Customer Experience

Start-Ups Set Sights on Smaller businesses

When start-ups jumped into insurance, many focused on the private auto industry. Unsurprising, great deal of thought is arguably the least complex type of insurance and is usually the first to become disrupted (going back to Progressive within the '90s). Now that InsurTech investment is at an all-time high, more start-ups are entering the marketplace and also have become increasingly positive about their ability to tackle complex lines of economic. If recent start-ups like CoverWallet and then Insurance are any suggestion, small commercial clients are the following line to manage aggressive disruption. If carriers wish to stay competitive and grab profitable share of the market, they will have to adjust to today’s standards for that customer experience.

Small Commercial a clear Move for Startups

Targeting the small commercial business market is sensible, given a recent McKinsey study that calls the line “one from the few bright spots in P/C insurance.” The study points out that, since the 2008 recession, the amount of smaller businesses has grown, and 40% of sole proprietorships don't have insurance.

Unfortunately for the traditional carrier, the majority of small businesses will also be available to purchasing policies online. But remember that saying you're available to purchasing on the internet and actually purchasing online are a couple of completely different things – particularly if we use the recent past as an indicator.

Google Compare terminated operations after sluggish growth over the U.S., with many of the leads failing to purchase. This is not atypical for this insurance shopping method. In the past, Overstock also tried selling insurance online outside of personal auto – including commercial business – and that closed down quickly.

That two business giants failed doesn't mean online purchasing won't eventually become popular. Start-up culture is largely a test-and-learn environment.

But these initial growing pains do indicate that traditional insurance continues to have an opportunity to stay alive amid disruption if they offer an efficient, engaging consumer experience.

Consumers Want Both Confidence and Efficiency

It's not that consumers don't want to use carriers and agents, it's the customer efficiency of 30 years ago is no longer a suitable benchmark. Obviously small business owners are available to purchasing online, because traditional insurance hasn't yet given them the knowledge they really want. According to a PIA study on this past year, small commercial businesses would much prefer the personal attention from agents (by extension the carriers they work with) once they do a better job of adapting to technologies and also the Internet. In the customer's perspective, an event by having an insurance company isn't compared only with other carriers – but to other companies they are doing business with regardless of industry. Be it Amazon, Apple, Google, etc., your customer experience will be rated against the companies leading in the current, digital world.

This explains most of the start-ups entering the area now and why they've the potential to achieve top of the hand.

To achieve better communication, carriers need to think more broadly about their usage of data and predictive analytics. You need to gain a remarkably detailed view of your customers, their behaviors as well as their responses for your communication and product offerings. We always recommend an incremental rollout of analytics to obtain your feet wet before getting started. At the same time, it's critically important to be prepared to build off that early momentum and develop a general predictive analytics strategy that seamlessly merges with business goals. Recognize that this evolution to increasingly data-driven is really as much about organizational change as it is about technology.

When carriers understand how predictive analytics benefits them, they can confidently make data-driven decisions that improve every aspect of their business – such as the customer experience. For example, using underwriting analytics to attain real-time insights into pricing policies doesn't just help a carrier’s bottom line – it also greatly streamlines and expedites the communication chain between consumers, agents and carriers.

At the current Dig In insurance conference, a panel of InsurTech CEOs discussed how start-ups dissect insurance data – with techniques that vary from traditional insurers and agents. A member of the crowd asked, “Why are start-ups so combative within their approach?” It was an intriguing question that highlights the digital divide when it comes to how the industry thinks about evolving versus how technology and Internet marketers consider playing in industries ripe for disruption. What feels “combative” towards the incumbent is often seen as “customer-centric” to the new entrant.

It's important that carriers understand that there's a method to co-exist, but relying on new entrants to simply accept things as they are is really a bad bet. Consider start-ups as an advocate for a better customer experience, and find out the ones that match your business as innovation partners. Adopt the mantra that the customer always wins, and you will remain relevant in the customer value chain.