This article explores the shift to a data driven, agile insurance model – providing the personalised, usage-based covers with the freedom and flexibility customers crave. Commercial insurers, like RSA are working in partnership with insurtechs to provide and deliver for customers in an ever-changing market.
The rise of a new insurance customer
The past year's challenges have only accelerated the growing shift from traditional full-time employment to freelancing, flexi-working, working part-time, and independent contracting for many people. Often referred to as the gig economy, this ever-increasing movement of people to on-demand service delivery has brought with it a new focus for business insurers.
While the business world adapts to embrace this new flexible economy, the B2C sector is also evolving to suit an increasingly demanding consumer. Millennials now make up the largest population of buyers, and their growing reliance on smartphones, mobile apps, social media and instant messaging means they expect the same customer experience when buying insurance as they do when shopping on retail giants like Amazon.
The result is a new breed of insurance customer who looks for solutions to their problems on the internet, prioritises value for money and needs to feel empowered to make their own choices. This has created a market for flexible, personalised insurance products, with quick and easy online administration designed to suit their daily needs.
Enter the insurtech
Although increasingly demanding consumers are at the heart of the shift to more flexible insurance products, the enabler is technology. In response, insurtechs are introducing technological innovations such as the Internet of things (IoT), artificial intelligence (AI), predictive modelling and big data that are reinventing customer experience.
Insurtechs have changed the low-interaction model between insurer and customer by leveraging connected devices and can offer:
- Faster, improved decision making with more profound insight and analytics
- Enhanced operations and customer service with AI-enabled services
- Transparency and cost efficiencies through better data management and streamlined delivery models
What is pay-as-you-go insurance?
With insurtechs focusing on meeting the needs of the modern consumer and growing gig economy with agile digital solutions, the UK has seen the emergence of usage-based insurance offerings. Going against the age-old principle of paying a premium for blanket cover over an annual period, on-demand or pay-as-you-go insurance is designed around smaller or rolling subscriptions, which can be changed or cancelled when you need to. Consumers can now purchase cover on their smartphones or PCs whenever and wherever they want, and only when the asset requiring coverage is in use and at risk. The basis for each model differs with the insurance cover offered; for example, for motorists, it may be based on a milage usage rate, or for couriers on a per-job basis or for house sharers, a per-item contents cover.
Collaboration is key
The UK insurtech sector has seen sustained growth over recent years, raising just shy of £750million in 2018 and contributed heavily to the £3.5 billion that insurtech businesses raised globally in 2019.
Insurtechs may have all the ingenuity and access to a brighter, more digitally advanced future, but they lack the ability to scale their offering and require credibility and authority to succeed in such a competitive market.
This is where collaborations with established commercial insurers can make all the difference – allowing innovation-focused insurtechs to develop capabilities for long-term business sustainability, and traditional brands to drive product innovation and superior customer-centric solutions.
The benefits for the customer are clear – technology and demand models that suit their changing needs, coupled with underwriting and knowledge that inspires confidence. The usage-based insurance model delivers more value to customers than just obtaining low cost insurance, and with streamlined operational costs, insurers are not losing out on premiums.
Taking steps into the future, RSA has partnered with exciting insurtechs in recent years.
RSA partners with Zego to provide flexible cover for couriers
RSA has partnered with London-based Insurtech, Zego, to provide flexible insurance cover for the growing courier market since 2018.
Combining RSA's dedicated expertise in delegated authorities with Zego's passion for creating flexible insurance solutions for customers, Zego launched a pay-as-you-go insurance product aimed at part-time courier and parcel delivery drivers.
Zego has since expanded further, now offering a wider range of usage-based policies to delivery, courier or trade van fleets in the UK, reducing the upfront costs for these businesses and aligning their insurance costs with their workload, and revenue.
“Pay-as-you-go insurance provides a more flexible, bespoke approach, giving customers a much more cost-effective means of protection. As an example, for a delivery driver or rider who may have had their vehicle sat on their driveway for 90% of the time during lockdown, pay-as-you-go insurance would have allowed them to pay for just the insurance they need, protecting them financially when they weren’t working. Likewise, pay-as-you-go insurance models allow fleet businesses to match insurance costs against their revenues. And for consumers, it means they can make savings on their insurance costs when their vehicle is unused for long periods of time." Harry Franks, Chief Business Development Officer, Zego
Guardhog - insurance solutions for the sharing economy
The sharing economy has created a new market for travelling and short-term holiday stays. It’s brought new challenges to insurers, but Guardhog provides a flexible cover to address this issue.
The company’s flagship product is a usage-based policy that only covers hosts for the time their property is occupied, meaning they pay less than they might on a standard insurance policy.
Underwritten by RSA, this policy covers hosts for malicious damage caused by guests, accidental damage and theft, as well as public and home-sharing liability – which can cover a neighboring property if a guest causes any damage.
Premiums depend on the value of the property and items within it, and average policyholders pay between £1 and £3 a day.
“Usage-based insurance is a brilliant way to encourage customers to try something new, knowing they don’t need to commit upfront to annual premiums. The benefits for the customer are enormous, and provided with the technology, it makes it easy to implement... it’s a win-win-win.” Co-founder at Guardhog, Humphrey Bowles
Whilst this kind of policy doesn’t work for everyone, there are multiple additional benefits of taking out a policy with an insurtech; with some adding innovative features that help customers to get even more more value.
For example, Guardhog have developed an additional service ‘SUPERHOG’, a data-driven intelligence platform that focuses on building trust, safety and security in the short-term rentals sector. Verification and validation of hosts and guests is completed at the touch of a button, building confidence for this growing industry.
With consumer buying behaviours now anchored firmly in agile, fast and customer-centric solutions, people are willing to explore using less traditional approaches to meet their everyday needs. With low financial commitment and a flexible, digital-first approach, customers are gradually shifting towards a new way of insuring, and the on-demand insurance market is only set to grow.
At RSA, we build partnerships for the long-term. We help you create a powerful proposition for your customers, combining your business with our knowledge, experience and dependability.