There’s no doubt that 2020 will be remembered as the year that changed the world. Whether that overall change was for the better or for the worse is a matter of perspective. One thing is for certain, 2020 has been the year of immense innovation and adaptability in the face of seemingly insurmountable adversity caused by the COVID-19 pandemic. In this piece, I’ll touch on some of the greatest challenges that could have had a potentially crippling effect on the economy but instead were overcome and ultimately paved the way for increased resilience and innovation.
Public transport shunned in favour of private vehicles, but driving patterns dramatically shift
With ten months of varying national and regional lockdown restrictions, passenger numbers on public transport have plummeted as many people continue to work remotely, and with most opting for the safety of travelling by private vehicle when they do need to get out and about. But because of restrictive travel measures, motorists have been using their vehicles far less frequently.
This posed a major challenge for traditional motor insurers that were not able to swiftly adapt to this change, with many coming under fire for failing to adjust annual premiums in line with new driver trends. As motorists became increasingly frustrated having to pay the same premiums or sometimes even more despite their vehicle usage being substantially minimised, the relatively new and still largely unfamiliar InsurTech industry was able to rise to the occasion.
In short, InsurTech involves the utilisation of the latest technological innovations such as data analysis, cloud computing, artificial intelligence and machine learning to enable insurance products to become more agile and flexible in line with modern consumer demand – all while remaining price competitive.
Being fully-digital and technology-driven, InsurTechs demonstrated the flexibility and agility that enabled them to adapt to the huge shift in customer demand and step change in how insurance is purchased and consumed. They did this by offering an entirely digital user experience in near real-time, with temporary policies tailored to the time actually needed – anywhere from 1 hour to 28 days.
In a time of furlough and economic uncertainty, this meant that many motorists who were not using their vehicles regularly did not have to take drastic action like declaring their vehicle SORN to achieve short-term financial relief. Nor did they have to risk driving uninsured or committing to an annual policy that they could ill afford at the time.
The rise of the digital dealership offering temporary insurance as part of the purchase journey
In the automotive retail market, dealerships were forced to make drastic changes to their operating models to comply with social distancing guidelines. Showroom footfall and subsequent sales initially plummeted. But in the face of this immense adversity, we witnessed the rise of the digital dealership, a concept that would have been unfathomable even just a year ago.
Cazoo was the first fully-digital platform to enter the vehicle dealership market in late 2019, and there has also been significant investment this year in new entrants such as Cinch and Carwow. Traditional dealerships such as Arnold Clark, Cargiant and Motorpoint have extended the digital aspects of their purchase journeys with services including home delivery and Click and Collect as alternative options to the full show room experience.
InsurTech has been instrumental in ensuring that car insurance supports this shift to digital, as several national blue-chip dealerships, with both physical and digital showroom floors, now offer temporary driveaway insurance policies that cover the vehicle for a fixed-term, usually between five to seven days.
The entirely online one-step user experience is the first of its kind in the traditionally outdated and inflexible driveaway insurance industry and it is dramatically simplifying the process of how insurance is purchased and consumed. Due to the flexibility and agility of the digital solution, each retailer has its own unique URL, where the customer can obtain a simple single-cost policy in just 90 seconds through an entirely digital process, which fits in line with the evolving consumer purchase trends.
This takes the stress out of searching for annual insurance on the spot and provides the driver with near instant cover so that they can immediately drive their new car while giving them the opportunity to thoroughly research the best annual policy to suit their needs. It’s also an ideal solution while the car is under its money-back warranty, as the driver does not have to commit to an annual policy on a car that might be returned. Another benefit is there’s no risk to any existing No Claims Discount, as it’s a separate and standalone policy.
Declining brand loyalty and a demand for a more personalised and convenient user experience
Insurance has an unenviable reputation for being inflexible and even unwilling to adapt to shifting consumer trends – making it confusing for most customers. Even pre-COVID, there was a clear trend that brand loyalty was in decline, as modern day consumers are no longer prepared to remain blindly loyal to any company for a long-term period. Instead, they will reward businesses that offer a simple and convenient user experience at best value. COVID accelerated this trend and many large insurers have struggled to adapt accordingly.
Conversely, this has enabled InsurTech to thrive, as the products and user journeys are developed with direct input from customers to ensure that they are receiving a straightforward and fit-for-purpose solution that best fits their needs and requirements. Just some examples of this are simplified terms and conditions, near-instant and paperless policy documentation via the web or dedicated app, and data-driven customer engagement initiatives that offer personalised discounts and communication via email and text messaging. The end result is a user experience that is easier, more convenient and better value for potential consumers in the market.
Cautiously optimistic (if somewhat uncertain) future
Even in the most stable periods, it’s a challenge to accurately predict future market trends. And with 2020 completely rewriting the rulebook on how business is conducted, it would be remiss of me to make outright predictions. One thing is for certain, the days of slow, inflexible and costly motor insurance are numbered. It is important to note that this doesn’t mean that InsurTech is gaining the upper hand at the expense of the traditional insurers in a bid to replace them.
Instead it is there to fill a gap and act as a complementary add-on to provide the best possible value to the consumer. Industry players that enter new collaborative partnerships will dramatically improve the consumer experience, leading to new business wins and return custom, which ultimately impacts positively on the bottom line. But those that fail to adapt will be left behind.
I believe that we can look forward to a futuristic economy in 2021, where ground breaking technology continues to advance at an unprecedented rate to adapt to rapidly evolving consumer lifestyles and subsequent purchasing habits. The real winner will be the consumer and that is in everyone’s best interest.