Digital services must be entirely responsive to customers’ needs, easy to use and fast. Only then will customers experience the brand positively and their time on the website or app is more likely to convert into a sale.
The ‘on demand’ or ‘micro-duration’ insurance
Insurers have been successfully adapting their counter fraud strategies and controls to deal with the increased fraud risks represented by the digital channel. However, the market continues to evolve at a rapid rate, driven by customer demand and modern day life styles. One of the more recent trends to emerge can be categorized as the development of ‘on demand’ or ‘micro-duration’ insurance, largely driven by the life styles of the Millennial generation.
As a broad definition for the UK, the Millennial generation can be loosely defined as those aged between 18 to 34 years old.
What do Millennials need?
Many are now leaving education or at an early stage in their careers. The Millennials are a critical mass that cannot be ignored and yet they are the most under-insured generation on record. Insurers are acutely aware that this demographic are their long term customers and that establishing a relationship with them is vital. The issue is that many traditional insurance services do not have relevance to a large proportion of this audience. It can be argued that rising living costs are removing some of the need for insurance for this generation. Many are still living at home with parents and owning a car can be a financial commitment beyond their means. What they need is flexible insurance and what has become attractive to Millennials is the ability to insure their belongings. Insurers have responded with App based, on demand / micro-duration cover.
How does the insurance industry react?
Axa Insurance launched on demand cover in the UK with US technology partner Trov in 2016. Users can easily insure just the things they care about, entirely from the convenience of a mobile app. With a simple swipe, users are provided with a personalised quote and can quickly turn insurance on or off for an item without the need for any interaction with a traditional insurance agent. Items protected are covered internationally against accidental damage, loss, and theft and protection is offered for more than 30,000 insurable items on the Trov database such as laptops, mobile phones and cameras. Claims are handled via an in-app chatbot, which asks users questions regarding the incident, making claims notification easy by simply sending some texts. When a claim is accepted, the item will be:
- replaced,
- repaired, or
- if that is not possible, the user will be reimbursed.
As a further example, Ageas also entered the on demand insurance market in 2016 powering App based insurance cover for Millennials’ travel insurance and possessions with ‘Back Me Up’. With no annual contract and a flat monthly fee the core product enables users to insure three items against accidental and malicious damage, loss and theft with a claims limit of up to £3000 each month. Users can switch possessions in and out whenever they want and leave whenever they want, with no penalty fees or charges. Benefits include annual mobile phone screen repair, worldwide and UK travel cover for lost items, cancellations and medical emergencies and up to £1,500 for replacement house or car keys and locks.
Most recently, insurtech disruptor, Lemonade, which aims to redefine insurance for Millennials, has launched its ‘Zero Everything’ upgrade. The upgrade allows customers to file up to two claims every year and receive full replacement value, with no deductible payments, no depreciation and no premium rate increases. Lemonade’s ‘Zero Everything’ is pitched as a seamless, technology-powered product that ‘undoes losses, in seconds’. Lemonade sells insurance to the rental and homeowner market and the company’s goal is to reverse the poor perception of the insurance industry by using technology and behavioral science to create a faster and more transparent service. The company is working with a professor of psychology and behavioral economics to take antagonism out of its relationship with customers and set out to create algorithms that make it easy and quick to sign up and approve claims – in minutes rather than days.
The industry drive to innovate and engage with the Millennials is unquestionable.
What of the fraud risks associated with on demand and ‘micro duration’ insurance and the associated automated and rapid claims service?
Without effective counter fraud tools, the cost to insurers to cater for this innovation can be extremely high. Risk can no longer necessarily be spread over an annual policy cost. The flexibility of the on demand or micro-duration offering means a very low up front cost to the policyholder with the ability to make a claim swiftly. This coupled with the anonymity of the policy inception and claim process potentially makes the possibility of making a fraudulent claim more attractive and less daunting. Whilst the nature of the market means that the cost of individual claims will be low; faced with those claims in volume, the impact on an insurer’s bottom line can be significant.
Fraud checks at policy inception and claim need to be swift, accurate and effective. Radar is a rapid validation of risk tool from CRIF Decision Solutions which can be used at point of quote, sale and claim. The high volume fraud screening tool draws on the widest range of external data sources, enriching the insurer’s internal data in order to verify the applicant’s identity, confirm prior claims history and validate the information they provide about themselves. Radar is highly configurable and enables insurers to conduct sub-second, real time enquiries. It can be flexed to incorporate additional data sets required by the insurer and adapted to reflect strategic risk tolerances. Available via web services, Radar requires minimal investment by insurers in their technology infrastructure. The speed and flexibility of the solution makes it the ideal counter fraud tool for insurers active in or about to embrace the on demand and micro-duration insurance market.
