Article by Cove CEO Andy Coon

Insurance – it’s something we all need, but something we would prefer not to deal with. When you ask Kiwis what the ideal insurance experience is, it’s essentially no experience at all. Most people don’t want to think about it and just want it to get sorted out in the background.

New technology is enabling lots of interesting things in the insurance sector internationally, and it’s time New Zealand started to see some of this innovation. These technologies have the potential to improve the speed, service level and transparency insurance companies can offer to customers. And even more interestingly, insurers can assist in preventing things from going wrong rather than paying to fix them up afterwards.

Key to this is pairing automation with AI and machine learning and utilising the Internet of Things throughout the insurance value chain. Start-ups and innovative insurers are starting to recognise the power of this technology and customers are loving the new options.

An old industry based on sound ideas

Insurance is one of the world’s oldest industries centered around the peer to peer pooling of risk. If you crashed your car, you relied on friends or family to help you buy another one and in exchange you would help them in their time of need.

The insurer in the middle performs a few key functions:

• Working out how much each party should contribute to the risk pool (premiums) – this includes knowing that a young male with a Subaru WRX is more likely to crash than a middle-aged Toyota Corolla driver; and-making sure there’s enough money available to pay out all the claims, including in the event of natural disasters
• Working out who to pay claims to: some people try to claim for things that aren’t covered; and some invent fictitious claim events
• Helps people to get their car fixed after an incident

Technology doesn’t necessarily change these functions, but it can revolutionise how they are done.

Instant everything… but still understanding the risk

Modern consumers have become accustomed to having everything instantly available at their fingertips through powerful smartphones. Companies who embrace this like Amazon can take huge market share from traditional providers who are unwilling or unable to provide this type of service.

Insurance is full of large, slow moving companies but there is a new breed like Lemonade, a US based digital insurer that bring speed to their customers through their ‘instant everything’ concept – buy a policy in seconds and claim payouts in minutes.

Delivering this means shortcutting some old processes without losing the data normally collected because it is still key to understanding the risk. But luckily, this can be figured out with the use of quick online chatbots which gather most of the data from external datasets, rather than through long phone calls.

There is also a good use case here for a blockchain service which centralises and verifies all this personal data. Banks or other insurers already have this information, so rather than repeating it again, a customer can provide the new insurer access to that.

Claims handling has different issues but clever AI can step in to help understand if a claim looks genuine or fraudulent. Some providers often ask the customer to record a video that describes the incident. If nothing looks suspicious the claim can be rapidly settled but if something triggers the machine it heads back to a consultant for a closer look.

This mode of operating saves customers a huge amount of time and energy. It also saves innovative insurers a lot of time and money previously spent manually handling all of this, allowing insurers to give this back to their customers through lower premiums.

It also allows increased flexibility. The money saved by not manually processing a policy means there is no need for a long-term contract to recover this. Monthly contracts are becoming more common among digital insurers and this is proving very popular with rapidly changing millennial lifestyles.

Inviting your insurer along for the ride

This doesn’t sound like the key to a good time and in fact some concepts sound very annoying. One example included a voice that said, “Nudge Nudge!” in an increasingly loud and urgent tone when it thinks the person is driving too aggressively. What enables this irritation is an emerging field called telematics which uses sensors in a vehicle to detect how a person is driving and what is going on around them. There are, however, some great applications out there.

A car crash is a stressful time and there is pressure to act quickly. With telematics the insurer can be notified if something has happened as well as how severe it is and respond accordingly. A representative will contact the driver shortly after to guide them through the process, help with collection of statements, organise any emergency services etc. It also provides data to back up an account of what happened should anybody choose to argue with the description given of the events.

The most exciting application we’ve seen of this is in life & health insurance. Smart watches and mobile based health applications are making the regular logging of vital data easier than ever. This can also be done through facial recognition software tied to a ‘selfie’. US based company Lapetus uses photos to quickly determine things like BMI, gender and damage from smoking.

Given all this data an insurer might be able to pick up early signs of something going wrong and help intervene before it becomes more critical. There’s a strong financial incentive for the insurer to do this and it could save your life.

Insurers spend a lot of time understanding risk so through sharing of data, customers and insurers can work together to avoid disasters from happening rather than just fixing them up afterwards, which is really exciting news for the industry.