Going mobile

Cover (a graduate of the 2016 Y Combinator batch) built an app that

quotes insurance for any personal property (jewelry, car, house, drones,
etc.) based on a picture of the object. The app currently routes customers
to a broker, but Cover will be licensed in the next few months to provide
an end-to-end in-app solution. It’s a compelling solution that lets
consumers interact with insurance in a very different way.

“Today’s brokers are not suited for mobile-sourced customers who expect
instantaneous results from interaction: namely quotes and the ability to
convert,” says Cover CEO Karn Saroya. “Our goal is to do more for the
mobile consumer, because they expect more. If they have downloaded
our app and entered their information, their intent is very strong and we
want to satisfy that intent.”

Saroya also mentioned getting creative requests that Cover never

envisioned, like people taking selfies to try to get a life insurance quote or
insuring a racehorse with a snapshot: a glimpse into the possible future.

Microinsurance

Rather than blanketing an entire entity like a car or health with a lengthy,
lifetime policy, investors are looking for companies that are trying to focus
on events like a car ride or doctor’s appointment to insure instead —
e.g., microinsurance.

Rounding the edges

The most successful players in insurance tech will win by rounding the
edges on existing products. Don’t reinvent the wheel, take what works and
make it work for today. That means making policies be more transparent,
providing better user experiences and aligning incentives to adapt to the
world in which we live.

Many of these policies were designed 100 years ago, before modern
technologies and the complexities of a digitally connected, shared world.
Design a policy in a way that simplifies the coverage, eliminates exclusions
and makes it easy for people to articulate the benefits. Like rounding the
edges on a sharp corner, it’s simple to do and makes it less likely for
people to get hurt.

“Currently, the burden is on the insurance industry to adapt to

consumers’ changing needs for increased transparency,” according to
Farron Blanc, VP, Innovation Studio Lead at RGAx, one of the largest life
insurance companies. “Insurance must similarly adapt; whether that is
improved transparency in how an underwriter verifies applicant
disclosures or the shape and timing of commission payments for advice.
Insurance must adapt in order to advance its honorable purpose and
change lives for the better.”

Transparent policies. Insurance is notoriously complicated and opaque.

The policies tend to be written by lawyers and bought by regular
consumers. That doesn’t seem fair, does it? Well, you can disrupt
insurance by providing clear and transparent policies to customers.

Put in plain English what you are covering and what you aren’t covering.
Eliminate exclusions and address the nuances that happen today. If you
are a homeowner’s insurer, you should allow for limited use of Airbnb. If
you are an auto insurer, you should be allowing for limited use of driving
for Uber. If someone is going to make it a full-time job, then it veers into
the commercial space — but give people room to dabble with their lives.
Make sure your policies are easy to understand and actually cover the
issues your customers face. This will lead to people spreading your
policies by word of mouth.

User experience design. Design the user experience in such a way to be

as easy as possible. Most insurance is still sold through brokers. However,
a broker adds an expensive layer, and that money comes out of the
customer’s pocket. Allow users to sign up directly with you. Have a mobile
application to allow sign up and to process claims. If there is a claim, hop
on a video chat with your customer and diagnose the situation. Allow
customers to communicate via whichever channel they desire: mobile,
SMS or chatbot. Then, once a claim is processed, notify them through the
same channel where they contacted you. This will lead to very high
customer satisfaction.

Meanwhile, incentivize users to collect as much data as possible. Mobile

devices and IoT enable a host of ways to collect more data, learn about
your customers and further align incentives based on actual real-time
behavior. Start training your customers early and eventually it’ll pay off
when you learn how to segment them based on their own behaviors.
Aligning incentives. Being able to use your coverage when you need it is
the hallmark of insurance. However, insurance is not designed to cover
every scratch on your car and every cough you get. Insurance originally
was designed for catastrophes — big expenses. For example, Lloyd’s of
London would cover you if your ship was stolen by pirates.

