The trends in insurance. This book covers: peer 2 peer insurance, new business models, customer intimacy and why disruption cannot be achieved with technology alone.

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Trends in insurance
The disruption in insurance is ongoing
From product oriented to customer driven
With focus on prevention instead of claims

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Inhoud
Trends in insurance........................................................................... 1
Introduction ..................................................................................... 3
1. Making products simple ............................................................. 4
“The main issue customers have with insurers is the lack of trust” .Fout!
Bladwijzer niet gedefinieerd.
2. Engage the customer................................................................. 7
Apps............................................................................................. 9
3. Technology............................................................................. 11
Technology is an enabler............................................................... 11
Technology as competitive advantage............................................. 12
Digital stone age.......................................................................... 12
SME, all online and direct? ............................................................ 14
4. Business models ..................................................................... 15
Solution provider ......................................................................... 16

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Introduction
Nowadays you hear a lot about disruption and technology in insurance. Having
worked in insurance for fifteen years, mostly as a consultant in change projects I
decided it is time to write down my view on the trends in insurance.
I do not call it disruption simply because disruptors like Uber, Airbnb are not
likely to take over the complete landscape of insurance. Still big shifts in the
structure of insurance are around the corner and the question is whether insurers
are ready to cope with the impact even small changes can have. And even more
important, what can be done to remain a successful insurer in these demanding
times.
This book covers four main topics:
 Simplify products
 Engage the customer
 Technology
 New business models
These four topics are all answers to one simple question:
I know a lot of insurance professionals think insurance is not a commodity, but
ask your neighbour, the butcher and the man in the street and they will all say
that all insurers are alike. Because products are more or less the same, they
mostly compete on price and customer engagement is low.
Definition of a commodity:” A basic good used in commerce that is
interchangeable with other commodities of the same type.
How can I change the fact that insurance is a commodity?

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1.Making products simple
A few weeks ago I was at a congress about Marketing and distribution of
insurances.
One of the key-note speakers, James York founder of Worry+Peace an insurance
broker, stated that we need simple products. I absolutely agree with him on this,
but on the other hand making the current products easy is going to be nearly
impossible, because the products are complex and developed with the focus on
the product. So the whole infrastructure of the insurance company is product
oriented.
Several insurers have rewritten the terms and conditions of their products, this
made the terms and conditions more understandable, but this is not enough to
make a truly simple product. A simple product is easy to understand, has clear
terms and conditions and offers a good cover.
2014 research by EY states that people trust insurers even less than banks.
While banks where the bad guys during the economic crisis. For in the
Netherlands only 53% of the population trusts insurers.
So (re)gaining the trust of the customer is not so much about rewriting the terms
and conditions, but being a trustworthy party. And that means that insures can
only sell easy to understand products, tailored for the customer at a fair price.
This process should not start with the product, since the product is the result not
the starting point. Instead of looking like a car dealer, open a shop, buy a chair
and wait for the customer, start with the customers and deliver a solution
beyond their current needs. Remember that Henry Ford never asked the
customer what he wanted, he knew that answer. He looked for the demand
behind their current needs. And that is what a non-commodity insurer would do.
“The main issue customers have with insurers is the
lack of trust”

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Instead of having a product and trying to sell it, they sell the solution. And if you
are truly a trustworthy partner, you advise your customer in time to change the
product, so the product keeps up with the altered situation of the customer, even
if this means earning less premium.
The last economic down turn showed that customers are more and more looking
for low priced products. Why? Simply because the products are commodities so,
why should I pay more? And insurers encourage customers to search for the
lowest priced products. Aggregators focus mainly on price and we see very little
reaction against that by insurers. No insurer presents a top of the line product,
with a corresponding cover and service and of course a corresponding price.
There is absolutely a market for products like this.
Tailored products
In a tailored product, or in other words a modular product, a customer can
decide which covers he needs. This helps customers to understand what they
insure, the do not buy a standard product, they buy a product fit for their
situation. With the technology available at the moment we can help the customer
select the right combination of covers, without overwelming them with options
and possibilities. A trustworty partner advises the customer based on data which

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covers are best for the customer. Off course the customer is allowed to choose
his own set of covers. This functionality should be available for both brokered
sales as well as for direct sales. A broker shoud have all the possibilties direct
customers have and even more.
And per module the coverage is easy to explain, especially when the modules are
defined at atomic level, so a single module, covers a single event.
A simple product is not only easy to understand it also has simple and fast
processes and an excellent customer service. This combination makes a product
simple, not rewriting the terms and conditions or bringing products online. A
genuine simple product is provided by a reliable insurer looking at the best
interests for his customers.

