Hotels lament the rise of Airbnb. Taxi companies will never have the same hold on the market they did pre-Uber. Travel agencies took a hit with the adoption of end-to-end booking services like Expedia and Travelocity. Insurance was past due for disruption and is now getting a heavy dose of it. In the last few years, we’ve seen the rise of various innovative carriers, all looking to find that magical combination that leads to long-term viability.
While they’re doing well on some fronts, profit has proven more elusive.
And while a pleasant experience on the front-end is nice and draws people in, the real purpose of insurance is to protect us from financial calamity in a time of need. Unfortunately, many insurtechs followed the decade-plus example of tech startups: get adoption first, worry about profitability later.
That doesn’t work in an industry as complex as insurance.
To date, disruptive carriers have focused most of their investment on the initial steps in the customer journey. Digital age consumers appreciate the frictionless experience disruptors have created to go from quote to policy. It’s light years ahead of the days when you visited your broker’s office or waited on hold or for a callback hoping underwriting wouldn’t take all day. Distribution has been disrupted, to the benefit of the modern consumer.
As insurtechs look to stabilize at scale, underwriting risk can be mitigated by any number of readily available data sources. Claims handling cannot.
Claims operations are the industry’s trenches where boots hit the ground and expertise in managing wide-ranging scenarios is imperative. Scalable desk and field operations can’t be built on the fly, which is why traditional incumbents shine in this area – some have over 100 years of experience.
Missteps in claims handling are a double whammy: not only does it affect the bottom line in terms of cycle time and LAE, but a poor claims experience is also the number one reason for policyholder churn. Having amazing distribution capabilities won’t save the day when policyholders routinely jump ship.
Where we do see insurtechs investing is around straight-through processing. While it’s a boon for both carriers and insureds, not every claim can take that path. Also, those aren’t the claims where you lose your shirt – it’s the complex ones that can really sting.
To create a financially healthy future, insurtechs must double-down their focus and investment in the last mile of the customer journey. Not just friendly UIs where insureds can upload loss information, but the actual execution of servicing the claim.
Hiring seasoned teams, having agile desk and field capabilities, robust data capabilities, and technology to enable the orchestration of it all are the next steps forward toward long-term viability for insurtech carriers.