EXCLUSIVE: “Paws For Thought” – Shreyas Vasanthkumar, Duck Creek Technologies in ‘The Insurtech Magazine’
Could embedded insurance help address the exceptionally low rate of pet protection in the UK? Shreyas Vasanthkumar, Managing Director EMEA at Duck Creek Technologies, explores the potential
A recent survey by Duck Creek Technologies of pet insurance buyers in the UK, about their feelings on pet insurance pricing, availability, products and service offering, showed a market under-delivering for its policyholders and their pets.
None of the pet insurance buyers we spoke to said that they were completely happy with the coverage they could get at a price point they could afford, leaving many to purchase a more basic plan than they would have preferred, which would only cover emergencies.
A more holistic approach is clearly needed, and it’s a need that embedded insurance has the potential to meet in a market where too many policyholders have become disillusioned with traditional insurance. Embedded insurance has attracted strong interest from leading insurance giants and insurtech startups alike, as a potential new frontier for expanding the reach of insurance.
The idea is to provide coverage as part of a product or service – for instance, a new car that comes with motor insurance included, or a new smart watch that is covered for theft or damage from the point of purchase. And, while it is still conceptual in many fields, the idea of embedded insurance has the prospect to be a tech-powered game-changer. This is because the key priorities for insurers are policy development and speedy distribution of new products – connecting innovative and relevant products with customers at exactly the right time in their buying journey.
This is particularly important in today’s uncertain economic environment with the cost of household living increasingly impacting consumers. The key to optimum customer experience is having a ‘single view’, simple, cost-effective bundled products and seamless interactions with their insurer where the customer can clearly see the value-add and benefits in order that they can make an informed decision about the product purchase.
At the same time, all types of insurance providers – from speciality risk to commercial, motor and personal lines – are driving to improve underwriting outcomes. Reacting nimbly to change is essential tprofitable underwriting as well as growing market share.
“70 per cent of dog and 84 per cent of cat owners do not have insurance cover for their pets in the UK”
Essentially, embedded insurance has the potential to address both these drivers of insurance business: connecting with customers on a grand scale and helping to control underwriting outcomes. The secret ingredient is modern core systems architecture.
WHY DATA IS KEY
The data a customer gives when they buy the product or service is linked to the insurance provider, and a personalised policy is generated and embedded in the product at a cost that is priced into the product at the point of sale. Technology can also be used to generate a simple and transparent claims trigger, without the need to file a claim or liaise with loss adjusters.
The potential spans many product lines and goes hand-in-hand with risk mitigation – for instance, cyber-breach and data theft insurance could be included as standard on smartphones that have the highest level of security protection installed. Imagine experiencing flooding at your business headquarters and receiving a business interruption or physical damage payout within 24 hours, without having to pick up the phone or lodge a claim.
Similarly, if you bought a new smart watch and accidentally dropped it onto a concrete floor six months later, the watch would immediately register itself as damaged beyond repair, and its owner would receive the insurance claim value into their bank account within 24 hours without you having to contact the insurer.
So how can the embedded concept be extended to pet insurance, a market that has been identified as in sore need of a radical shake-up?
Embedding insurance into pet services provided at veterinary clinics or rescue centres, for instance, or as part of the sale of products such as pet collars or even pet food subscriptions, could help to revolutionise the fairness and relevance of insurance coverage for this market.
One of the biggest challenges pet insurers face in attracting customers is dissatisfaction with rising premium costs, and lack of trust among consumers over the value that pet insurance actually brings.So, while the size of the UK pet market is projected to grow to £1.5billion in gross written premium by 2025, with an estimated 3.4 million pet insurance buyers, at the moment, 70 per cent of dog and 84 per cent of cat owners do not have insurance cover for their pets in the UK.
Add to that the fact that 42 per cent of pet owners feel that insurance is too expensive.
Insurers are under pressure to bring new, more relevant and affordable at the time of quoting. For claims settling, it can predict an accurate reserve, based on the type of illness, or even predict a possible litigation. Low-code, Cloud-based modern core systems architecture, meanwhile, enables data-hungry applications like AI to run in the background, making data-powered decisions and drastically improving the efficiency of underwriting and administering high volumes of policies.
Cloud architecture, enabling faster speed-to-market, now makes it possible for insurers to launch new coverage within a few weeks and not months, with single product definition toolsets allowing for quick additions or revisions to products using a single point of change for rating, rule, form and page modifications.
“Embedding insurance into pet services or as part of the sale of products could revolutionise the fairness and relevance of insurance coverage for this market”
The benefits of getting it right at a central level are clear – allowing for a personalised customer experience on the front end while running a significantly higher volume of policy sales across the board, powered by streamlined workflows that have eliminated inconsistency, poor integration and lack of transparency.
FAIRER FOR PETS AND OWNERS
While embedded insurance has been around as a concept for a while, realising the full benefits requires a different way of selling, innovative new products and a closer, more personalised relationship to deliver relevant coverage exactly when customers are most likely to recognise its value and the real-time experience it offers.
Ultimately, the big change in mindset for insurers is that it’s not about the process of selling standalone insurance to a customer, it’s about providing the customer with a seamless experience when hey buy other products and services.
There is a golden opportunity for insurers to use joined-up thinking, powered by technology, to reconnect with consumers and offer more relevant, fair and simple products that are backed by faster or automated claims.
The focus on joined-up data can help improve underwriting and pricing accuracy, enriched by pet information from industry sources and pricing, based on analytics from pet activity.
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