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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EIP CEO Ross Sinclair speaks to Business Reporter: The Future of Insurance
It’s time to rethink how we offer mobile device insurance
As the eerie quiet of lockdown rolled across our cities and towns, our devices lit up. In the UK, we watched ‘Whitty’, subscribed to steaming services, binged box-sets, jumped around with Joe and rediscovered how it really is ‘good to talk’.
Has the lockdown changed customer attitudes towards mobile device insurance?
Mobiles, tablets and laptops were central to remote working, home-schooling, online-gaming, house-partying and quizzing. They were lifelines to our loved ones, long-distance relationships and long-lost friendships. As we stayed home and stayed connected, the networks saw data usage surge (by 11GB per person a month on average), and figures from Ofcom show the average phone call rose from 3 mins 40 secs before lockdown to 5 mins 30 secs by the end of it.
But did this increased dependence shift our attitudes towards protecting our mobile devices? Or could mobile device insurance become another casualty of lockdown? What do providers need to consider as we move towards a new normal?
Demand for mobile device insurance will quickly return
Whilst claim statistics show that drops, knocks and spills are less likely to happen at home than on the move, they still put a lot of smartphones out of action through lockdown. Loss and theft reduced significantly through the pandemic, but we can expect these risks to rise again as travel restrictions ease.
Our increased reliance on mobile devices is likely to drive strong demand for protection against the cost of repair and replacement. But, with more pressure on household budgets than ever before, value for money is going to come under a keener lens and mobile insurance will need to deliver on its digital promise and keep pace with the requirement from consumers to be always-connected.
To date, the traditional offering has changed little but the explosion in business and consumer connectivity opens the field for the disruptive effort of InsurTech. New technologies will start to play out in the mobile insurance market. AI and machine learning will help shape risk premiums and drive changes in pricing and cover, and devices themselves will be able to detect when they’re damaged trigger a claim.
Customers will no longer accept the slow, cumbersome experiences of before
As we emerge from lockdown and start to shape the new normal, all generations have embraced and adopted digital services at an unprecedented pace. Immediacy will be a non-negotiable demand; people will expect slick processes, a straightforward experience and real-time resolution. Claim forms, call-backs and lengthy repair cycles won’t cut it. To delight customers in this internet-enabled everything, post-Covid climate, insurers need to speed up the customer-facing processes, work and think digitally. Intelligent analytics will drive personalised insurance cover, protect against fraudulent claims and enable fair, risk-based premiums at point of sale AND beyond as a customers’ risk profile develops.
The global phone insurance market was worth US$27bn in 2020 and analysts forecast strong growth in the next five years. InsurTechs are going to set the pace of change in this industry. Consumers want fast, simple, and inexpensive. They’ll get it. Loyalty may play a less substantial role in customers’ decision making with the move to an online marketplace but innovation and reputation will hold customers attention. As data enables innovation around customized solutions and frictionless service solutions, tech will become a key differentiator. People will lose patience with call-waiting times and switch to top-notch technology-driven experiences. Put simply, we’ve developed a digital independence during lockdown. And companies need to #getwiththeprogramme.
If you want to know more about EIP’s digital insurance solutions get in touch with the EIP team. See how our innovative software, powered by automation, is transforming the insurance experience.
Author: Esther Connock (Business Development at EIP Ltd.)
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