The emergence of ‘engagement insurance’ and the developing social conscience of protection insurance

Imagine a world where a consumer has an ongoing daily engagement with their insurance brand. Where insurance is a value add service that offers more than just protection against an unwelcome event. Where the insurance brand is discussed openly, positively and frequently in the office, at the pub, in the coffee shop (sic!).

Imagine a world where policyholders chose their insurer for the value add more than the cover itself. Where the premium is not the single determining factor for buying the insurance. Where the insurance brand becomes “sticky” and renews without thought year after year.

This is the world of insurance protection where consumers (policyholders) buy their insurance cover because of what they get with it, more than what they get in it. And this world is entirely possible, plausible and closer than you think!

To quote Maria Ferrante-Schepis in Flirting with the Uninterested, “You must give people a REASON to pay more for something” and “Insurance companies, when you really think about it, are not just in the protection business. They are in the “lifestyle continuity business””.

This is what I like to call “engagement insurance”.

Today, insurers like Vitality and Oscar have developed a model where they encourage ongoing engagement with their customers. I see this first hand with some business colleagues of mine who are Vitality customers. These are two men, in there twenties, millenials by any definition, who are mobile, digital, active.

On a regular basis I sit with them over a coffee and listen to them compare notes and talk about the free coffee or cinema tickets that Vitality have sent them for achieving an activity goal. They don’t discuss the insurance cover or even the premium, but they do discuss the Vitality rewards they get for doing what they do.

What they value the most is the engagement they have with their insurer. And this is fascinating to me because (and I am a big fan of Vitality) the actual benefits and incentives on offer are very limited.

Vitality have made their insurance product “sticky”?

“Sticky” is the Holy Grail for any sales organizations regardless of their industry, market or product. It defines the experience of the buyer once they have bought the product or service. It means once the purchase has been made, the buyer “sticks” with it through their own choice. It means that price is no longer the primary determining factor when making a buying decision!

But there is another and very significant consequence of this emerging model of “engagement insurance”.

The consequence is social in its nature and benefits more than just the policyholder and insurer alike, and not just because it leads to a better premium or combined ratio.

In the long term, the social consequence could be profound and seen in safer roads, healthier lifestyles and a greater sense of social responsibility.

• Telematics and smartphone apps are being used to encourage and reward safer driving through the conditions and pricing of the motor insurance policy. Ingenie set the market direction when they positioned the black box from ‘big brother’ to ‘co-pilot’.

• Conclusive research shows how healthier lifestyles lead to a lower cost on already over-stretched health services, to great productivity in the workforce, and enhanced standards of living. The adoption of wearable tech is already showing us that insurance can play a huge role in improving health and lifestyles.

• Moral hazard is the elephant in the room for insurance. The emergence of social, P2P and friendship groups (or the return to mutual insurance?) will change attitudes towards claiming on insurance. Will we ever see again the tabloid headline of a fraudster boasting on a Spanish beach of how they will pay for their holiday through an insurance claim?

To give me a startup’s perspective on the social benefits of ‘engagement insurance’, this week I interviewed Hesus Inoma, the founder of Irish digital startup, WeSavvy. Having grown up in Lisbon for 14 years, Hesus moved to Ireland to study International Insurance and European Studies at the University of Limerick.

Very quickly it became clear that Hesus is motivated by the social agenda for his insurance start-up. “I want this to be a lifestyle product”, he explained. “We’re starting with the health and life market and using wearables tech to give customer full control over their insurance premium. We want to create a no-claims bonus for health insurance that you can take with you if you change insurer.”

Like all distribution start-ups, Hesus’ value proposition for the insurance carrier is a simple one…by encouraging, motivating and rewarding greater levels of activity amongst policyholders, claims ratios are improved and everybody wins.

But there is a Part 2 to the value proposition. This insurance model builds loyalty and “stickiness”. This works because consumers and insurers only connect when the consumer buys the policy or makes a claim against it.

There is no way for an insurer to build brand value and customer loyalty in the current retail model, unless there is a claim and the policyholder gets the response they want. With WeSavvy, they aim to create an ongoing engagement where the policyholder gets continuous feedback from their platform that in turn creates engagement, which leads to brand loyalty.

Hesus is also embarking on an ambitious plan to create an industry wide benchmark for insurance premiums. He calls it “crowdsourcing your quote” and the concept is simple.

Using a network effect, WeSavvy is building a database of protection insurance quotes and premiums. Using a profiling system, WeSavvy will group similar or same quotes together. Once they hit scale, WeSavvy will be able to offer an industry price benchmark and baseline for normalizing insurance premiums.

However, the initial phase for WeSavvy is in the life and health space with a cash back proposition based on activity level, “its like Oscar… on Steroids!”

WeSavvy are regulated by the Central Bank of Ireland with the ability to passport its services across 9 European countries and begin beta testing this month with a medical cash plan.

Hesus has been supported by the Irish enterprise program, New Frontiers Phase 2, which is based in Synergy Centre Tallaght in Dublin. This is a state funded program and Hesus is busy preparing for his investor pitch in the coming months as well as going live in the meantime! Next week, Hesus takes WeSavvy to the Deloitte Digital Disruptors’ insurance bootcamp in Lisbon. This is a startup acceleration program run by Deloitte Portugal focused on digital solutions to disrupt the European insurance industry.

What is clear to me when talking to Hesus and other InsuranceTech startups in the retail distribution space is that engagement is a core value of their proposition. And the social benefits that spin out of this “engagement insurance” model have the potential to be massive.