The small expenses cost the same to process as the big ones. Aligning
incentives so the user is incentivized to handle small issues themselves,
with zero handling cost, and using their insurance for the big expenses,
saves insurance companies a lot of money. This can allow you, as the
insurer, to pass on savings to your customers.

Prevention of loss is becoming more of a focus for insurers, with a shift

in the industry to move from merely compensating for risk to mitigation
of it. Protection is more than just helping you up after you have fallen, it’s
about stopping the fall before it happens. Advancements in cybersecurity,
sensors for the auto industry and connected home devices are all
contributing to reducing risk before an incident. This isn’t specific to P & C
insurance either. Life and health insurance companies are heavily
investing in preventable health technologies through fitness trackers,
educational apps and programs that incentivize healthier lifestyles in an
effort to reduce the cost of healthcare.

Cost reduction is a key component to any business and is often the

difference between success and failure. Many insurance companies are
starting to leverage new technologies to streamline outdated processes.
This could be anything from more profitable ways of improving the
enterprise by using uniform applications across industries to more niche
applications such as reducing fraud. In addition, technologies enabling
instant claim processing, better underwriting tools or enhancing agents’
capabilities by digitalization can cut down the operational costs on a
massive scale.

Adapt to changing behavior

Technology innovation has exploded in the last 100 years. In the last two
decades alone, millennials have especially grown up in an era of rapid
change. They’ve gone from tech ground zero to a thriving tech ecosystem
— addressing any and every problem one can imagine.

There also has been a shift in thinking. Millennials want access to cars and
houses, but don’t want the responsibility of owning them. In fact,
a Goldman Sachs report states that 60 percent of millennials would prefer
to rent things like homes and cars rather than own them.

Insurance companies now need to insure the sharing economy, from

Airbnb renters to Zipcar users. And anything that is shared needs to be
protected. This is where insurance technology comes in. It is the next
frontier for companies to tackle.

New insurance products

Many new technologies have brought about a huge shift in the way we
interact with the world around us. With these advances come unfamiliar
liabilities, risks and market opportunities. For example, with technologies
like autonomous driving, there is an expected decrease in the auto
insurance market size, which means corporations will need to
compensate by finding new product offerings and becoming “specialty
insurers” rather than just a traditional auto insurer. Risks in the future will
not be as easy to segment or blanket with overreaching policies and will
require more specific expertise, tools and flexibility with the shift of
liability.

On the other hand, technology can empower traditional types of

insurance offerings, as well, and open the way for different carriers to
offer products that were not cost-efficient before. For example,
blockchain-enabled technologies can result in dissimilar ways to insure or
improve the way products are offered and distributed (i.e. Smart
Contracts allowing instant claim settling, digital currencies playing a large
role in microinsurance, etc.).

Leveraging Artificial Intelligence

Solaria Labs, Liberty Mutual Insurance’s tech incubator, has created an API
developer portal to bring together public data and “proprietary insurance
information” to help users find potentially safer routes — and help them
assess damage when that doesn’t work out.

The AI in the API gives users repair estimates post-crash. “The AI Auto
Damage Estimator app technology was trained using anonymized claims
photos so the software could be built,” wrote Ted Kwartler, the assistant
vice president of Liberty Mutual Innovation, in an email. So if you do end
up in a crash, you can take a picture of the crumpled fender and upload it
to the app. The AI will compare it with thousands of photos to determine
which one is most like your car’s damage and tell you on the spot what
the likely cost of repair will be.

The API also aggregates public data on things like auto theft, parking
citations, and crashes to help drivers find the safest routes and parking
places. The “proprietary insurance information” is added to make the
collected data useful for users. “It’s a combination of insurance expertise
and consumer testing to help guide the decision of what services to make
available and how to organize the data,” Kwartler said.

Photos are anonymized for the purpose of training the AI, and the data
used by the API to determine routes is publicly available. “Liberty Mutual
will not share personally identifiable usage data we collect with any third
party except to service customers’ auto policies, for research, or as
required by law,” according to Kwartler.