Today’s insurance landscape is a complex web of inefficiencies. Currently, brokers are forced to spend far too much time on menial admin and not enough time sourcing the best possible deal for their clients.
This has resulted in an epidemic of inaccurate insurance pricing, with research revealing that as much as 80% of SMEs are underinsured in the UK by as much as 45%. The problem exists across large companies too, with reports showing that 40% of all commercial properties are underinsured.
Damningly, 80% of businesses affected by a major incident close down with 18 months, partly due to not having the correct cover. Addressing the underinsurance problem should be viewed as an emergency and one in need of immediate resolution.
What’s more, when we consider how much these companies are underinsured by on average, the coverage they have would not be enough to save their business should a catastrophic incident occur, such as a factory fire. This begs the question – has insurance become a meaningless, regulatory tickbox that no longer serves its intended purpose, Mark Costello, CEO at Taveo provides some insight into how we fix it?
Longstanding challenges in the insurance sector
All too often when people talk about insurance they’re left with a bad taste in their mouth. However, our sector didn’t set out to be the bad guy.
Unfortunately, the attitudes and processes around insurance servicing have stunted any notion of a customer-centric service that provides real value for money. Insurance justifies its processes on an ‘it’s the way we’ve always done it’ ethos, but this mantra ultimately falls short of providing customers with the best possible service.
An overreliance on manual processes, relationship-based dealmaking, and a lack of tech implementation have caused these issues. It has led to overinflated prices for customers, clunky services, a stranglehold on profit margins for admin-laden brokers, and minimal data insight to inform accurate pricing. Unable to meet the efficiency and accuracy required in today’s insurance landscape, the underinsurance problem has been left unchecked.
Ultimately, the way we quote commercial insurance is wrong. Brokers, bogged down by manual tasks that keep them tied to a desk, often rely on the SME owners themselves to inform them about the commercial property for which they are seeking insurance. Owners, unqualified to price their own properties, often inaccurately estimate square footage, play up or play down risks, and fail to recognise specific elements that must be included in the insurance package to ensure they are fully covered. This is not the fault of the SME – why should our customers, who are experts in their own business, but not in insurance – have to self-quote, and then suffer the consequences?
This way of brokering has turned insurance into a grudge purchase, when it should be a process that brings confidence and security to business owners. The insurance industry considers itself ‘trusted advisors’, but how true can this be when underinsurance is so rife?
The way forwards
All is not lost. There’s still time to turn our sector around and provide customers with a fast and easy way to soundly protect their business. We need to revolutionise insurance brokering by leveraging powerful, emerging technologies. Thankfully, digitally-native insurance companies have already started to implement technology to great effect in the name of improved accuracy and efficiency.
To meet the challenge of inaccurate insurance quotes, and the dynamic of SME owners providing information to the broker, rather than the other way around, insurance should take advantage of emerging technology. Artificial intelligence (AI) and machine learning can, and have, produced systems whereby risk can be measured automatically, through comparables and geospatial data.
The impact of AI on insurance can be split into five key contributions; automated claims processing, fraud detection, natural language processing, predictive analysis and customer service chatbots.
However, it’s in the automation of claims processing and customer service chatbots where the real efficiency gains shine through, as insurers are released from the shackles of typical working hours and limited human resource. With AI, customers can get real-time updates on their claims at any time and any place. That said, there’s a balance to be struck.
Keeping the human touch
There’s no doubt that technology is critical to driving greater efficiencies in insurance, but it’s not the be-all and end-all. You could deliver the most accurate deals, in record time, but it all stands for nothing if your customers are constantly handled by a wall of emotionless technology.
They need to know that their case is being managed by a person. There are many things that the human brain can do that computers simply cannot and may never be able to. Human resource should therefore be directed to high value tasks, where we can really make a difference. Technology can take care of the rest. It’s not a case of replacing humans with technology, but instead augmenting them and empowering them with tools that enable them to work more productively and, importantly, happily.
It’s time to elevate the insurance market out of the pit of distrust and scepticism that it has resided in for so long, and empower brokers with the tools necessary to deliver the right deals to each customer. Underinsurance needs to be a thing of the past, and artificial intelligence has the power to get us there.
Mark Costello, CEO at Taveo