Insurance Partnerships in a digital world

We’re living in a period of unprecedented change… ready or not, the fourth industrial revolution is already underway.

In contrast to the first Industrial revolution, which was powered by steam, the fourth, which fuses the physical, digital, and biological worlds, will be fueled by big data and artificial intelligence (AI).This latest revolution has already transformed entire business sectors – retail, transport, media, hospitality and many more, all wholeheartedly disrupted by changes bought about through the digital revolution.

Thus far the UK Financial Services sector hasn’t experienced significant levels of disruption. However the threat of disruption is very real and insurers need to invest now to capitalise on the inevitable opportunities that will emerge.

Simplicity is key – customers want Insurers to make their lives easier and are increasingly looking for a one-stop shop for all of their consumer needs. That’s why we expect greater collaboration with partners, not less.

Here’s what Rob Fleet, Director of Partnerships has to say on the future of partnerships

Should we expect greater collaboration in insurance?

We certainly expect to see more. Technology and data will continue to blur the boundaries between products, organisations and industries. In the past, industries often operated in silos, but these traditional barriers are being torn down at rapid pace. At Direct Line Group, we understand that the insurers who reach out, who build relationships and data sharing agreements with the digital platforms of the future - the banks, retailers, car manufacturers and utilities companies - will be most successful at delivering for customers and remaining competitive.

We understand that our customers want us to make insurance easier. Their lives and expectations have been reshaped by the digital revolution and they want to be able to purchase and manage their insurance cover alongside their favourite products and services via easy to use digital platforms that give greater flexibility, as well as products tailored to their individual needs. We believe that in order to offer them that, we need to invest in greater collaboration with partners.

Will the platform giants take over the insurance industry?

We don’t know yet. Platform giants such as Amazon, Google and Facebook already play a dominant role in the digital economy, providing their customers with ‘helpful insights’ to seamlessly introduce and cross sell relevant products and services from broader ecosystem players. This provides a highly convenient and personal experience to the consumer.

It’s an on-going data cycle; the more customers engage with the platforms the more they are rewarded with increasingly personalised experiences that support all aspects of their lives. Some commentators believe that in the future consumers will simply turn to one lifestyle app for all of their needs – including, of course, insurance.

Insurers who have traditionally struggled to establish their own ‘sticky’ platforms need to build relationships and data sharing protocols with the digital platforms of the future or risk being locked out of the customer relationship.
Are you thinking about new partnership business models?

Alongside the emergence of the platform economy, new insurance distribution models are evolving as technology makes it easier for distributors to aggregate product offerings and pitch insurers against each other via digital online marketplaces. Platform providers may create competitive advantage over existing price comparison websites by offering insurers seamless access to customer data, enabling them to optimise their risk selection, and produce competitive pricing for a wider pool of potential customers.

Other distributors will build out their propositions by combining insurance with adjacent products and services to strengthen their consumer service offerings in a similar way to the Added Value Account model in banking - albeit with a much slicker digital experience controlled from a single mobile app.

We understand that the insurers who embed themselves in a wide range of digital ecosystems and platforms will compete more effectively – and we are at the forefront of this evolution.

What technology will enhance the consumer experience?

The digital economy isn’t an exclusive club but one of the pre-requisites is having a platform underpinned by Application Programming Interface (API) technology. APIs are undoubtedly the keys to unlock access to the digital age.

In plain English APIs are the glue that holds the digital economy together enabling customers to securely move their data from one platform, mobile app or experience to another with the click of a button.

API’s have become standard protocol across many industries and are the technology that the Open Banking standard is based on.

How is a company like Direct Line Group thinking about the future?

If the distribution playing field is levelled and customer access is controlled by 3rd party platforms, insurers will be forced to differentiate themselves and create competitive advantage by evolving and optimising their core manufacturing processes – product development, pricing, underwriting and claims. This will become even more relevant if there is an increasing trend towards commoditisation and insurance aggregation amongst the platform distributors.

We must find ways to ethically make sense of the billions of zettabytes of unstructured data that the digital economy generates every second and use artificial intelligence and machine learning techniques to translate it into meaningful data to support risk selection, pricing and fraud detection.

How could product development change?

Our products will move away from traditional category-led product lines, with annual contracts and blanket covers, and evolve to much more granular modules of cover, each with its own set of pricing and underwriting rules. This will provide the flexibility for distributors to mix and match and build the bespoke offerings that they require to support their hyper personalised customer services and niche markets.

The Internet of Things (IoT) presents a unique opportunity for us to evolve and automate our claims propositions, leveraging incoming data from devices in cars, homes or even people to provide intelligence to drive claims events. Not only does this provide better experiences for customers, it removes cost through automation. In a world of increased aggregation where margins are slim, controlling the cost base must be a key priority.

Finally, wherever possible we must leverage the customer’s preferred access channels throughout the end to end insurance journey, to make it as simple as possible for people. If the customer wants to make an amendment to their policy or track progress on their claim, we have to enable them to do this through their preferred retail, banking or technology app via transactional APIs.

How would you sum up the future for insurance partnerships and the digital economy?

The opportunities that the digital revolution offers insurance are becoming clearer. The digital economy is underpinned by collaboration and it provides the possibility of a vibrant ecosystem of organisations that open their platforms, enabling customers to consume personalised content, products and services at the touch of a button. Companies that offer simple, user friendly customer experience are the ones that stand to benefit.

It’s time for our industry to break away from its stereotype and embrace this new digital world head on. Disruption is upon us and those that change and adapt will win and those that don’t will disappear.