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!