit a low plateau in the implementation of consumer engagement strategies using digital technologies. There may be a unique opportunity, in the form of Usage-Based Insurance (UBI), which could allow a transformational breakthrough into the brave, new, digitally-engaged world.

We’d appreciate your thoughts.

What’s causing the blockage?

As reported on WRIN.tv, a new report from the global consultancy EY indicates that insurers are ‘only playing at the digital game.’  The report was based on a 2013 survey of 100 insurance companies and explored various dimensions, including readiness for digital, leadership, and strategies for the future.

The majority of insurers surveyed agreed that while digitization was important to the consumer, short term pressures and internal system limitations were preventing digital from becoming a priority.  The report says:

While insurers aspire to future digital leadership, they haven’t made the significant improvements necessary to realize their ambitious digital objectives. By their own admission, more than two-thirds of insurers have delivered some easy quick wins, but only 10% cite transformational changes to digital capabilities.

What is the end-game for digitalization?

Insurance&Technolgy’s editorial director, Kathy Burger,  recently penned a column stressing that implementing digital technology is not and end in itself, but only the means for achieving an improved customer experience.   And while we have plenty of examples from organizations in other industries continually drive improved customer experience, the nature of insurance itself is a conundrum.

Burger notes that Deb Smallwood, founder of analyst firm SMA, recently cited Walt Disney Co. which “ability to innovate and introduce new things while never wavering from its mission,” resulting in a steady stream of returning customers.

But a customer’s encounters with insurance are not generally a walk in a park, much less a Disney theme park.  Smallwood says the consumer insurance experience is “dark, murky and full of challenges, because our world is complex.”

Transforming automobile insurance one teenage driver at a time…

Most brokers we know would agree that in the sales process, few products rival automobile insurance in the ‘dark, murky, and challenging’ category.  But there is hope.

A recent article in the Toronto Star by Adam Mayers, personal finance editor begins:

Parents in the Toronto area who are trying to get out from under the high cost of car insurance can be forgiven for wishing their teenage drivers lived somewhere else.

Then the article takes a quick left turn:

There may be some relief in sight next year when a variation of a Quebec program by insurer Industrial Alliance comes to Ontario. It will not be run by Industrial Alliance, but will be loosely based on its Mobiliz program, which is aimed at 16- to 24-year-old drivers.

The article goes on to describe how an unnamed insurer is planning to use the Baseline Telematics’ technology to introduce a UBI scheme for Ontario auto, which will base premiums on actual vehicle use, not just demographics, and will allow monthly changes to premium, rather than annual renewals.  The program will also provide on-line access for drivers to compare their driving patterns with similar drivers.

Mayers cites Paul-Andre Savoié, president of Baseline, saying that “The instant reward is a powerful incentive for young drivers on tight budgets. It pairs good driving with immediate saving.”

Mayers notes that similar UBI approaches can be taken with other forms of insurance, but concludes his article with a combination of gratitude and seemingly low expectations: “With two 20-something occasional drivers in our household, I’d just be happy with a break on my car insurance.”

What does this all mean?   What do you think?

In analyzing the roadblocks to digital adoption by insurers, the EY report says that Insurers are holding themselves back:

Internal factors — legacy technology, slow pace of delivery and cultural constraints — are hindering digital progress. Focusing on key enablers such as culture and innovation will release significant future value and enable companies to better grasp digital business opportunities as they arise.

We think that a focus on UBI as a key enabler could be an important strategy.  It would force internal as well as external changes that would guide the implementation of several technologies towards consumer engagement.

We’d be interested in your thoughts.

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