What is driving current appetite for digital insurance products?
New and changing customer behaviours are increasingly becoming ‘digital first’, driving the need for insurance providers to expand their digital offering. Having a digital platform gives wider market reach whilst enabling client expectations to be met for quicker product delivery with immediate quotes and documentation.
We all know an online solution enables carriers to expedite business that can be digitised. In doing so, this can allow underwriters to spend more time undertaking extensive analysis of complex risks, exploring product innovation, improving risk selection and pricing.
What determines whether business should go down the digital route?
I would break it down to capability, market need, and the nature of the product itself – by that I mean its rating and marketing and the level of understanding around the available data.
Capability comes down to the classic change management framework of people, process, technology. Does the technology exist within your organisation? Do you have people with the appropriate skills to design, build and deploy? Are the people in your business (particularly senior management) invested in the solution? Can you compartmentalise business to provide a clear offering without creating silos?
Market need is also key. Is there demand for the solution? While your business might have the internal demand, strategic drivers, and necessary support, you don’t want to build a product that clients don't actually want, or where their needs are already addressed by other, simpler solutions. That need must be established by market research before you build anything.
Once you have established an appetite and begun to hone the offering, it’s essential that a clearly defined and explicit customer question set is established. Questions should have a clear response and answer. Subjective responses that require the involvement of a human in the decision loop, will immediately prevent you from automating delivery of a digital solution.
Insurance is a data-heavy industry, though no-one in the chain can truly benefit if we're collecting poor and/or unnecessary data. It takes time to capture and can be costly to store and maintain. The question set needs to talk directly to the rating; as such we can pose the question ‘why do we need this?’. In doing so, anything captured can be linked to interrogating a ratable factor, necessary to the production of documentation or captured for regulatory compliance.
What kind of business is best suited to being digitised?
Any coverage can be digitised, it’s just a case of understanding whether there’s sufficient information, appetite, and market need to make it successful. This tripartite creates the business case for creating a digital product.
In deciding what is suitable, you need to determine whether, on balance, you are creating efficiencies, are reducing the need for intervention, and question if simply you are creating a digital solution for its own sake.
If your product is more costly or has a 100% referral rate, with every submission ending up in the laps of the underwriters, why is it being built?
Should all Insurance business be digitised?
Access to a digital platform enables companies to intelligently segment their business. There are some who take the view that if they’re digitising a book of business, 100% needs to go through a digital platform otherwise it’s not worth doing.
I would argue that you need to set out your appetite for what segments of business would benefit from digitisation. You can then take more of a portfolio view of the risks being covered, with risks segmented into those suitable for the digital route and others which continue with the conventional underwriting approach.
We can support clients to effectively triage those risks where the data supports the decision to go down a digital route. It’s about striking that balance between what detail we ask clients to provide, what third-party data can be used to bridge the gap, and whether we can use predictive modelling and large language models to further enhance rating and decision making.
Mark Wilding, Digital Product Development Specialist, AEGIS London
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