Like many older markets poised for change, the insurance industry has already seen its first wave of innovation.
In many ways similar to the early innovation of online bank account opening, Insurtech 1.0 brought an age-old product into the digital age by giving customers a way to apply for insurance online. The enthusiasm of the customers turned into the enthusiasm of the investors and everyone headed towards the sunset.
Well, not at all. It seems some people may have flown too close to the sun instead: focusing on the customer experience on the front end leads to really rapid growth, but failing to focus on the underwriting on the back end leads to huge numbers. I can have claims, very quickly.
This is because insurance, basically, is about risk. It follows that digital insurance innovation should primarily focus on digital underwriting innovation – in short, using technology to accurately assess and value risk in real time.
The truly magical (and most misunderstood) fact is that just about everything else can flow from that innovative underwriting foundation: an accelerated, digital customer experience, sustainable growth free of excessive claims, and embedding insurance into other digital journeys. The ability to create a better experience for consumers, partners and insurers alike.
By focusing first on growth and then on underwriting, the Insurtech 1.0 wave has inevitably flown in the wrong direction. But there’s plenty of time to turn the tide – consumers’ overwhelming appetite for convenient, trendy insurance products has only increased.
Insurtech companies need to keep pace with the demand created through sustainable unit economics and intelligent risk management.
So what does focusing on the next generation of underwriting really look like, and how should you build on it? Here’s our five-step playbook for winning in the InsurTech 2.0 era.
Reorganize Your Business Around Underwriting Excellence
Refocusing on underwriting innovation begins with refocusing your business.
Ask yourself the following questions:
- Do your primary KPIs include traditional growth metrics as well as ways to measure underwriting results?
- Do most of your employees work under underwriting, directly or indirectly?
- Do your company goals include clear underwriting goals?
- Can all of your employees explain how/why underwriting differs in your company?
If you answered no to one or more of the questions, it may be worth reconsidering your goals, metrics, and organizational structure.
prove your model
No one likes to qualify growth, but in insurtech, smart growth is the name of the game. Before you build confidence in your underwriting engine, resist the urge to rapidly scale up acquisitions. But how do you do that?
Source: Insurance Innovation Reporter
