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.
