As we ring in the new year, insurance customers will benefit from fairer and more equitable pricing based on their risk profile, not on whether they are a new customer or not, as the Financial Conduct Authority (FCA) will officially enforce its dual pricing ban at the start of 2022 .
Although the potential short-term implication could be an increase in new policy prices, the longer-term benefit will be more transparent pricing that is not punitive towards long-standing policy holders. It may even lay the foundations for a future where insurers can reward loyal customers with more competitive rates – within the context of their risk profile.
This means many insurers will move away from a purely cost-saving model, as insurance is complex and ease of doing business is becoming increasingly important. Priority will need to be placed on giving customers a greater understanding of what they are (and perhaps more importantly, are not) covered for through product transparency, simplified policy language and an enhanced user journey.
Partnerships are key to enhancing the customer journey
A highly-effective way to enhance the customer journey is through collaborative partnerships, which have steadily increased in 2021. And for good reason too – they feed innovation and creativity. A good case in point is the ongoing collaboration between InsurTechs and traditional insurers.
Together they make the perfect team. InsurTechs, which provide fully-digital UBI products such as temporary car insurance, have been able to swiftly adapt to market changes and meet new consumer demand instantly. At face value this may paint a bleak picture for traditional insurers but dig deeper and there is an exciting new era of possibility awaiting the insurance industry.
We know that the large insurers lack the agility to respond swiftly according to unpredictable market trends, and this is where smaller InsurTech businesses can prove to be invaluable partners, as they are at the heart of the digital UBI product revolution.
They have the proprietary technology and skillset to create bespoke digital products for the large insurers, thereby enabling them to keep up with the industry disruptors through collaboration rather than direct competition – all while satisfying ever evolving customer demand at a competitive cost. This ultimately means that UBI products should be seen as a complementary add-on, rather than an outright replacement to the existing annual model, which still has an important role to play.
Of course, it’s a two-way street and InsurTechs can also benefit substantially from collaborating with the large insurers. By partnering with a widened portfolio of well-established underwriting partners, InsurTechs are able to expand their coverage options and acceptance criteria, while ensuring that they offer their customers a comprehensive choice of the most competitively-priced policies in the market.
The importance of looking beyond industry partnerships only
Collaboration within the insurance space is paramount to future success, but the industry should be careful not to insulate itself from new opportunities that reach further and add greater value to the end user. For example, enhancing an existing motor policy offering by partnering with a recovery service provider to add breakdown cover as an option for additional peace-of-mind.
Another example is in the automotive retail sector, where we continue to witness the astronomical rise of digital car dealerships and their ongoing collaboration with InsurTechs, where temporary driveaway insurance policies are offered as part of the purchase experience.
This dramatically simplifies the process of how insurance is purchased and consumed as dealerships are able to offer customers a fixed-price insurance solution that is more transparent and user-friendly, thereby creating a more positive experience of getting a newly-purchased car insured.
The past year has proven that the insurance industry has risen to the challenge of adapting with the times, but we still have a long way to go before we shake off the old stigma of operating under a cumbersome and inflexible model. A customer-centric and technology-driven approach will go a long way in improving ease of doing business in this highly complex industry. And that will ultimately lead to more brand trust and an enhanced industry reputation in 2022 and beyond.