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Insurance propositions as a value lever for non-insurance firms

Value in insurance can create an opportunity for companies in the sharing economy and mobility sector to leverage their own capabilities and gain competitive advantage.
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By Stephen Goodman , 

Consulting Director – Strategy, Marsh

06/06/2023 · 4 minute read

Value in insurance is still dominated by historical fundamentals, including understanding risk and balance sheet management.

The impacts of technology and evolving customer expectations are not changing these fundamentals. They are, however, providing non-insurance firms opportunities to leverage their own capabilities and competitive advantages to generate value from insurance, while insurers often lag behind.

What drives value in insurance?

Value in insurance is generated from four key areas — customer access; data, risk assessment, and pricing; effective claims management; and balance sheet management:

  • Customer access: This is crucial, particularly given the compulsory or “grudge purchase” nature of many insurance products.
  • Effective underwriting: Built on data, risk, and pricing – it enables fair pricing.
  • Claims management: This serves two purposes, which are often in tension; claims control and efficiencies reduce cost and help identify risk trends that drive underwriting, while claims customer experience is a key “moment of truth”, driving perception and renewals.
  • Balance sheet management: This underpins insurers long-term sustainability, is key to customer trust, and provides a value generation opportunity from assets and investments.

Where non-insurers have the advantage, and how this is changing

Non-insurers have key advantages in the following areas: 

  • Customer engagement: The average consumer engages with their insurer annually, on purchase or renewal. Non-insurers interact far more frequently and positively; for example, most car owners use their apps and vehicle interfaces multiple times a day.
  • Data capabilities: Non-insurers frequently collect far more data than insurers, and have far greater capabilities. Devices — from phones and watches to fridges and bikes — track usage, activities, and external and internal conditions. Distilling the value of data is core to driving customer experience and product improvements.
  • Prevention and mitigation: Combining customer engagement and data capabilities creates opportunities for ongoing prevention and mitigation. Notification of changes of external conditions, or early identification and remediation of defects or damage, can prevent larger, more complex claims.

How non-insurers can generate value

Customers, particularly consumers, have limited engagement with insurers, which is often accompanied by negative perceptions. This has long meant that non-insurers can more effectively distribute insurance than insurers, with introducer and “white labelled” models common vehicles.

Non-insurers’ other competitive advantages create the opportunity to extend their insurance propositions to capture greater value, including:

  • Customer access: Using data and frequent touch points allows non-insurers to personalise engagement with customers when they are most receptive to insurance purchase decisions. End-to-end ownership of insurance customers also gives control over customer experience, providing a consistent customer experience that aligns with brand and value.
  • Data, risk assessment, and pricing: Insurance models are built on historic data, meaning they are slower to incorporate new data and frequently require a significant track record. Non-insurers can immediately leverage their data capabilities, and more rapidly detect emerging trends, creating personalised proposition and pricing that reflect both underlying trends and overall customer value. For example, “Pay how you drive”, an established example of Usage Based Insurance, generally requires an insurer to fit special technology in the vehicle, and only measures selected activity. Motor original equipment manufacturers (OEMs) can replicate that functionality using in-built sensors, and use other data to refine and improve risk indicators rapidly.
  • Effective claims management: Claims is a direct and indirect value lever. Eliminating third parties generates greater direct value.  Delivering for a customer at this “moment of truth” drives deep customer and brand loyalty for both the insurance and the underlying product. Claims adjacent activity, such as repairs, creates cost savings through high standards, preventative action, and greater longevity — and can also generate direct value through the use of internal services.

While many of the above propositions require non-insurers to engage in regulated activities, the value opportunity significantly exceeds the cost of an increased regulatory burden.

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