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IF IT’S A LOSS, YOU’RE TOO LATE – WHY THE INSURANCE INDUSTRY NEEDS TO FOCUS ON FIRST NOTIFICATION OF RISK

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Simon Dicks, Insurance Channel Manager EMEA, Lytx

 

Insuring commercial fleets can be an expensive business. Average repair costs have increased by up to 40% in the past 8 years and disputes about who was responsible can drive up expenditure for both fleets and insurers.

Part of the problem is that the insurance industry hasn’t had the tools to forecast costs and premiums accurately enough in this sector. Underwriting decisions are still made in the same way they always have been, by looking back at historical data from previous years. This approach simply isn’t giving insurance companies an accurate indication of potential risk – or a proper indication of the impact of driver behaviour.

Technology is helping insurers to an extent by providing information about First Notification of Loss (FNOL) – automatically sending notifications when unusual G-force readings are captured within a black box tracking device as a result of sudden braking or impact. This is good, but far better is the ability to use proactive technology to detect when an incident is at risk of occurring and when a driver is distracted.

The only way to address this is to put a highly accurate level of camera technology both inside and outside cabs, supported by sophisticated technologies such as Machine Vision (MV) and Artificial Intelligence (AI). This way, we can see not just that an incident has happened, but why it happened. What’s more, we can assess risk before an accident happens at all and prevent it happening in the first place. We call this First Notification of Risk (FNOR) – and it’s a whole step up from FNOL.

Machine Vision scans the internal and external environment of the vehicle to identify distracted driving behaviours such as mobile phone use, eating, drinking, smoking, inattentive behaviour or failure to wear a seatbelt. AI, comparing the behaviour against a vast bank of accumulated data, is then able to determine the riskiness of that situation and whether it needs to be flagged to the fleet manager, driver, or insurer via a short video clip. The big difference in this approach is that it’s proactive, not reactive. For the first time, fleets and insurers can identify adverse driving and distracted driving in real-time for the first time.

This includes the ability to alert drivers of any momentary slip-ups or distracted behaviours. Using the same technology, drivers will receive an audio or visual alert to help keep them on track and to lessen the likelihood of a moment’s distraction becoming anything more.

When insurers have access to these insights, they can also start to see patterns from the data over time. For example, a fleet manager might start to see that there’s a peak in risky driving behaviours on a Friday afternoon when lots of drivers are rushing to finish for the weekend. As a result, they may decide to spread the shifts differently so as to avoid that pattern of behaviour.

When insurers are only looking at FNOL, it’s already too late. A driver could be unthinkingly driving whilst smoking, on their phone, and nobody would never know. Whereas with FNOR, both managers and insurers are provided with insights that remove the guesswork, and underwriters have the information they need to assess risk with far greater precision.

There’s still a long way to go in making the move towards FNOR. With so many different companies selling cameras and telematics systems and producing information in hundreds of different formats, claims data will have to be standardised before the sector can really transform. However, by starting to embrace ideas like FNOR, the industry can move towards a solution that saves them time, money and lives.

To find out more, visit  www.lytx.com/FNOR

Top 10

Why the rise of millennials spells change for insurance companies

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By Stephan Kaiser, CEO at KoverNow

 

Most of us, regardless of our age, use our phones to inform shopping decisions, make purchases, order deliveries and carry out even complex banking transactions. What most of us are not doing is managing our insurance policies through our mobiles. This seems odd, and for the millennials amongst us, it’s even more unfathomable. Why should so many other functions of our lives be enabled by mobile apps when accessing a simple insurance arrangement is not?

Much of it has to do with the technology underpinning the insurance value chain. Regulatory changes have put continuous pressure on the cost-income-ratio of banks for the last decade.  This has led to many innovations, including our banking apps (the first mobile banking app was only launched in 2011), but the insurance sector has not kept up, or focused in the same way on efficiency gains and consequently has invested significantly less in IT. We calculate that insurance IT spending as a percentage of revenues has been at about 50% that of banking IT spending over the last 10 years (7-8% for banking and 3-4% for insurance). As a result, we have no apps in insurance for today’s consumers who use their phones to shop around, compare prices, and only pay for what is needed.

Millennials, understandably, want to know why they can’t have more choice, why they can’t select cover just for the items they really value and quickly, without any fuss, from an app. Traditionally selective insurance in which individual items are named comes at a premium price, but not everything that any of us, particularly millennials, own needs to be insured in one job lot.

 

The Millennial mind

In an effort to delve into the attitudes that millennials have to their belongings and insurance, we recently ran a survey targeting 500 people aged between 25 and 39. Our cohort live and work in Singapore, but they are all well-travelled and educated.

We discovered that almost 74% of respondents to our survey already owned health insurance and a fraction below 73% also had life insurance. For this group, this type of insurance was essential. We asked them what items would cause them distress if they were lost, stolen or damaged. Unsurprisingly, given their age and circumstances, almost 80% said it would be a smartphone or tablet, while 71% said it would be their laptop. However, only 12% had taken out insurance cover on these precious belongings.

When we asked further questions, we found that our respondents were willing to purchase insurance for their items, and in fact, just under 80% would pay a monthly amount to secure their electrical goods. The same is true for fashion items such as jewellery, luxury watches and luxury handbags. While they would be less distressed to lose them than their smartphones and laptops, they would still be willing to insure these items.

