When plumbers sell insurance

When plumbers sell insurance

Digital and digitization in insurance are terms that have been increasingly used in the insurance industry over the past decade and not only by insurers but also by consultants, IT vendors and research firms. I have already provided my high level definition of digital and digitization in this blog.

While attending RGI's Next event, where an innovation for the connected home was presented, I reflected on the visibility of the relationship between the insurer and the end-consumer. Many innovation and digital gurus claim that with digitization insurance will become invisible. At the first sight, it sounds like an interesting idea and of course it would be logical to believe that if there is less or no human intervention then it would be difficult for a consumer to get a physical representation of an insurance product and the company behind it. However, I don’t like the idea of insurers becoming invisible. Insurance is a difficult product to understand for average consumers because it is not something they can touch and feel. In addition, risk is a concept that is highly conceptual especially for young people. Many consumers, who buy insurance for the first time, do so because it is compulsory and in general they don’t try to analyse the details of the product, which is nothing more than a list of benefits, terms and conditions that are painful to read and difficult to understand. I think digitization represents a great opportunity insurers have to seize to better productize insurance products. Making insurance invisible does not properly address the consumers’ needs and expectations I think. In our open world where information is so easily accessible and transferrable and where transparency is important, insurers need to make insurance more palpable and digitization is a great opportunity to democratize the knowledge of insurance and risk among the public. Let’s take the example of home insurance. What if home insurance is sold on top of a box (an Apple TV style one) that controls various sensors that monitor home parameters including thermostats, smoke detector, video surveillance and water usage? The insured would be able to regularly check these sensors via a smartphone app and be informed quickly about abnormal events. With this box, the insurer would add home insurance at a preferred price (maybe included with the box warranty). The connected home model is an interesting example demonstrating that digital transformation can contribute to making insurance products more palpable and risk easier to understand and to monitor from a customer point of view. So when will we see plumbers and electricians sell home insurance!

Data Initiation Helps Define Digitization in Insurance

Data Initiation Helps Define Digitization in Insurance
My colleague Karen Monks and I have published a report on digital transformation in insurance recently. The main objective of this report was to identify differences in terms of digital transformation in insurance between different continents. However we have quickly noticed that the term “digitization” can generate confusion in insurance professionals’ mind. Celent defines digital transformation as the strategy of transferring as many manual tasks as possible into digital activities. This strategy can be achieved through different ways, including:
  • Process automation.
  • Selling products online.
  • Leveraging mobile devices and mobile technologies in general.
  • Dematerialization of documents and communication materials.
In addition, we believe that data gathering through all sorts of tools, and therefore data management and analytics, play an important role in digital transformation efforts. This been said I personally think there is a priority insurers should define when embarking in digital transformation initiatives. First of all I recommend them to set up a basic constraint as the corner stone of their digitization initiatives portfolio prioritization: data must be entered into their information system only once (not two, three times but only once). With this in mind they should reexamine all their core processes and find out where data leading to the same information is entered more than once. When this analysis is done they can start defining initiatives that will reduce these repetitive tasks. You’ll be surprised to see how this simple principle can generate drastic improvements to processes and drive higher automation, efficiency, etc. When doing this, I also advise insurers to question whether the unique initial data entry into their information system can be done differently. With this advice I am trying to get them think of what I call the second wave of digitization. Indeed, to me digital transformation initiatives nowadays assume that human action is the initial generator of new data within an information system. However with the Internet of Things concept that my colleague Donald Light explained in two reports recently (here and here), insurers can also automate the initial data entry by leveraging connected objects. No need for human action any longer then! To me there is a digitization sequencing insurers need to respect between these two phases. Indeed I think it is easier to generate value from the Internet of Things concept if an insurer has already well thought how to minimize repetitive tasks consisting in entering new data within their information system. Therefore I do think that insurers who have already done a great job at minimizing these tasks initiated by human action and who have an appetite to leverage the Internet of Things will be the leading insurers going forward.  

Guest Blog: Real Trees, Digital Forests – Part 1

Guest Blog: Real Trees, Digital Forests – Part 1
To digitize something has generally referred to the process of transitioning an activity or thing from being handled in an analog manner to one that uses consistent, discreet measurement units. On the other hand, ‘analog’, being the base of the word analogy, refers to a way of measuring or dealing with a quantity or thing as it relates to something else. Think of the movement of a thermometer’s indicator across its dial as a metal spring tightens or unwinds based on the ambient temperature. In today’s business world, the term digitization has been usurped as another way to refer to the latest information technology (IT) trends such as social media, big data, and smart devices and their effect on pressing issues. While not immediately harmful, I do think this may be a case of arborists inspecting flora at the cost of not recognizing changes in the ecosphere (‘not seeing the forest for the trees’…). Digitization can also seem to be somewhat of an anachronism. It describes something that already has happened, a term used in more of an IT engineering sense than one that is found in the writings of analysts or among business leaders. The main point of this blog post is to take back control of the term while insurers can still make use of it by way of a new definition. The reason to re-define digitization for financial services, and for insurance especially, is to pave the way for where the industry should be heading after 60-plus years of computerized process automation. We are at a unique waypoint in the insurance journey where we can send scouts ahead to explore new business models based on a new generation of the very mechanisms that brought us to this point. Digitized insurance business models are the new destinations towards which our industry should be driven. Our reclaimed definition of digitization for insurance is the use all relevant IT mechanisms and techniques to create new business models that individually optimize the management of risks for consumers and businesses in a holistic manner. This new definition requires new thinking about the methods to achieve a familiar outcome. It does not mean simply applying the latest technology to old problems and business models in hopes of better, faster, or less expensive results. Features of these new business models use social media, pervasive sensor technology, interconnected vehicles, homes, and businesses among other mechanisms to gauge, aggregate, and indemnify risks in real time. To be clear, there will remain a need to continue the current manner of individual insurance contracts that rely on aggregated statistics amassed from prior experience or extrapolated via mathematical models. This is because the insurance business, the public, and our regulators are not ready for a wholesale shift to a new paradigm for insurance, especially one that would potentially remove much that is familiar in this space. When viewed in light of the new definition, it is clear that historically the insurance industry has used the power of information technology for the aforementioned task of the automation of its data intensive processes. This was a necessary step but one that seems to have been perpetuated recently due to an all too common foible: ‘…doing what we’ve always done’. Some insurance business professionals will struggle to see why any change except improvements on existing processes are needed. People in the IT trenches could reasonably argue that the industry has some distance to go in terms of fully exorcising what process automation demons remain in straight-thru-processing, on-line claims processing, and sales via the existing paradigm. However, the trajectory of such improvement in terms of speed or accuracy gained from the application of IT is quickly reaching the height of its ROI arc and will soon be heading towards the land of diminishing returns. The newer frontier lies in leveraging the amassed capabilities that business now has at its disposal, and not simply for the improvement of existing mechanisms. Let’s talk about a frontier where consumers and small businesses are truly treated as individuals. A destination where groups are aggregated only as needed for the statistical needs of risk management, not as a business, sales, or service approach or interaction. I am stating that we are at such a point along the insurance and IT timelines where we can technologically leverage a great deal more data, much closer to real time, and in ways that will fundamentally change the way risk is managed. And it all adds up to better services sold to much more eager and willing consumers and business. Stay tuned for my next Guest Posting, “Part 2: Transitioning from Big Brother to Mindful Mom.”