Tapping Into Social Circles

Insurance is not considered to be an extremely innovative or exciting industry, and with reason. No one wants to be confronted with unexpected surprises when it comes to our protection. Being conservative in the insurance world is not bad, because less risk is a good thing.  

Nevertheless, the world is not standing still. Some interesting technologies are finding their way into the insurance industry. Here’s an expert, up-close look at the Top 3.

Innovation #1: Mobile Devices in Insurance

When we think about insurance, it’s all about our protection. Wouldn’t it be logical to carry this protection with us always, even on everyday items such as keys, a wallet and a cell phone? Some companies have recognized this need and have started offering mobile insurance applications.

The general idea is not very complicated. All of your insurance data are accessible through the mobile application, and thus you have a full set of information with you. Sometimes this is convenient — for instance, if you need to know your current life insurance coverage and conditions offered by your employer when making a decision about buying additional life protection. But sometimes it is crucial, as in the example of a motor vehicle accident. When used for accidents, mobile services should help consumers find advice during this difficult time. They can arrange help from police, medical services and towing. They can also be used to locate and contact the nearest vehicle repair facility.

Some insurers already provide these kinds of mobile services (Nationwide, State Farm, and USAA, for example). Using their apps, you can check your own data, take a photo of an accident scene, call towing services, initiate claim processing, etc.

Outlook

Mobile services are expected to develop even further, move towards seamlessness and cover other types of insurance. In travel insurance, for example, they might determine a person’s location, notify them about any gaps in their travel protection and provide suggestions to buy insurance through the mobile device. While in a hospital abroad, your policy can be automatically translated into the native language so that you can be shown to the local doctor. The technology already exists, but is it not being sufficiently leveraged.

The next stage of development would be to use video streaming to support customers after an accident. Using a video recorder, a customer can show the service center specialist the accident, documenting it at the same time. How many of us would refuse having a live advisor in a moment of need?

Innovation #2: Tapping into social circles

Different companies are already exploring the possibility of consumers using their friends and social circle to reduce insurance payments. The technology to do this already exists; now it’s about defining a viable business model.  

How does it work? The idea is very simple. Once a registered user, consumers can build groups consisting of the people they trust: friends, family members, colleagues, etc. When a group member needs to be reimbursed for a small claim, members of the group cover the associated costs together — typically under $50 per person — instead of submitting to the insurer. This solves several issues for insurance companies:•    Insurers are able to provide group members with better insurance deals, since the claims history of the people in the group remains clean (group members pay for the small claims themselves, distributing the risk — i.e. micro-insurance).•    Insurers increase their cross-sell, since group members are trying to increase the size of the group by recruiting other members. Those who recruit new members get acquisition commission from insurers.•    Claims fraud rate goes down because people are much less likely to try to cheat on friends than on the insurance company.

A German company, friendsurance.de, has been using this model. It claims insurers participating in this program could save up to 15% in operational costs because they don’t have to process insurance small claims.

Outlook

A similar lending concept has already demonstrated the power of the social circle for finance management services. The communitylend.com platform, also available in Canada, has already enabled peer-to-peer lending and enjoys solid growth.

Will a similar approach work for insurance? The key will be readiness of insurers to participate in such a service. In order for the model to work, insurers must be prepared to offer lower rates to the members of social groups. Otherwise, consumers won’t see a tangible benefit to joining a social circle insurance community.

Innovation #3: Leveraging websites and social media

Social media have changed many things in our life. But how exactly can they influence insurance? Insurance is probably not a product that you would prefer to buy from a Facebook contact claiming to be an insurance broker or from a company you saw on LinkedIn. Many of us make the buying decision based on the experiences of people we trust and respect — often our family, friends or people we know.

Outlook

A key development would be a more intelligent use of data and insights by insurance companies in order to create better, consumer-focused products and improved service. The focus should shift from attempting to contact consumers over social media to listening to what consumers are saying. Some companies are trying to do this through a social media presence. For example, State Farm and TD are using social media to ask for consumers’ opinions. Ideally insurers will listen to consumers whenever and wherever consumers are ready to share their experiences, by means of article comments, blogs, review sites and even advice exchanges with friends.

The technology is already there. Some companies, such as Research Now, offer solutions to track a particular brand’s feedback and opinions through all social media and websites, extracting meaningful insights. Intelligent algorithms, data mining algorithms and meaningful data visualization can fully transform the face of modern marketing for insurance companies. Take, for example, a recent article about a retired B.C. couple on a fixed income. The couple reportedly received a $50,000 bill for a U.S. hospital stay despite the fact that they had purchased a travel insurance policy. This resulted in over 1,000 comments from readers. Just imagine this untapped goldmine of direct consumer insights for travel insurance providers.