Sometimes, technology innovators make predictions that turn out to be remarkably accurate because they understood how needs and capabilities would advance. At other times, innovators turn out to be right for the entirely wrong reasons.
The COVID-19 crisis has highlighted the accuracy of many forecasts of the growth of areas like e-commerce, remote working and learning, and medical services – but not because anyone predicted that a pandemic would spark the change.
The insurance sector is the latest to provide examples of great foresight resulting in exactly the right kind of service for many consumers. A South Africa insurance startup called Naked, which provides quick cover and claims via an app, has for some time offered a “CoverPause” feature. This allows customers who do not plan to use their cars for a period to pause the accident element of their cover, and downgrade it to stationary cover.
It was never designed for lockdown conditions, but was perfect for lockdown. According to Naked, its policyholders did not drive for more than 27 days of the first 35 days of lockdown.
This insurance “pause button” was not available to most of the car-owning public, despite accident numbers and car usage plummeting during lockdown.
According to towing and roadside assistance provider Global Choices, South Africa’s rate of car accidents fell by around 75% in April as people stayed home. The figure is based on incidents for which tow trucks had to be dispatched dropping to a quarter of the usual levels.
“This indicates that South African drivers adhered to the call to stay at home, only using their cars for essential trips as defined under the lockdown regulations,” says Naked co-founder Ernest North. “It supports our decision to reduce premiums so that clients pay just roughly 10% of the normal comprehensive premium when they enable CoverPause.”
TransUnion, which collects, aggregates and provides credit data, sees even more of a knock-on effect as many people delay car purchases.
“We are expecting work-from-home to be a reality for many people for at least a year, meaning traffic won’t be back to usual levels for a while,” says Kriben Reddy, TransUnion head of auto information solutions. “Even after the pandemic, many enterprises will continue to support remote working because they have invested in the infrastructure and might see benefits in downsizing office space.
“Another trend that we’ll see is vehicle purchases moving online as people continue to follow physical distancing protocols.”
This is bad news for most insurance companies as consumers look for options that address their new reality, but good news for those that have introduced flexible approaches. As North puts it, Increased numbers of people working from home could mean fewer car accidents and thefts in the future, resulting in lower claims, but increased pressure to pass those savings back to consumers.
“The rate of digital disruption in the car insurance industry has certainly accelerated as technology-driven startups offer customers more transparent and flexible insurance solutions. Using artificial intelligence and digital channels allow us to bring costs down for the end-user and to make it easy for people to manage their own insurance coverage digitally.
“Given that people are becoming used to the convenience, low costs and control they get from digital tools they are using to manage their lives at this time, it’s difficult to imagine them going back to the old ways of doing things. Industries and companies that have not embraced digital will need to catch up – fast.”
Read more about how life insurance has transformed in the face of lockdown and social distancing.
Life insurance rebooted
Marius Botha, managing director of life insurer Stangen, sees lockdown and social distancing having a similar impact on long-term insurance. Ironically, for a company that has been around for more than 80 years, it was also prepared. Recently acquired by short-term insurer King Price, it was in the process of launching King Price Life when the pandemic began.
“We call ourselves a restart-up because the company has been transformed and re-transformed many times, and has been using a direct life insurance model since 2017. When the short-term industry moved towards a direct sales models and even online sales models, it was only a matter of time before the life insurance industry did so. But large insurance companies have seen a slow adoption of direct fulfillment online channels.
“It was a market heavily dominated by brokers, which then transitioned into more of a call centre-based model. COVID-19 and the lockdown will start changing those dynamics, so life insurance can also move increasingly towards online sales models. I don’t think that necessarily has to diminish the role of brokers and intermediaries in the advice space. There’s a large need and purpose for advice. But even some of the advice engagement needs to happen online.”
Life insurance is not the same as short-term insurance, however, as so many risk factors come into play. Medical check-ups were a key element of addressing that risk. Doubly ironically, the current health crisis has meant that check-ups increase risk.
“One of the things that was most unexpected for life companies was that the regulator intervened to stop medical tests in the underwriting process,” says Botha. “They specifically asked us to no longer do medical underwriting tests so that the laboratories have capacity to test for COVID-19 instead.
“That is a major disruption for a life company from a sales point of view. Many companies can’t adapt to that, and some of the traditional players still used paper application processes in their broker models. Those brokers couldn’t reach the customer, and then they struggled to get customers to complete the forms.”
Stangen had one advantage: it had been a sister company to African Bank when that company went into curatorship, although it was the one entity in the group that avoided that fate. Nevertheless, it had to reinvent itself.
“As one of the smaller players in the industry, given our history and the need to set ourselves up after the African Bank era, the best way to describe it was innovation through necessity, not design. So we ended up in a position where we had to invest in a new technology stack that was fully integrated front and back end. We wanted to create a cloud-based solution that bolted online direct fulfillment capabilities.
“Pre COVID-19 a large part of sales, about 75%, was all done through call centre assistants. Direct fulfilment, where customers do the full journey on their own, was 25%. Post-lockdown, although it’s obviously early days, we’ve already seen another 10% shift to direct fulfilment compared to the call centre.”
Stangen also found itself well-positioned to operate from staff’s homes, due to all operations being cloud-based. The challenge that then presented itself was addressing medical risk. Here, too, emerging technology came to the rescue. But so did a strategy adopted several years ago.
“When we launched three years ago, we cut out full blood tests in terms of a medical underwriting process, and everything was done through an online health-based questionnaire and then only a small percentage of customers was sent for an HIV test based on a scorecard. When we couldn’t send out the travel nurses to go and do HIV tests, we launched an Express Life product, which cuts out the need for even an HIV test.”
Botha is adamant, however, that Stangen is not a fully digital insurer. Since many find the online process alienating, it also uses SMS marketing and human interaction. The key, he says, is in the customer journey. Where technology facilitates this, it will be embraced.
For example, it is piloting the use of tools like facial recognition software, which allows the patient to take a selfie for identification, as well as verification of age and gender, and even assessment of body mass through analysis of facial features.
Read more about how property insurance is getting smarter.
Property insurance gets smart
King Price itself is also moving to automated claims management systems, particularly in property insurance. Claims can be logged electronically, authorised instantly, and jobs automatically scheduled with an approved service provider for immediate repair. This allows for more effective claims cost control, shorter claims cycles, and less incident reporting lag time.
The company introduced the process in 2016 as part of a community insurance offering for the sectional title market to address poor insurance service delivery. Initially only available to managing agents, this month sees it being launched through brokers as well. The system integrates all approved suppliers, like electricians and plumbers, into a management platform that allows for faster and cheaper claims services.
“This integration has resulted in profound changes in how we operate and interact with the value chain,” says King Price community insurance partner Ria Furriel. “Multiple stakeholders – owners, trustees, brokers, managing agents and suppliers – can all connect to a central system, interact with one another, and create and exchange value. Everybody is on the same page, all the time.
“By designing, creating and maintaining assets more efficiently, smarter developments give insurers the ability to create more accurate risk profiles – which often means lower premiums. They also enable predictive maintenance, with connected systems able to detect impending issues before they become problems.”
Once all these tools are perfected, it will allow for fully automated vehicle, property and life insurance at the click of a button. It didn’t need a pandemic to get us there, but it is certainly speeding up the journey.
- Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee