Insurance as a concept dates back more than 4,000 years to Babylonian merchants who paid money lenders an additional sum to waive their loans if their ships carrying goods were lost at sea. Closer home, takaful — Arabic for mutual guarantee — started about 1,400 years ago as a means for communities to protect themselves in an uncertain world.
Today, the global insurance industry covers more than $500 trillion of value, insuring intangible assets like life and health as well as physical assets such as ships, equipment and properties. And yes, there are insurers who can cover you against bed bugs, teeth stains or missed flights ... all for a price.
Food critics are known to insure their taste buds, fashion models their legs, guitarists their middle fingers and singers their vocal chords.
With global insurance penetration levels still in single digit percentages and insurers carrying a high cost base from managing complex products and multi-layered distribution, the industry is now turning to digital technologies to enhance customer experience, improve efficiency and increase accessibility. “Insurtechs”, or technology-led companies working in the insurance sector attracted investments of $2.5 billion last year and this is set to double every two years.
For banks with a large, loyal and increasingly digitally active client base, digital insurance represents a good opportunity to help address an important customer need while also helping to grow fee-based revenues.
Instant 24x7 access through digital platforms and big data based analytics is enabling digital insurance start-ups to provide customers with on-demand insurance that customers can buy when and how they need it. Trov, a Silicon Valley start-up allows customers to buy micro-duration general insurance policies on individual items of their choice, for example insuring your guitar only when you are planning a gig instead of when it is safely locked up at home, or your bicycle when you are riding it for an hour a day instead of round the year.
Zego is a UK-based insurtech that targets self-employed people such as courier delivery boys for providing motor insurance by the hour, allowing them to clock in when the shift begins and turn off cover when it ends.
Ladder in the US allows customers to ladder up or down their life insurance coverage at the click of a button based on circumstances or life events. Liv., the digital bank by Emirates NBD, launched last month a mobile phone insurance policy that enables its millennial customers, at the click of a button, to protect their devices against damage or theft, without the need for printed forms or wet signatures.
As traditional insurers battle with rising costs in a slow growth industry, they are leveraging new technologies or tying up with insurtechs to digitise their operations and launch new propositions.
MetLife has piloted a product called Vitana that provides pregnant women in Singapore with a cover against gestational diabetes, using blockchain technology to issue a policy. The policy triggers automatic payouts on diagnosis, without the customer having to raise a claim.
German insurer Allianz has tied up with Monuma, a French insurtech firm, to help carry out underwriting of valuables with the help of photographs from the customer’s mobile device along with GPS coordinates and time stamping. The turnaround is fast and the cost is one-tenth.
AI to help model customer risk profiles, robotic process automation to reduce costs, drones to help with risk assessment and facial recognition technologies to assist with underwriting are some of the technologies that insurers are leveraging to deliver a faster — and better — customer experience.
New players and partnerships
As in banking, big-techs are starting to engage with insurance given its almost universal relevance across different user platforms.
Amazon Protect offers insurance coverage against accidental damage and theft on purchases from their portal. Alphabet, Google’s parent company, launched a subsidiary focusing on tools for health data collection. Auto manufacturers such as Ford and Tesla as well as telecom providers and large retailers are partnering with insurers to integrate coverage into their offerings.
Going further, China is seeing the emergence of digital insurance eco-systems powered by rapid digitisation, strong data mining capabilities and use of advanced technologies. ZhongAn, created jointly by Alibaba, Tencent and Ping An, offers online insurance policies for a wide range of events by leveraging big data for risk assessment and pricing. The company has signed up over 450 million customers to date, with each customer buying on an average 10 policies.
With the emergence of new business models such as ride-hailing replacing car purchase and new risks such as driverless cars and smart homes, the insurance industry is in the process of being reshaped, reformed and recharged. Digital is set to breathe life into this transformation, and very soon you may be able to buy an alien abduction insurance policy through a mobile app ...
Suvo Sarkar is Senior Executive Vice-President and Group Head — Retail Banking & Wealth Management at Emirates NBD.