By FINTECH Books Contributor, Martin Carroll
Digital technology, analytics and mobile connectivity will enable new models for insurance distribution.
Traditionally insurers have relied on brokers, agents and other intermediaries to distribute their products and so acquire customers. In some cases there have long been ‘affiliate’ schemes operated to aid insurers in acquiring customers via an employer (e.g. work site marketing of benefits schemes including insurance products) or product provider (e.g. auto dealer car insurance).
More recently direct to customer channels emerged using both the telephone and internet. As digital channels of communication have evolved and become an essential part of everyone’s lives, so have their importance in marketing and sales of insurance. Furthermore availability of data on these customers and, more importantly, their behaviour has exploded.
Whether that be from social media, smartphone app usage,browsing data, location data, driving data (e.g. connected car services) or wearable technology (e.g. smart watches). To understand the implications of these changes it is important to recognise that insurers’ current rates are set such that the aggregate premiums cover the aggregate cost of providing insurance for their customer portfolios.
They rely on the so-called ‘law of large numbers’, so that individual behaviour is less important. As data on individuals becomes increasingly available, e.g. via connected cars, smartphones and wearable technology, this is changing. Most Insurtech activity focuses on the ‘front office’, i.e. marketing and sales or providing assistance and other services to customers.
In some cases this front office focus translates into new disruptive channels where customers and their data come together.
Key questions remain about how these distribution channels will evolve as data becomes even more readily available, and more under the control of customers, particularly with the advent of data privacy regulations requiring portability of personal data and the personal information economy.