And how do they seek out suitable financial products or services? Around 45% said they used online search engines and word of mouth recommendations, but 40% said that online reviews, articles and/or videos informed their purchasing decisions.

As expected, most of this young cohort is open to using a mobile app to purchase insurance. When we asked them what the top four most common insurance products they would consider buying through an app were, they said: health, mobile device, life and travel insurance.

This attitude to sourcing services through mobile apps is to be expected. Millennials are a generation that have entered a digitalised workplace and they lead digitalised lives. They expect the services they are offered to be personalised and adaptable, and if they own only a few items that they consider to be precious, why should they have to pay a standard amount for a standard policy? To this cohort, the concept of a mobile insurance app is regarded as convenient, easy to use and user-friendly.

 

Keep up, or lose out

These findings throw out a challenge to the insurance industry to change. What is more, the clock is ticking. While millennials have paved the way for digital transformation, it is the Gen Z generation of digital natives snapping at their heels that will reject anything not available as an app or as part of the digital ecosystem.

So what can insurance companies do to compete? Developing apps is not the difficult part; building them to provide a holistic service that meets the lifestyles of young customers is trickier. When asked what the most important attributes were that would impact their experience when they were using a mobile app, price advantages topped the list, then a hassle-free claims process and easy to use interface, and the responsiveness of the support team.

Millennials are looking for speed and efficiency without compromising their security, which is why banking mobile apps have found such favour. They are also receptive to brand influence, and strategic co-operation with well-regarded brands would be a good step for insurers to take if they want to reach this audience.

Agility, however, is what insurers really need to develop. Standardised policies that cannot be researched, selected, purchased and managed through an app will struggle to find favour with young consumers. But if the policy also lacks flexibility, is too expensive or too complex to provide cover for a handful of precious items, they will reject it outright.

To millennials the apps on their smartphones are the doors to all the services they need and want. If insurance policies cannot be accessed through apps, they are unlikely to be found, let alone used. Insurance companies must change to take advantage of this growing sector of the market, and they need to do it now.

 

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Are we there yet? The journey of consumer spending habits is not over

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Dr. Alexandra Dobra-Kiel, Head of Behavioural Research and Insight, Behave

 

One of the upheavals in our lives over the past two years has been the way we do our shopping. Going in and out of lockdowns with ever evolving measures to keep us safe has changed consumer behaviour – people have been forced to make their purchases online, cook at home, and think domestically when booking their next holiday. As we enter 2022 we will create yet another “new normal” from the habits we adopted to navigate the latest government advice. Whether these habits will stick with us in the long-term will determine whether or not consumer spending reverts to its pre-March 2020 behaviour.

 

Online vs in-store

As the retail sector has seen throughout the pandemic, consumers are spending more and more online. The ease of shopping from one’s home has been growing in appeal with the percentage of internet sales of total retail sales climbing steeply since the first lockdown in March 2020. Each successive lockdown brought with it spikes in online shopping that raised the floor of online retail sales.

Some consumers are maintaining the shopping habits they’ve developed, and the decline in in-store shopping will continue. Convenience and choice have won out over consumers getting what they want slightly faster, as many retailers and marketplaces offer expedited or even same day delivery on products.

 

In-store shopping at risk

The negative outlook for in-store shopping is not just about consumers wanting to mitigate risks of contracting the latest variant, it’s about how aspects of the shopping experience have changed as a whole.

Pleasant social interactions is the top reason for which consumers choose to shop in-store, something that compulsory mask wearing impacts.The mouth is paramount for the nonverbal communication of emotional states, and covering one with a mask impacts an individual’s capacity to recognise and interpret these emotions. Studies show that this is particularly true when it comes to recognising happy emotional states. In-store customer facing employees will need to think about how to use their body language and verbal communication to restore effective and pleasant social interactions.

Another way compulsory mask wearing makes in-store shopping less appealing for consumers is that masks are a psychological marker for danger (i.e. disease) and can trigger anxiety-related associations that, in turn, reduce consumers’ appetite for in-store shopping. So while mask wearing is meant to protect those who do choose to shop in-store, in an unintended way it acts as a deterrent for people as well.

 

Services uncertainty

Spending on services such as dining out and travelling is likely to remain stagnant, as consumers grapple with uncertainty around restrictions.

In the lead up to Christmas, UK pubs and restaurants are usually bustling with people out celebrating with friends. However, with the arrival of the Omicron variant and the government advising people to work from home and avoid socialising, the hospitality industry took a big hit at peak holiday time – a period essential for optimising takings and remaining a viable enterprise throughout the rest of the winter months. People didn’t want to get caught in a scenario where they would be forced to isolate, particularly if they had had all their vaccinations, and weren’t exhibiting any symptoms ahead of their Christmas plans.

The travel industry experienced a similar scenario and, for the second year in a row, couldn’t capitalise on the peak time for Brits to go abroad during the Christmas break. Questions surrounding testing and quarantine requirements to leave and enter the UK created barriers that many were either unable or unwilling to work around.

 

What does the future hold?

Even as rules and restrictions are loosened, it will be difficult to determine whether the spending habits consumers have developed over the past two years will stick around in the long-term. That is, will these habits outlast the pandemic, as we’ve been living this way for so long?

 

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