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2. Engage the customer
More than 55% of insurance customers
want more interaction with their insurer.
And also more than 50% of the customers
have proactively contacted their insurer,
according to EY research done in 2014
among 24.000 customers in 30 countries.
And still insurers do not contact their
customers. They hide behind a façade of a
nice office, a well-designed website and a
phone number, only open on business
hours.
My insurer only contacts me once a year, to
inform me about the new premium rates. And once in a while with a letter about
some internal change in their name, products or service.
The Agila story
A small German Pet Insurer, Agila Haustierversicherung, suffered from the
changing customer behavior due to internet. Instead of going along with the
competitor, who just reduced prices and kept doing the same, Agila turned their
way of doing business around.
Instead of selling only via intermediaries they now also sell direct, online. With
self-explaining products, reduced complexity in terms and conditions and service
via their own customer service center.
I had the pleasure of meeting mr. Marco Brandt, Marketing and Sales of Agila.
He explained to me that this was just part of the transformation. The big change
is the interaction with the customer.

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The have a moderated platform for pet owner and enthusiasts in Germany, via
Facebook. Here the customers can ask questions to dog trainers, veterinarians,
and other pet owners.
Because people love their pets like their children, this created a massive fan-
base for an insurer. People post pictures of their pets on the Facebook page and
even every year Agila gets contacted by the media to reveal the trends in pets
names.
They also invested in becoming the reliable partner, they process claims within 8
hours, and they have very simple terms and conditions.
Since they altered the terms and conditions the most commonly asked questions
is where are the complex terms and conditions? Because customers expect a
complex document full off small print and they get a one page document, stating
everything is covered except eight exclusions.
Marco Brandt, Agila Haustierversicherung.
The example of Agila is great, but if you happen to sell fleet, life or property
insurance, then you can’t expect customers to be engaged via a Facebook group.
But there is one essential thing all customers have in common, that is
“Customers don’t want loss”
Instead of focusing on risk, insurers should focus on prevention. Because by
helping customers to avoid accidents you can have a huge impact on the
customer. Every time a customer makes a claim, there is damage, an injury or
even death. These events interrupt the day to day life of the customer, it effects
the wellbeing of the customer. By preventing injuries and damage insurers can
have a great impact on people’s lives without customers being very aware of
that.
“Do not always give your customer what he wants, if he expects complex
terms and conditions feel free to ignore this need”

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A great example here is Axa in the UK. They decided to focus on Vans, because
vans are more likely to be involved in an accident than any other type of vehicle.
Based on customer data they know where their customers are located this
combined with the weather forecast results in a push-message on the app if
there is bad weather with strong winds expected in the area of the customer.
This way the insurer actively helps to reduce the change of getting involved in an
accident.
Customers appreciate this, because they now benefit from the knowledge and
experience of the insurer. Axa contacts his customers on a weekly basis via the
app, not only with alert messages also with tips. This creates both brand
awareness and customer loyalty, because now the customers gains something
additional by being insured by Axa.
A few weeks ago I have spoken to a surgeon, who specializes in heart diseases.
We spoke about wearable devices which share information with insurers. He was
enthusiastic about it because from the point of prevention it offers a great
benefit. The more data you have, the better heart attacks can be predicted. But
what have insurers done? They introduced these wearables and told customers
that in exchange for their data they would get a discount. The public reaction
was that customers wondered about their privacy etc. and that there was no
attention what so ever for the benefits.
Apps
I worked for many insurers, and most of them wanted an app in the last few
years. Because, customers expect us to have an app. When I talked to
management about the app and asked how they would use the app, they mostly

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came up with things like, customers can view their policy, in the future change it
(technology is always a struggle) and have all our contact information at hand.
But customers are not going to read their policy document and they only contact
us in case of a policy enhancement or a claim. Also we have to keep in mind that
a great deal of the business is done via intermediaries so customers contact
them first.
So we are not relevant for our customers, so neither is our app. So what is the
benefit of an app. Look at the bigger picture, the customer and the complete
customer experience you provide instead of just doing small parts and hope for
the best.
Always engage the customer
The real transformation is to engage customers, in an integrated manner so
customers have the same experience with your company during the purchase of
the product, during renewals and in case of a claim. Because just having a good
sales processes is not enough to gain the customers engagement. When a
customer has a good initial experience, due to a smooth sales process but once
the policy is up for renewal the processes are complex and slow customers get
disappointed. This bad experience has much more impact than the initial good
experience. In case of a bad experience customers are likely to tell 10 people in
their social circle about their bad experience.
The best way to avoid the commodity is by really adding value for the customers,
giving them the experience they have with non-insurers. The customer service
provided by Amazon is the standard, not the customer service provided by
insurer Y.
Engaged customers who are more likely to renew their policy, because they
experience a mutual relationship. This is in my opinion one of the best ways to
avoid the commodity trap. Because a group of loyal customers is not very
interested in switching to a new provider, who just offers a low premium. In
fact the absolute price matters less than the
individual perception of price. A too low price has the

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same negative effect on loyalty as on that is too high,
states the IBM Institute for Business Value.
The issue of retention will be the topic of one of my upcoming blogs. For more
information please visit insurance-innovator.com
3. Technology
When we speak about innovation, disruption etc. most people look at technology
for the solution. With reason since technology provides us with new insights, new
possibilities and it shift the way we work.
The possibilities of big data seem endless, pricing at individual level, prediction
accidents, prevention due to better insights. All very interesting and good
initiatives where customers and insurers can really benefit. Because when a
wearable device can predict my changes of a heart attack I can visit a doctor
before it happens. And that is great news, for the customer and the insurer.
Because nobody wants a heart attack.
But I still have trouble with this whole subject. I do not believe that you can
truly beat the commodity insurance is, by just having the newest technology or
the best data analysis. The newest technology and data analysis need to be part
of a bigger picture and then can absolutely tribute to the success.
Technology is an enabler
Technology is a game changer since it enables us to do thing we did not think
were possible a decade ago. The analysis of data allows us to predict the claim-
ratio for every individual car and driver. This creates new possibilities, like
individual pricing based on a complete understanding of the risk. Internet only
insurers have only a handful of employees, compared to traditional insurers who
employ several thousand people. And that by itself is the great disruption
insurance is facing.
People always talk about Google entering the insurance market, but via their
growth-equity fund Google Capital they already entered the health insurance
market in the US via Oscar.

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Oscar aims at transforming the cost curve through technology. So instead of
starting a new health insurer they invest in a start-up with the potential to
change the business. They change the business by having a new perspective on
the market supported by technology, but not just by technology.
Technology as competitive advantage
Technology can be copied and is in itself not a long-lasting competitive
advantage. If insurer A develops a new platform, insurer B and C will copy the
idea and launch their own (improved) version of the platform. And from that
moment on the playing field is level again. Via technology you can beat the
competition, if your platform is agile and time to market is short, then you can
launch several new products or features per year. Competition will follow, and
copy but after a while they won’t be able to handle the processes the way you
can. Being technologically fit with an organization prepared for change that is a
competitive advantage which will last, because to become fit and ready takes
time.
Digital stone age
In the Wall Street Journal of 29. October 2015, Mark Wilson, the Chief Executive
of Aviva, said that insurance is in the stone age when it comes to using
technology. In order to update the technology they hired people from Google and
Amazon.
I am sure that not only Aviva is in the stone age. For one of my former clients I
was responsible for run off program for legacy applications. During a two year
period we were able to eliminate 60 applications of the 153. And this was just for
the life insurance part of the organization. So insurers have a lot of applications,
not all modern, which need maintenance and cost a lot of money. Especially in
life insurance legacy is holding transformation back, due to the long term
contracts and the legislation related to pensions and life insurance.

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Most insurers have a lot of legacy to maintain. These legacy systems are not
always suited for the current demands. On the other hand, during the Insurance
and Marketing Summit I visited in December 2015, Isabel Connor, Chief
Marketing Officer of Generali, talked about the enormous transformation Generali
P&C was going through. A lot of work needed to be done to change from a
product driven company to a customer centric organization, but technology was
not top of the list. So the focus should not be on technology but on the
customers needs.
During the Insurance and Marketing Summit, I attended a presentation by mr.
David Stevens, Head of Automated Advice Strategy at LV=. They developed
online tooling to support customers in choosing the right strategy to get the most
out of their hard earned retirement savings.
This is online tooling which enables the customer to fill out the data and get an
online personal advice. Key element is their support, all customers are contacted
by certified advisors to discuss their report and to make small adjustments if
necessary. This combination of online and offline is key in delivering trust to a
customer. Certainly the customers of LV= are attracted by this approach, since it
is a big decision and the confirmation of a real person helps in the decision
making. You can only choose once and the result will impact the rest of your life,
so it is a very important decision.

