While incumbent insurers traditionally relied on third parties to distribute their products, digital challengers have relied on the direct channel since their inception. Digital challengers are reviving the customer experience, not only because they have been active creating innovative and tailor-made insurance products but also for their unique ways of engaging with customers.

Listed below are the top digital challengers impacting D2C in insurance, as identified by GlobalData.

Digital challengers are reinventing the way the insurance industry engages with customers

While incumbent insurers traditionally relied on third parties to distribute their products, digital challengers have relied on the direct channel since their inception. Digital challengers are reviving the customer experience, not only because they have been active creating innovative and tailor-made insurance products but also for their unique ways of engaging with customers.

On the one hand, digital challengers have created slick digital interfaces with customer touchpoints throughout the entire journey, encouraging incumbent insurers to pay more and more attention to the direct channel. One example is China’s Zhong An, which was established in 2013 by internet service titan Alibaba and insurance company Ping An. Zhong An was China’s first truly digital insurer, and was the first company in the country to be granted an internet insurance license. The company not only sells insurance policies online but also handles all claims online. In its first year of operation, Zhong An underwrote over 630 million insurance policies and serviced some 150 million clients. An important success factor was Zhong An’s customer centricity, with the company making purchasing insurance a straightforward and convenient process, as well as offering innovative products to the Chinese market.

On the other hand, digital challengers are reinventing the style of communication adopted by the industry. Home insurer Lemonade is often cited for leading this change. Lemonade has excelled at cutting through legal jargon, using plain talk to improve customers’ understanding of the brand’s value proposition. In fact, the company has largely promoted transparency of its business by communicating on the way it makes profit, and explaining that if customers’ “money [is] leftover, we give it back to causes.” Meanwhile UK insurtech DeadHappy has created pay-as-you go life insurance products with catchy and memorable names to anchor the brand in customers’ minds. DeadHappy’s products include “Fund my wake party”, “Rest in happiness”, and “Send someone on a shopping spree”.

Digital challengers are sending a message to consumers that the way they operate is both different and better than the offerings of long-established players. For instance, Lemonade asks customers to “forget everything you know about insurance,” while Oscar claims to make health insurance “easy.”

Digital challengers are excelling at simplifying the customer journey

Home insurance provider Hippo claims that over half of the people would rather go to the dentist than deal with their insurance company. Meanwhile, a PwC study found that the most important factor influencing customers’ trust in their insurer is personal experience dealing with their provider, with 39% of respondents citing this reason. Press coverage and transparency of price/terms or conditions came joint second with 25% each.

Digital challengers have been active at addressing customer pain points and removing friction. Tech-driven startups have largely digitised the customer experience from end to end in the value chain, allowing customers to take out a policy or update it. Firstly, digital insurers have simplified terms by removing the legal jargon, but other key changes resulting from their emergence include the availability of quick, instant quotes online or via apps, and more niche lines or tailor-made, flexible cover.

For instance, Igloo allows customers to “pay what you want” for their phones, allowing to take out cover for as little as one day. Similarly, Metromile invented the pay-per-mile concept so that customers only pay for the miles they drive – a concept particularly beneficial to low-mileage drivers. Meanwhile, motor insurance provider Root allows customers to either buy a recommended plan or create a new one by taking a simple quiz. The company also rewards safe driving. Lemonade provides instant cover for homeowners and renters and claims to have the world record for settling a claim at just three seconds. Jim, an AI-powered bot, processed the claim with no paperwork required from the customer.

This is an edited extract from the Direct to Customer in Insurance – Thematic Research report produced by GlobalData Thematic Research.

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