Canada's Condominium Magazine
Need home or auto insurance? This could be a good year for you to get it. A report from Ernst & Young says that 2017 will be a disruptive year for Canada’s property and casualty insurance industry, and that could mean good things for consumers. New technologies and evolving customer demands will drive innovation and change in the way insurers serve their customers with new products and services while cutting their costs and improving efficiencies through the use of robotics and advanced analytics, the EY report concludes. New digital players will pose a direct and growing threat to old-school insurers, and insurers will have to develop “millennial-minded” strategies that offer 24/7 digital access, personalization, self-directed functionality and seamless customer experience.
Millennials, says EY, are now the largest generation in the workforce, their wealth growing faster than any other age group. And they like insurance.
According to US insurer Aflac, millennials are big on protecting their belongings. They are the most likely generation to purchase insurance for their cell phones, home appliances, trips, pets and major events like weddings. They are also twice as likely to start a business as baby boomers, making them a prime target for the commercial insurance carriers.
Is the old-school insurance model capable of serving this demographic? According to Forbes, the average age of life insurance agents in the US is fifty-nine years. Faxes are still used in that industry, and duplicate forms. Getting paid when a claim is made can be “a nightmare.”
But millennials and most other consumers today aren’t satisfied with that model. They want to get a quote from the comfort of their home, at any time of day or night, or via their smartphone in less than fifteen minutes, which is increasingly possible thanks to insurtech, the emerging data-driven technology that allows customised insurance policies and even peer-to-peer insurance.
Advances in technology are raising customer expectations for innovative insurance offerings and digitally enabled business models. Growing demands for technology-driven solutions and threats from new, digital players will push insurers to enhance their digital capabilities in 2017. P&C insurers will increasingly use digital technology to reach new clients, upsell insurance services and products, and enhance interfaces between sales agents/brokers and customers.
The world’s first peer-to-peer insurer, Lemonade, launched last year in New York City. It sells home insurance for renters and owners. Unlike the “antagonistic” insurance model, based on an inherent conflict of interest between the insured and the insurer—whenever a policyholder makes a claim, the insurer loses money—Lemonade is a public benefit corporation. Users form small groups of policyholders and pay into pools to pay claims. When the policy period ends, any money left in the pool is donated to a cause of the customers’ choice. The company takes a fixed fee out of customers’ payments to make its profit.
They claim to make the process of buying insurance “delightful” and promise it can be done in just ninety seconds via their “charming” artificial intelligence bot, Maya. Prices start at $5 a month for renters, $35 for homeowners.
Bots are now essential technology for streamlining back-office operations by digitizing routine procedures. EY says a robot is one-tenth the cost of an on-shore full-time employee, one-third the cost of an offshore one, and a robot works 24/7 “without complaint.” Bots reduce error rates, never forget their training, and can be “trained” by business users. In short, they are a sensible way to reduce costs and insurers should be using them.
Canadian insurance companies are not as far along as their US and UK counterparts in adopting new products and business models, says EY, but that will change in 2017. There were “pockets” of change in 2016, one example being Economical Insurance’s Sonnet, a fully online insurance company “inspired by the power of optimism.”
But innovation is not an option for the insurance industry, it is essential. Companies that do not keep up with innovation to cut their costs and move with demographic trends will experience weaker growth and rising claims. This will be challenging for a conservative industry like insurance, says EY, but to succeed they will have to stay focused on customer needs. The most successful have chief innovation officers and strong connections with insurtech start-ups and other innovation centres.
Watch the video to see what kind of change is already happening in the insurance industry.