How mobile is transforming insurance

In a survey of 113 insurance executives conducted in June 2014 by The Economist Intelligence Unit, sponsored by SAP, 62% of respondents see mobile as offering unique capabilities with th

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From protector to partner: Can mobile expand insurers’ relationships with consumers?

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Preface 2

Contents

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From protector to partner: Can mobile expand insurers’ relationships with consumers? explores how mobile technologies are transforming the insurance industry The “anytime, anywhere”

interactions that mobile enables are allowing a new level of intimacy in the insurer-policyholder relationship with the potential to change the insurance game The report explores how insurers can become trusted partners that provide valuable new services that help policyholders identify and assess risks as well as gain protection tailored to their individual needs

As the basis for this research, The Economist Intelligence Unit conducted two global surveys, sponsored by SAP The first polled 113 insurance executives in June 2014 and the other polled 1,827 consumers in September 2014 The findings and views expressed in this report do not necessarily reflect the views of the sponsor The author was Anthony O’Donnell Riva Richmond edited the report and Mike Kenny was responsible for the layout We would like to thank all of the executives who participated, whether on record or

anonymously, for their valuable insights

Eric Herbek, vice-president of product development for Consumer Health Engagement

at Cigna Neff Hudson, emerging channels executive at USAAKevin Murray, group chief operating officer and UK chief information officer at AXA

Rick Roy, chief information officer at CUNA Mutual Group

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This report is based on two new surveys conducted

by The Economist Intelligence Unit (EIU) and sponsored by SAP: one of 113 insurance executives

in June 2014 and the other of 1,827 consumers in September 2014

The executive survey The survey of executives at

life, property/casualty and health insurers went

to a senior group Almost six in 10 (59%) worked

in the C-suite, including chief executives, chief financial officers, chief risk officers and CIOs

Another 7% were at the vice-president or director level or ran business units

The survey attracted executives at large insurers primarily, including many national or global operations About half (48%) generated annual revenue of more than $5bn, and just over one-quarter (27%) had assets between $1bn and $5bn

Respondents were fairly evenly distributed across North America, EMEA, Latin America and Asia

Three countries accounted for almost half (48%)

of respondents: the US, the UK and Brazil Eight percent came from France and 5% from Japan

The consumer survey Respondents to the

consumer survey were from five regions and 48 countries All currently use mobile devices and

have bank accounts About 13% of respondents were from the US, and 6% each were from Brazil, Mexico, Canada, China, the UK and France; no other country accounted for more than 4% Emerging markets were well-represented, with 19% of respondents hailing from the BRIC countries and another 48% from a more broadly defined group of emerging economies About one-fifth (19%) came from North America, 19% from Latin America, 23% from EMEA, 26% from Asia-Pacific and 14% from Middle and Eastern Europe, specifically

The median survey-taker was in the 41-to-50 age group—the average age was 45 Men outnumbered women by a ratio of 57:43 In terms of income, respondents exhibited a dumbbell pattern: the largest group made more than $125,000 per year (14%), while the second-largest made less than $10,000 (9%) and the third largest earned between $10,000 and $15,000 (7%) The average annual income of respondents was approximately

$57,000 Most have smartphones (86%) and almost half have tablets (47%) A significant portion also uses a feature phone (22%)—a basic phone for calls and texts, with simple games and Internet connectivity

About the surveys

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Little more than a decade ago, mobile technology

at insurance companies was limited to BlackBerry devices for executives and “rugged” laptops for field claims adjusters Today the picture is very different The consumerisation of technology has put an array of mobile technologies and services into the hands of both insurers and their policyholders, changing the way they interact and shining a spotlight on customer service

While the Internet has enabled a new level of efficiency and convenience, mobile has enabled truly “anytime, anywhere” customer engagement

As a result, a new level of intimacy is developing in insurers’ relationships with their policyholders In

a survey of 113 insurance executives conducted in June 2014 by The Economist Intelligence Unit, sponsored by SAP, 62% of respondents see mobile

as offering unique capabilities with the potential

to change the insurance game

Mobile is enabling insurers to reach current and potential customers in new ways with new offerings Not only can mobile make communication more convenient and frequent, it now supports a new paradigm: Insurers can become trusted partners that provide policyholders with valuable new services that help them identify and assess risks—and take action to protect themselves based on their individual needs

As mobile technologies continue to be more and more widely adopted, they are also improving the efficiency and responsiveness of employees at insurance companies and their many partner companies

Introduction

1

Source: Economist Intelligence Unit survey, September 2014.

