Investors have backed ‘insurtechs’ such as Lemonade but will consumers do the same?

The answer may well rest with incumbent insurers; or those that decide to anticipate potential disrupters and disrupt other insurers themselves.

“I just don’t see that Lemonade has had a significant impact on the industry, let alone transformed it in any meaningful way,” said Chris Sandilands at consultancy Oxbow in a recent blog post."

Oliver Ralph in FT 5th July, 2020

There are insurers that are successfully executing transformation strategies. Look at Direct Line Group and its claims operation. Any policy holder can initiate a self-service first notice of loss (FNOL) claim by just clicking a button on its website. FNOL in seconds! Not just motor and home but all claims categories including commercial.

“It is a matter of time,” said Mr Ferguson. “These businesses take ten or 20 years to become really disruptive.In ten years, I don’t see how the old school players can compete with those that are more efficient and can lower claims.”

Malcolm Ferguson, a partner at Octopus in the FT

This is the critical point- incumbent insures do have time to react and apply as much innovation fizz as Lemonade. But that time protection will shorten.

COVID-19 has driven a change in consumer behaviour. They are used to the online buying service of Amazon and the phenomenal efficiency and speed of its logistics and supply chain model. They want the same from insurers; in fact demand it.

It is not enough to just make FNOL faster and more convenient. That is great for cash-settlement of simple claims but what about claimants who need lost or damaged property repaired, restored or replaced?

The claims adjuster does not deliver this outcome- the supply chain does. Transformation must extend to the supply chain. Suppliers and service providers are the ones who put a policyholder's life and property back together again. So digital transformation must embrace the supply chain as much as the claims journey.

Even more so with CAT events where suppliers are the critical part of sorting out customers. In Australia, the Haynes Royal Commission on Financial Services recommendations have been largely forgotten as COVID-19 stole the headlines but bush-fires, flooding and cataclysmic hailstorm damage have, unfortunately, not gone away.

The Haynes report categorically stated insurers must handle CAT events better including: -

  • Responding quickly
  • Identifying vulnerable parties for proactive action
  • Deploying a clear claims process
  • Actioning triage across all parties involved
  • Keeping policyholders informed

All these are achievable today with modern claims, risk and supply chain management platforms. Those that embrace the supply chain as well as claims management like 360SiteView.

These platforms also enable new UBI and parametric insurance products to be launched and claims managed. And they cover the whole range of claims types from simple accidental damage to CAT events.

This is where incumbent insurers have the jump on Lemonade which is focused on renters and limited geographies. They may be forgiven until now by not having the technology platforms to act fast and effectively i.e. innovation took too long, cost too much and involved too much complexity to replicate the speed of a disrupter like Lemonade.

No-code and low-code platforms that involve no Capex, low Opex, and deliver fast time to value ( literally weeks rather than months) give insurers the flexibility, speed and cash-flow efficiencies to anticipate disrupters, gain the loyalty of customers and suppliers and face the future with confidence.

The question is "How many insurers will be inspired and motivated to change by Lemonade and how many will leave it until too late?"

Would love to hear your views;