Insurance is clearly broken, so what's its future?

Let's just put it out there: insurance is a boring, clumsy, mysterious beast. Nobody enjoys buying it and hardly anybody feels fully covered when they do. Thankfully old-fashioned insurance is about to change forever. With InsurTech the new Fintech, a new age of insurance is just around the corner. So what might it look like? Here are a few predictions...

  • Pay-as-you-go

The first big change will be a shift away from bloated, fixed premiums. On-demand cover will take its place, better suited to lifestyles of fewer routines, increased shared ownership and gigs on the side.

There’s a number of hot new InsurTech startups to help. Making a last-minute road trip? Simply whip out your mobile phone and top up with Cuvva or Metromile. Santa get you a new camera for Christmas? Simply swipe or snap your things and services like Trov will do the rest. Pay-per-day and pay-per-use insurance is on the cusp of taking off.

  • Pay-as-you-grow

Entrepreneurial journeys often begin with little more than a big idea and a laptop. If things go well the office, inventory, customers and employees quickly follow, and your cover can’t keep up with your business growth. Very few insurers really understand SMEs, let alone digital start-ups (although I’ve personally always found Hiscox among the best).

Digital Risk is a new player swapping annual premiums for monthly subscriptions offering more control and greater flexibility. Perhaps the same logic could be applied to family cover too.

  • One person, one policy

Product bundling is nothing new in insurance. Buy contents on top of travel and it should trigger an automatic saving. But what if insurance companies were more ambitious and introduced a single policy for everything?

The demand is there. I, for one, would happily pay extra for the added convenience.

  • Self-insuring objects

The insurance industry is yet to properly catch up with connected homes, cars and things.

Yes you can use in-car telematics to assess driver safety and recover a stolen vehicle but that’s just scratching the surface. For example, 2017 will see the launch of the first ever electric wallet for cars. Powered by Blockchain, it’ll automatically pay for car sharing rides, tolls, parking meters, electric charging, and more.

  • What does this mean for insurance?

A previously idle car, computer or device could activate cover the moment it is switched on or packed in your smart suitcase. All without the need to fill out a form or call a call centre. Anything that reduces consumer effort is on to a winner.

  • Bye-bye broker

There’s no escaping the fact that insurance is a pain in the ass to buy. Let alone make changes to or claim on. It’s bad business too. Stuck shoppers are crying to be converted into paying customers but fall at the final hurdle.

Here’s where AI can help: rising InsurTech start-ups such as Spixll, Ladder and Simples are turning to bots to make product recommendations, give instant decisions and answer any questions you have about your policies. No more form-filling or confusing jargon.

Lemonade have refined the art to the point that it now only takes 90 seconds to get covered, 3 minutes to get paid on a claim. They’re also blowing the old business model to pieces; any profit they make is distributed to good causes the customer cares about. Lemonade is currently only available in New York but expect it to catch on pretty soon.

  • **No accidents, no insurance

“We’re not in the business of making better cars. We’re in the business of making better drivers.”

That throwaway line by John Krafcik, head of Google’s Waymo, explains why the biggest disruption of all will come from driverless cars.

Since 2009, Google have accumulated the equivalent of over 300 years of human driving experience. That’s on top of 1 billion simulated miles driven in 2016. All without a single accident, which makes car insurance kind of redundant.

Another benefit of taking drivers out of the equation is fraud reduction. A staggering 1 in 3 customers commit insurance fraud, adding £100 to the average premium. Driverless vehicles present a simple fix to the problem.

All in all, I’m betting 2018 will be an interesting year in InsurTech. Next time you go through the pain of taking out a new policy, just remember that a better experience of many magnitudes might be in place for your renewal.

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