North America Latin America Middle and Eastern Europe

61 55

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Insurers have long struggled with many advances

in “customer experience” for the simple reason that their touchpoints with policyholders tend to

be few and far between While consumers may interact with their banks several times a week, they may contact their insurer only occasionally—to purchase a policy, to pay their premium and, potentially, to file a claim

According to a companion survey of 1,827 insurance and banking customers polled in August and September 2014 by the EIU, more than half deal with their insurer once a year or less often

When they do connect, the interaction rarely takes

place on a mobile device Only 26% of consumers have ever connected with their insurer via mobile When they do interact with their insurer on mobile, the reason is convenience—just as it is for banking Mobile lets them communicate with their insurer any time they want (60%) without having to wait (41%) or make a trip to meet with an agent (37%) Nonetheless, policyholders today are disinclined

to use their mobile devices While 61% of respondents say they would use a mobile device to interact with their insurer if it were easy and safe, a significant minority (39%) say that even then they would not By contrast, 74% of these respondents

How open to mobile are the insured?

2

North America Latin America EMEA Asia

Percentage of insurance customers who have used mobile technologies to connect with their insurers, by region

(% of consumer respondents)

Shop for or compare policies Locate third-party service providers (eg, authorized repair centres, physicians) Receive alerts (eg, expiration and renewal)

Pay premiums and see payment history Update policy and personal data Research or purchase other financial services (eg, banking, mortgage, legal)

Access proof of insurance, check policy Review risk level (eg, health check) File claims and check claim history and status

21 23 26 28

23 29 27 25

17 30 23 24

21 21 20 24

13 23 16 20

16 23 22 20

17 19 15 19

10 14 8 15

13 16 12 14

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say they would use mobile to bank if it were easy and safe, while 26% would not

Of those consumers who do interact with insurers via mobile, only 23% say that they are more satisfied with the mobile experience than with the desktop experience The largest group of respondents (45%) say the experience is inferior

to that of desktop computers Similarly, security concerns and preference for PCs were top reasons for avoiding mobile banking, suggesting that many financial-services firms have work to do in the security area and with their mobile experiences

Consumers are especially wary about sharing private data with their insurer, including data generated by mobile devices and sensors Seven of

10 policyholders (70%) say they would be strongly

or moderately concerned about their insurer collecting and using their personal information to personalise products and services Almost as many (67%) would feel the same way about insurers collecting personal data to discourage risky behaviour Interestingly, when the question is stated slightly differently—collecting personal information to encourage healthy behaviour—the level of high-to-moderate concern drops to 62%

Between 76% and 87% of consumers have strong or moderate concerns about collection of data from a range of sources including mobile devices, location software, social media, wearable devices (eg Fitbit) and sensors (eg fire alarms)

Despite consumer concerns, one-third (32%) of insurers are collecting data on policy risk and another third (33%) plan to within three years

Insurers that move ahead without getting their policyholders on board by explaining the benefits offered and the privacy protections guaranteed may be putting themselves at risk of backlash

The mobile imperative in an

“omnichannel” world

Although insurers and consumers are somewhat at odds in their attitudes towards data collection (much of which will be generated by mobile devices), their attitudes may soon converge Consumers may be reluctant to share their data, but they want to benefit from the aggregate data that insurers collect to get a better understanding

of how to manage health, property and lifestyle risks About one-quarter of respondents say they have viewed their driving history (25%) and fire and surveillance data (24%) and gotten advice about managing risks and premiums, while more than half would like to do so

Consumers may be more likely to share data as they see the benefits in gaining a new

understanding of how to manage their health, property and lifestyle risks These findings set the stage for a breakthrough in the insurer-customer relationship enabled by the unique capabilities of mobile More than three-quarters (77%) of policyholders would exchange personal information for lower premiums, according to an October 2014 global study by Accenture, a global advisory firm.Mobile has become one of many channels that insurers must support More than half (53%) of insurance executives surveyed by the EIU

How concerned are you about your insurer collecting and using data from the following sources?

