iptiQ: The technology making it easier to buy insurance in the US
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Motorists can use black box telematics to bring their car insurance premiums down1, and some life and health insurers are offering deals based on data from fitness wearables.
But these developments are the exception rather than the rule for an industry struggling to become truly digital.
Buying insurance, especially life and health policies, can be a long and difficult process.
While digital technologies promise to make buying insurance easier, nine out of 10 insurers say they are struggling to develop the technology infrastructure they need to support digitisation.
As a result, 76% of insurers agree they need to partner with start-ups and technology platforms to stay competitive in the digital era.
Swiss Re’s partnering solution, iptiQ, allows insurers to harness the power of cloud-based applications and data analytics to make buying insurance easier, and to help more people to become insured.
Imagine using "artificial intelligence (AI) to buy insurance" and whatever policy you need is purchased. You wouldn't even have to say what type of insurance policy you require, as the AI working in the background will already have worked out when your renewals occur, and what your preferences for any given policy would be.
These kinds of innovations are already occurring in other industries, such as online retail. Amazon2, for example, can automatically select the best-matched product while UK online supermarket Ocado uses AI to offer an automated weekly grocery shop based on a customer’s preferences and how long it takes them to use certain items3.
However, despite some uses of technology such as telematics in motor insurance and the emerging use of wearable fitness technology in life and health, buying an insurance policy with a single voice command still remains in the realms of science fiction.
This is because the whole end-to-end process of buying an insurance policy can be incredibly complex.
Slow and difficult
For the potential customer, particularly in life and health insurance, the buying process can be hugely time-consuming, with the completion of multiple forms and often a medical examination.
This customer-facing complexity is the result of multiple back-end processes that are typically required ahead of issuing a policy.
The labyrinthine nature of insurance is not only frustrating for the customer; it is also incredibly inefficient. A McKinsey survey estimates that insurers have as much as 30-40% of their expenses locked up in their top 20 to 30 core end-to-end processes.
Despite this fact, just under 11% of InsurTech deals in 2017 were focussed on end-to-end solutions across the whole insurance value chain.
The low levels of investment in end-to-end solutions may be a reflection of just how difficult it is to make insurance truly digital: the survey by McKinsey found that nine out of 10 insurers acknowledge that they are struggling to develop the technology infrastructure they need to support digitisation.
"The size and complexity of their IT systems, many of which are based on dated legacy platforms, are a barrier to the rapid development that characterises digital," says the McKinsey report, The Making of a Digital Insurer.
Overcoming internal IT challenges can be a long and difficult process for insurers.
In response, many are choosing to improve their digital offerings more rapidly by partnering with others.
According to a survey by Accenture, 46% of insurers are partnering with start-ups and other external organisations on digital solutions. And 76% agreed that their competitive advantage “would not be determined by their organisation alone, but rather by the strength of the partners and ecosystems they choose”.
In the life and health sector, insurers from across Europe and the US are choosing to partner with Swiss Re's iptiQ. This is a totally omni-channel platform that allows insurers to easily launch new products and create highly customisable journeys. iptiQ does not sell directly to the consumer. Instead it provides digital, transparent and bespoke protection products in a B2B2C manner.
The platform combines automated underwriting with data analytics and customisable customer & agent-facing web applications.
All the data from customers using the platform runs through the analytics software and is used to improve both the automated underwriting and the customer experience.
So far, several hundreds of thousands of apps have run through the platform since it was launched in the US in2017. For Chief Marketing Officer iptiQ Americas Niels Keuker, it is the ability to have the data insights from so many apps and policies running through the platform that makes it so powerful.
“I think the amount of data collected throughout the various partnerships we have, in the various markets, is really unparalleled compared to the more traditional insurers,” says Keuker.
Fast and easy
The data collected by iptiQ, in compliance with applicable data protection laws, is analysed and generates new insights on how customers behave when buying insurance.
This in turn leads to an ongoing process of optimization of both underwriting and customer journeys, says Keuker, making the customer’s buying experience faster and easier.
“If we are able, through the relevant data insights and improvements throughout the customer journey, to engage with the customer, we believe that we can improve conversion rates,” he says.
Improving the conversion rates at which leads become policy holders could help with the level of effort and money that currently goes into marketing, underwriting and selling life and health insurance policies, known as their distribution & acquisition costs.
These distribution costs are estimated to make up anywhere between 15 and 40% of an insurance premium, according to a report by EY.
Improving conversion rates by making the buying process easier and more pleasant, makes selling insurance to the Middle Market more achievable.
When improved conversion rates are combined with fast, data-driven underwriting products, insurance can be made more affordable. Affordability is crucial when selling in the Middle Market where money is tight and insurance is not a priority.
Doing all of this right, can help close the protection gap, where people either are under-insured or have no life and health insurance at all.
Keuker believes that iptiQ can help address this gap by changing “the way life insurance is sold”,
“Technology enables us to simplify the way a policy is sold,” he says. “By making the buying and underwriting process easier, and integrating our products into relevant partners and brands that consumers regularly engage with, we can access customers who today don’t buy insurance.”