How to transform insurance with digital technology from the customer up
How mobile device insurance companies can improve customer pricing
While other insurers reinvent themselves for the digital age, mobile device insurance is lagging and must keep pace. EIP CEO Ross Sinclair believes it’s time to rethink how the mobile device insurance market operates.
The mobile phone industry is buzzing. Consumers are attached to their mobile devices more than ever before – more so after the Covid-19 pandemic. However, mobile devices are becoming increasingly expensive and device screens are getting larger, making repairs more costly. As a result, the insurance premiums to protect these devices are increasing proportionately and reaching the point of becoming prohibitive to consumers.
With their high use and propensity to damage, it’s surprising that mobile device insurance is behind other areas of the insurance industry. Now is the time that smartphones deserve smart insurance. EIP’s own data shows that more than 90% of device insurance claims are for accidental damage, due to large glass screens and extensive use. However, as EIP CEO Ross Sinclair explains, “Mobile device insurance claims are relatively simple, but the claims process, lacks efficiency.” The future for the sector, he said, is through usage-based insurance and personalised policies, priced on a customer’s specific profile. By leveraging a more personalised pricing approach, insurers gain not only much more stability of margins, but significantly increased profitability – and some of these profits can be reinvested in a softer and more efficient claims approaches.
It is important to understand a customers’ profile during the risk assessment and according to Sinclair, although the handset is a factor to risk, the biggest risk factor is the user of the device. “Our industry uses a ‘one price fits all approach which assumes that more expensive handsets are a higher risk than cheaper ones, but this is wildly inaccurate as the device price is not a risk factor,” he said. “A little old lady presents a very different risk of damaging her phone than a 22-year-old scaffolder – but until today no-one was taking that into account.”
Is device insurance pricing stuck in the past?
Of course, devices and their functionality have changed beyond recognition, but the insurance products that protect them have refused to evolve at the same pace. The failure to adapt could be a
contributor to the decline in mobile insurance sales, Sinclair said. There are several contributing factors in this shift in focus away from device insurance but price is a major component, it is not unusual to see insurance premiums for a mobile of between €15 to €20 per month, which can be discouraging for many customers. Sinclair added, “Insurers constantly walk an underwriting tightrope where prices need to be maintained at a level to attract a broad range of customers, rather than pricing for just those who are higher risk and would therefore incur higher claims levels,” Sinclair said.
Consequently, more intelligent pricing of these risks is the need of the hour, in order to maintain a balanced book of business and attract low risk customers with preferential pricing.
A solution for many InsurTechs is to make insurance pricing much more sophisticated. Sinclair added that mobile technology allows insurers to understand end-users’ activity in real-time and correlate this against claims data to build a much deeper picture of risk. “Think telematics in the motor insurance industry, where the ‘black box’ in the car tracks how, when and where the insured is driving and allows the insurer to price according to the specific customer risk,” he explained. “A few years ago, it would have been unthinkable – and technologically impossible – for customers to offer up this level of sensitive data to an insurer, but the culture is changing and the savings can be compelling, so we’re seeing the telematics industry growing by 20% per year.”
How EIP is flying the flag in mobile device insurance
Mobile device insurance providers need to increasingly focus on delivering the right claims experience – and the insurance experience as a whole. As Sinclair detailed, the focus must be on simple management of policies, easy ways to update details and make claims, and faster claims handling, decisions and payouts. This is what EIP aims to do. Its tools enables insurers, mobile operators, banks, retailers and others to offer subscription-based insurance products to their customers much more quickly, efficiently and cost effectively.
EIP has developed contextual pricing based upon a number of metrics surrounding the customer, such as age, location, gender, occupation and more. This contextual pricing uses up-to-the-minute claims data to deliver a unique price for each customer. By adopting this methodology, insurers can increase profitability of a given program by up to 40%, Sinclair claims.
On the claims side, one of EIP’s offerings, Autoclaim, uses the gyroscope and accelerometers within a mobile device to detect when it has been dropped and it then passes that information to the core system which automatically creates a draft claim. It then checks with the customer if they need to make a claim and if they confirm ‘yes’, the claim is submitted. The whole process takes less than ten seconds and two button presses.
Current state of the mobile insurance industry
While the industry at large is dragging its feet, mobile device insurance providers are slowly changing their strategies.
Looking forward, according to Sinclair, “It is clear that there will be renewed interest in mobile device insurance soon, with InsurTechs beginning to enter the market to offer companies more innovative ways of providing protection for mobile devices and other subscription insurances.” Indeed it’s easy to see how a slew of very clever insurance technology startups such as EIP are mushrooming and scaling up across the world. The global mobile phone insurance market which was estimated to be worth $20bn in 2019, is expected to grow at a CAGR of approximately 11.5% accounting for more than $76bn in 2030, according to data from Allied Market Research.
To stay in business, companies need to adopt these InsurTech tools and design the products and processes from the customer up rather than the insurer down. He concluded, “Those insurers who partner with the smartest InsurTech will likely flourish and those who don’t will likely be swallowed up or even disappear completely.
This article was originally featured in the 2021 InsurTech 100 list. The InsurTech100 is an annual list of the most influential global InsurTech brands. It recognises the next generation of InsurTech solution providers who are shaping the future of the Insurance industry. EIP are once again excited to be recognised amongst the worlds most exciting InsurTech companies in the Insurance industry for 2021.
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