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KASKO – delivering insurance as a service at the point of demand

Periodic Reporting for period 1 - KASKO (KASKO – delivering insurance as a service at the point of demand)

Reporting period: 2016-12-01 to 2017-05-31

Consumers worldwide are increasingly going online to purchase goods and services, with global e-commerce sales increasing from €1.85 trillion this year to almost €3.23 trillion by 2019. At the same time, the demand for insurance products has grown as people seek to secure the goods they buy and activities they undertake: non-life insurance premiums in Europe (including motor, liability, accident and home) are expected to grow from €455 billion in 2014 to €487 billion in 2020. Within this framework, consumer insurance purchasing behaviours are changing rapidly: whereas they once bought coverage through offline intermediary agents, 26% now buy directly online. Digital insurance transactions are expected to grow at a rate of 10 times the current non-life market. Digital interactions with financial services are forecast to soon outnumber face-to-face by 250 to 1, and mobile interactions will outnumber telephone calls by 30 to 1. Consumers are demanding greater convenience, value, and policies tailored to their purchases and actual usage.

These changes require insurance companies to pivot from traditional push-based sales through agents, to opportunity-based offers at points where consumers make purchases – namely, digital and mobile channels. Yet the European insurance industry is not prepared for this digital disruption, due to a set of concurrent challenges:
A. Customer challenges: Poor loyalty: only 55% of customers report a positive experience with their insurer, 34% for younger consumers. Poor perception of value: 75% of customers are not willing to pay for personalized advice. Poor product penetration: customers typically only hold 1-2 products.
B. Systemic challenges: Legacy IT systems: typical policy administration systems are 15-20 years old. High costs and timeframes for launching new products in distribution channels. Low appetite for business experiments.
C. Market challenges: Existing distribution channels for insurance carriers have no connection to the digital economy. Products fails to serve the demands of the digital economy. Multi-channel conflicts prevent insurers to offer different value-propositions to small yet growing digital channels.

Consequently, Europe’s large and systemically significant insurance industry - encompassing some 4,860 companies and 1 million employees - now faces serious challenges that threaten profitability and competitiveness. Consumers, too, are suffering. Insurance products are failing to match their consumption and activity preferences, such as renting out personal vehicles. The traditional agent-focused model leaves them over- or under-insured through unsuitable policies, and pushes up costs by up to 40% due to sales-based intermediary commissions.

KASKO is an innovative insurance technology SME pioneering the concept of “insurance as a service.” It enables insurance companies to easily offer tailored insurance products within any type of digital touch point and channel (i.e. Direct Website, Brokers/Agents, Affinity Partners (i.e. digital marketplace, retailers etc.) through easy-to-implement plug-ins or APIs without the need to connect directly to the inflexible insurance core systems. This seizes the opportunity created by major shifts enabled by digitalisation. The solution addresses the above-mentioned challenges by creating a software and business process that disrupts the model of insurance product creation and delivery. Using KASKO, online marketplaces can display a plug-in on their checkout pages with insurance offers from trusted providers generated in real time based on product and user behaviour data. This allows KASKO to offer highly relevant policies at lower costs at the right place and time, and to deliver benefits to insurance carriers, end consumers, and digital marketplaces.

The objective of KASKO - delivering insurance as a service at the point of demand was to deploy the platform and validate the technological, practical and the economic viability of the concept. As such its dimensions were to (1) Obtain valuable feedback from use-cases about user experience while using the platform; (2) Determine what technological adjustments and new functionalities are needed; (3) Test and refine the customer acquisition process; (4) Clarify the IPR status; (5) Disseminate and communicate information about KASKO; and (6) prepare a full business plan for investors. The outcome was to assist the company as it improves its product, applies for a patent, and scales up across Europe.
In this framework, KASKO conducted a user study by defining a framework of use-cases tested with insurers and distribution partners. The company defined the framework of a use-case and engaged in structured use-tests with both digital marketplaces (353) and business units within insurance carriers (245), to identify (i) Customer feedback about the proposition; and (ii) Required enhancements to the technology/product. The feedback was collected using semi-structured conversations/interviews requesting feedback through a series of questions whose main scope which were systematically documented in order to derive conclusions through a data analysis exercise. The ensuing data was compiled in a technology review report whose main scope was to evaluate what users experienced while using the platform and understand their needs in order to determine what technological adjustments and new functions were needed. The study provided valuable insights on user behavior and their needs, enabling the company to validate the strong interest and demand for its platform whist the feedback served to define what features need to be developed in order to improve usability and increase the added value of KASKO. KASKO also performed a series of tests in relation to its customer acquisition process to determine which channels generated the best ROI. The process involved conducting practical tests of its customer acquisition process to refine the commercial approach. By attracting 12 customers in 6 months, the project demonstrated that there is an interest from the market for such a product. On the other hand, it also enabled the company to determine the most effective strategy based on data and modify some elements of its business model to increase its growth further. The company also consulted with a patent expert who advised the company on the next steps of its IPR policy. Finally, KASKO also performed significant communication and outreach activities, both using online and offline channels, and its strategy proved to be instrumental in the growth of its customer base.

As such, the project proved to be very successful and instrument in consolidating KASKO’s business plan – and hence will be sustained.
KASKO's innovation addresses specific European challenges, as it is creating a new technology concept that will help lagging European insurers tap into unexploited revenue channels, resolving many difficulties relating to digitization, product innovation, customer satisfaction, competitiveness and growth. The continued health of the insurance industry is important for the whole European financial services sector, as insurance companies are deeply cross-connected, and underpin many businesses that need insurance to minimize risk.

KASKO is also helping insurers reach customers across Europe, rather than just in their home territory. This is a real challenge for insurance providers, who are inflexible and cautious of crossing borders due to distribution concerns despite EU-passporting rights. By achieving this, KASKO also aligns with the European Commission's initiative to move to a single market in financial services in order to promote growth and innovation and maintain competitiveness.
KASKO's innovation also unlocks the potential of many digital marketplaces, which require insurance products in order to convince customers to purchase their innovative products and services. This is particularly true of new sharing economy platforms, which have been shown to succeed only after adding an insurance product that builds user trust. In this way, KASKO will be an enabler of many future successful companies and whole sectors.

It is aimed at European market initially, starting in Germany and the UK and spreading to Austria, Belgium, France, Italy, Netherlands, Spain, Switzerland by 2020, followed by global markets. It has no direct European competitor, but competes with indirectly related providers that have inferior technology and business models.

KASKO aims to become an important European player in facilitating “insurance as a service” at the point of demand by creating technology that directly connects online marketplaces with insurance carriers. This will result in contextually relevant and fairly priced insurance services for more than 213 million potential end consumers.