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SME, all online and direct?
Recently I’ve spoken to one of the strategy consultants of a big insurer. He
stated that in the near future up till 80% of SME business would go online and
direct. Since the insurer operates mainly in the Dutch market this is quite a
prediction since nowadays only a small percentage is done direct in the SME
market, and the percentage online is even less.
And even in the more developed UK market, only 40% of the private lines and
10% of the commercial lines are sold direct (via internet). So intermediaries are
still a great factor. And intermediaries will be a great factor, more in commercial
lines than in private lines, because the risks in commercial lines are bigger and
impact not only the organization but also the entrepreneur and the employees.
The SME market is an interesting market for insurers. There are a lot of small
and medium size enterprises and the risks are relatively simple. But that is not
the perception of the entrepreneurs, most of them seem married to the
company. So they want to protect their assets. So they have the same need for
advice a larger company has, but they are less profitable, so the time per
customer needs to be limited.
I know a Dutch binder who services micro-SME and small SME customers via
internet. The freelancers, without personel, they buy online. But the customers
with a few employees check the site, generate a quote but do not buy their
insurance online. The reason this type of customer does not buy an online
insurance is trust, not only do they mistrust insurers, but also they need
confirmation that they have the right cover for their valuable assets. This binder
has a website where the customer enters all relevant data. The system generates
a quote and plans a call, in which the broker and the customer go through the
quote via a shared screen. During this call the broker asks a lot of questions to
validate the quote against the needs of the customer. If the quote needs change,
they do it during the call. At the end of the process the customer has his cover
and the comfort of having an expert looked at his insurance.
This unique combination of online and offline increased the number of customers
and these customers are loyal customers.

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4. Business models
Peer to peer insurance is the buzz word when talking about new business models
in insurance.
This is a new way of doing business, since a group of people collaborate via a
platform to share their risks and benefit from remaining claimless. This is a big
threat for insurers since they only get to insure the excess. So the group can opt
for a larger deductible, which automatically means a lower premium. On the
other hand the insurer can benefit from this model also, since all small claims
which are relatively expensive to handle are now handled via the pool. The vast
majority of claims will be below the deductible, so the insurer will need less
employees in the claims department.
The benefits of a peer to peer insurance are not only a lower premium the
customer also benefits from:
“Based on a shareconomy approach, policy owners with the same insurance type
form small groups. A part of their premiums is paid into a cashback pool. If no claims
are submitted, the members of the group get some of their money back at the end of
the year. In case of claims, the cashback decreases for everyone. Small claims are
settled with the money in the pool.
In the event of bigger claims, the standard insurance company covers any amount
that exceeds the coverage through the group. In case there is insufficient money left
in the pool to cover a claim, a stop-loss insurance covers the rest. As a result, policy
owners always enjoy full coverage and never pay more than they would
without Friendsurance.” 1

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 A closer relation with your group, especially if the group is a self-selected
group
 Based on mutual interest
 No administration with the insurance
The insurer benefits from:
 A positive innovative image
 Reduces fraud, since the people are less likely to make fraudulent claims if
they are engaged.
 And the people are engaged in the group and also the self-correcting
mechanism of the group will limit the number of fraudulent claims
 A new distribution channel for insurance products
 Increased affordability 1
Solution provider
Another business model insurer can adept is to move on from being a risk
oriented insurer to being a solution provider. A risk oriented insurer focusses on
the risk and puts a premium on that risk. You can extend that risk by adding
additional services, for instance in health insurance offer benefits for your
customers, related to their health. If the customer shares his personal health
data he will not only get a discount in the gym but also he will get a personalized
premium based on his data. And for the customers who want the whole package,
they not only get the gym discount and premium but also a complete cover of all
costs of recovery including in necessary taxi rides to the hospital etc. There is a
market for added value insurance. Insurance not focusing on the risk but on
continuation.
As mentioned before nobody wants an accident or a heart attack. With this in
mind you can divide customers in three groups, customers only looking for a
cover, customers looking for a cover with extra benefits and customers looking
1
Inspeer presentation by Louis de Broglie at the Insurance Marketing & Distribution
Europe Summit

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for continuation. The last group is not very price sensitive because they expect
excellent service and coverage and are willing to pay for that. Side stepping into
these segments of the market can be very profitable for an insurer since they are
now focusing on quality and service and working on customer relations without
the permanent struggle for the lowest prices.
Are a manager in insurance and looking for a way to improve business results
without huge investments in IT?
Contact me and let’s start the innovation from within!

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About the author
Joost Smaardijk is an experienced business consultant with over 15 years
of experience in insurance. He had worked for many insurance companies,
from small regional insurers to the top 5 companies like AIG and Allianz.
Joost started his career as claim handler property, this job made him
aware of the impact claims have on customers. And it also helped him to
realize that the way claims are dealt with is very determining for the
customers experience of the insurer as whole. After several roles in
underwriting, team management and change projects, Joost became an
independent business consultant focusing on adding value for the
customer.
He helped a small insurer in developing an agile approach to change. He
transformed the product development process from being product driven
to a process which focusses on customer’s needs. He is available for
several roles like:
 Manager product development (starting point: the customer)
 Retention manager (new customers are expensive let’s focus on
keeping the current customers)
When not working Joost loves to run and in the winter ski.
He lives with his wife and daughter in Rotterdam, The Netherlands.
Contact:
https://nl.linkedin.com/in/joostsmaardijk
Joost@insurance-innovator.com