The Avenga Team
For some years now, Insurtech companies and start-ups have been disrupting the market with fresh ideas and new technology. “Digitization” is not an issue for them, as they are already there where many an established provider still has to go.
The insurance industry is transforming. New technologies and new customer requirements are rapidly changing the rules of the game. Insurtech start-ups are showing industry leaders where the journey is headed. They focus on new ideas which are consistently geared to the needs of their customers. In doing so, they have a major advantage over established companies: No legacy problems with the IT infrastructure.
We took a closer look at three young providers and present what they are particularly good at doing.
Founded in the USA in 2015, Insurtech company Lemonade focuses on home contents, and homeowners’ and renters’ insurance. The provider’s specialty is its high speed – an important feature of user-friendly services.
The digital insurer enables immediate insurance conclusion via app or website, with easy-to-understand questions, within 90 seconds. The tariff option “Zero Everything” excludes all deductibles and future price increases. Claims are usually settled within three minutes. This is the speed which customers expect in the digital age.
Once the product has been purchased, the insurance cover can be quickly adjusted at any time via app. Lemonade follows the approach of keeping to the customer’s demand and adapting smoothly to the ever-changing needs of its customers. This enables customer-specific problem solving without having to forego the cost advantages of process-oriented mass production.
This is exactly how long the Insurtech start-up system took to analyse the claim transmitted by the customer via an input mask, compare it with the insurance cover, carry out 18 anti-fraud checks, approve the claim, and trigger the payment of the claim to the customer’s account.
There are many hurdles to setting up an insurance company and Lemonade has not been on the market long enough to evaluate the success of its concept. The biggest growth inhibitor for new market participants is new customer acquisition. Lemonade wants to increase its turnover in the future by means of annex sales and therefore provides other companies with an API to its platform. In addition to their own products, these companies can sell their customers a home contents, and homeowners’ and renters’ insurance depending on the context, without having to visit the Lemonade website or install the app.
According to the “Insurance Times“, Lemonade pays out 38 US dollars for every US dollar it takes in premiums. This is already taking into account that the Insurtech start-up is very selective in its choice of customers. Nearly half of those interested in homeowners’ and renters’ insurance have not received insurance coverage.
The sustainability of Lemonade’s business development will become apparent in the next few years when key performance indicators such as retention, claims and expenses or customer satisfaction can be evaluated on the basis of reliable data. Risk assumption in the insurance industry occurs years before an insurance claim occurs. Successful digital business models are transaction-based.
Customers are quick to realize the benefits and change their behaviour accordingly. In indemnity insurance, however, there are significantly fewer touchpoints.
Trōv was founded in the USA in 2012, and is an on-demand insurance platform which offers its customers insurance cover for around 10,000 specific products using a simple and user-friendly “Mobile-First” approach. All concluded micro-duration insurance covers are stored in the app and can be switched on and off with a swipe.
In this way, Trōv attempts to reawaken the customer’s awareness of an insurance product and its daily benefits, thereby establishing permanent points of contact with the customer. This approach is based on the development that the smartphone has become the centre of everyday life for many people.
With the Insurtech start-up, customers can insure exactly those things which they want to insure, and exactly when they want to insure them. This is achieved by controlling all interactions with customers 100% via the app on the smartphone: From registering a new item e.g. by importing an invoice from the mailbox, to activating the situational insurance with a swipe, to reporting the damage via chat. In this way, insuring objects and valuables is made as flexible and as simple as possible.
Even registration is much easier than with a conventional insurance: With a minimum of data input, the customer can create an account at Trōv. The smartphone used by the customer is automatically recognized by Trōv, the current value of the device is estimated and the customer has the opportunity to add it to the Trōv inventory. This way, information about the customer’s property is already stored in the cloud during registration and can be accessed at any time.
In October 2017, Trōv added the option of also taking out insurance cover on the Trōv website. To make it even easier for customers to find products, in addition to searching Trōv’s database, they can also search their items and valuables by category using drop-down menus.
The option of switching insurance cover on and off according to one’s situation sounds good, as customers can decide on their own when and what insurance cover they need. The customer no longer needs to think about home contents insurance with its small print. But can switching on and off become a daily habit? Insurance has rarely been actively requested by customers. In the case of situational insurance cover, customers must actively manage it themselves. In this regard, Trōv CEO, Scott Walchek, has already admitted that many of the Insurtech start-up customers leave their insurance cover on, 24/7. Thus, one can no longer speak of situational insurance cover and customer interaction.
Focused solutions with the aim to position them in a way which can be explained in one sentence and addresses a clearly defined target group. If the customer can already see from the brand name which services are to be expected, this is an optimal introduction to a focused insurance solution.
Haftpflicht Helden has accomplished this feat. Founded in Hamburg in 2015, the Insurtech start-up is – of course – specialized in liability insurance, especially those with minimum terms. The transparency which the name already promises is also evident in the service descriptions. This is made possible in part by the focus on flat-rate insurance, as Haftpflicht Helden calls it: The standard products already cover many individual liability areas, from key losses to bad debts.
This is the basis for plain and understandable product descriptions. In addition, there are explanatory texts which include passages such as: “At a first glance, insurance without a deductible seems more attractive. But is this really the case? In the interest of everyone, this question is not unimportant. Therefore, it is worthwhile to take a closer look. We have dealt with the deductible intensively and consider it sensible for the following reasons in the interest of our users”.
The customer is more likely to encounter classic “insurance German” in the set of terms and conditions, but Haftpflicht Helden also supports understanding here with explanatory articles on its website.
This simplicity also contributes to the high speed: New customers can take out insurance in just three minutes. Conclusion and administration are completely paperless via the website or the corresponding app.
Incidentally, the Insurtech start-up acts as an underwriting agent and sells products from the insurance company, NV-Versicherungen. For each contract, a fee of 14.50€ is paid, which is, to a “considerable extent”, passed on to the users by Haftpflicht Helden, as the founders say in an interview.
Learn more about the opportunities and challenges that the digital transformation offers established insurers. We have compiled the most important topics in a comprehensive overview on digital insurance for you, from customer proximity to new technology.