In the first episode of the Future of Insurance series of podcasts from Business Reporter, Max Tiong, Vice President, Digital Transformation at NTUC Income, shares how insurance is being reimagined through innovation.
Insurance is a highly competitive industry that’s recently gone through some major evolution, as customer requirements change and new technological opportunities arise. Max Tiong suggests that, in this demanding market, the road to continued success is to build relevant products and services into the everyday routines of consumers.
These lifestyle-based insurance products can deliver a huge step-change to customer experience, while at the same time allowing insurance companies the agility and flexibility necessary to thrive in a challenging market.
Importance of innovation
Developing these new types of insurance products requires considerable innovation. And that can be expensive, at least in the short term. After all, innovation programmes don’t deliver sales in the way that sales teams or business development initiatives do. And there is always the fear that money will be wasted if the experimental ideas don’t work out.
But businesses should not fear innovation, Tiong counsels. There is as much value in learning from what doesn’t work as there is in learning from what does. The reality is that the more you experiment, the more efficient you become.
Innovation is risky but ultimately it delivers a substantial pay-out with efficiencies and cost savings that make businesses more competitive. And one way of reducing the risk of innovation is to be customer-centric, rather than just focused on technology.
This is because new insurance services are not solely driven by advances in technology. While data analysis, artificial intelligence and the use of APIs are all important, insurance is a “high touch” product where the human element is essential.
The industry is not about to transform into a totally virtual service. Instead there is a need for a hybrid approach where human agents work alongside automation, chatbots and other virtual technology.
While employing humans agents in customer service channels will remain important, insurance also needs to use technology to create products that are easier to buy and more integrated into consumers’ lifestyle such that insurance can even become almost “invisible”.
To that end, NTUC Income has developed several such products. Chief among these are stackable micro insurance, usage-based insurance and subscription-based insurance. And the common denominator for all of them is lifestyle. Increasingly, people leave a digital footprint as they navigate through life, and this data can be used for their benefit, to deliver insurance that fits the way that they, as individuals, live.
Stackable micro insurance
Take the SNACK novel insurance proposition. This is designed to lower barriers to entry into insurance and is ideal for consumers who want insurance coverage but are not ready to commit to an insurance contact that comes with large premiums and long term commitments.
These customers may prefer micropayments that ease their cash flow. With SNACK, customers can build up their coverage over time, as they perform daily lifestyle activities like dining out, taking public transport or even going for a jog. For example, a food delivery driver might add a little insurance cover each time they as deliver a meal. Over a few months, this can add up to a substantial amount of coverage, sufficient to cover their protection needs.
While this type of cover is very suitable for workers in the “gig” economy, it is also suitable for anyone, regardless of age or occupation, who sees the value of accumulating protection over time. And it can be used to accumulate various types of insurance including term life insurance, critical illness cover, and personal accident insurance.
SNACK doesn’t stop with the consumer, however. In a highly innovative move, NTUC income has created SNACKUP, an extension of SNACK that adds a new dimension to customer loyalty by providing insurance as a reward rather than the more common air miles, points and cashback.
SNACKUP is an insurance product that companies can add onto their services. For instance, a restaurant owner might decide to offer a small amount of insurance coverage to their customers every time they buy a meal – a simple and very effective loyalty scheme.
Usage based insurance
Another unique proposition is usage-based motor insurance, where drivers are charged for each kilometer they drive, meaning that they won’t be paying for insurance when their car is safely in the garage.
Data is a critical part of this product. The cost of the insurance doesn’t only depend on how far you drive. The price per kilometer also depends on details such as when you drive and how long you are at the wheel. In addition, how you drive, your speed for instance, can also be factored into the cost.
This means that dangerous behaviours can be discouraged. Driving for long periods without a break, driving too fast, driving in the middle of the night when you are less alert – all of these behaviours can be identified and through price differentials and the driver can be encouraged to avoid them.
Flexible subscription-based insurance
One other interesting proposition that NTUC Income offers is that of subscription insurance. With TRIBE, customers can choose an affordable amount to pay each month, from as low as US$3.8. But this idea is by no means the same as purchasing insurance on credit.
Instead, the policy holder can vary their coverage between different products – say Hospitalisation cash plans, Critical illness plans, and life insurance, as their lifestyle evolves. A key feature is the ability to upsize, downsize, start and stop their subscription at any time, without any penalty.
The omnichannel experience
Of course it isn’t just the product that is important. Mr Tiong stresses the necessity of having an omnichannel strategy where customers can find and buy insurance products through the channels they trust most, whether that is via a human agent, a website,an app or telesales. It could even be via a third-party website where insurance can be bought as part of a different offer.
Insurance is changing. And this is important because, from the customer’s perspective, there will always be something to improve. What is needed by an individual will depend on many factors: their age, lifestyle, digital literacy, social media use. And the more insurance companies can understand their individual customers, the more they will be able to personalize their services.
By being customer centric, insurance companies can develop new ideas and test them to see if they are relevant to particular consumer segments. This will always be much more effective than creating products and hoping that customers will like them.
Innovation will never be easy. But without it, no insurance provider can thrive in this fast-moving marketplace.