(% of consumers who are very or somewhat concerned)

Mobile phone, tablet Social media Location data (eg, GPS) Connected devices (eg, automobile sensors, smoke detectors, security systems)

Wearables (eg, Fitbit) Other personal or behavioural data

83 82 81 77 75 86

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❛❛

Mobile is unique

for its ubiquity

and the services

that it can enable,

but it still must be

complemented by

other channels.

❜❜

Francisco Javier Duque,

marketing manager of SURA

Group

Asia EMEA Latin America MEE North America

Personalise products and services

Strongly concerned Moderately concerned Minimally concerned Not at all concerned

Discourage risky behaviour

Encourage healthy behaviour

How concerned are you about your insurer collecting and using your personal information to—

Asked directly whether mobile is just another channel, about one-third (32%) of executives disagree, another third agree (36%) and the remaining third are not sure However, 62% see mobile as having capabilities that other channels

do not—capabilities with the potential to change the game

For example, through sensors, location-based services and telemetry, mobile empowers insurers

to collect data that correlates with risk and enables

the delivery of custom offerings Policyholders can inventory property, document damage and file claims with their devices

“Mobile is unique for its ubiquity and the services that it can enable, but it still must be complemented by other channels,” says Francisco Javier Duque, marketing manager at Suramericana, the insurance and social security subsidiary of SURA Group “It presents difficulties in accommodating the variety of devices and operating systems, but it creates opportunities because it facilitates access to information and services and accompanying the client on an anytime-anywhere basis.”

SURA’s business model goes beyond the traditional indemnifying benefit of insurance, or paying claims in the event of a loss, Mr Duque says

Have you used your mobile device to get any of the following types of information and advice?

(% of consumer respondents)

Have done Would like to do

Manage my and my family’s health Manage my personal assets and related risks Legal advice and/or services View driving history and manage driving risks and auto premiums View home fire and surveillance data and manage related risks and premiums

52 34

36 48 27

50 25

53 24

54

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“SURA’s customer experience is designed for our policyholders to enjoy quality, timely service delivered in an integrated manner, so that we can develop a long-term, win/win relationship.”

SURA, a multi-line insurer based in Medellin, Colombia, was the first insurer in Latin America to offer a telematics-powered, usage-based auto-insurance programme, and it provides policyholders with a range of downloadable applications for Apple and Android devices “These enable us to maintain contact with policyholders, educate in preventive health, schedule medical appointments, manage risks and request roadside services,” Mr Duque says “We also have a GPS service for private vehicles and commercial fleets through which our customers can access a variety

of useful information for safe and reliable driving—

we capture information such as location and driving style to generate added value.”

Since 2001, SURA has offered online services to enable agents and policyholders to interact and execute transactions at the company’s site, while its digital channel has evolved into a multi-channel approach “Now, with smartphones, we can offer

an even higher quality of services, some through the traditional navigator and others from applications downloaded to mobile devices,” Mr Duque says

“It’s a challenge for companies to simply initiate and complete service within a single channel, let alone begin in one and end in another,” he adds

“But customer experience must be designed in a way that channels complement each other to support better service.”

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USAA, a San Antonio, Texas-based insurer and financial-services company that serves military personnel, has become a leader in customer-facing mobile capabilities because of its need to reach its clients when they are deployed Today, mobile is USAA’s largest contact channel, reporting 590m interactions during 2013 By contrast, its website logged 350m interactions and its voice-response system received 110m calls, according to Neff Hudson, the company’s emerging channels executive.

USAA aims to provide both high-tech and

“high-touch” services, giving policyholders the option to talk to a person when desired while also providing digital pathways that make decision-making easy “That could take the form of text on screen, an avatar or a phone-call offer—the point

is to offer help at the decision point and emulate the logical flow of the person making the decision,” Mr Hudson explains

The mobile aspect is particularly transformative

For instance, it fundamentally changes the relationship of driver to car and driver to insurer,

Mr Hudson says “Instead of the old paper policy that sat in the glove box, we can put the entire policy on your phone,” he says “With a driver’s permission, USAA can use GPS to send a tow truck [and] coach policyholders on driver safety.”

In the last couple of years, USAA has created apps designed to reduce losses It has an app that enables fire-hazard self-assessments and recently

launched another that can capture video and deliver a repair estimate within a few hours The proliferation of mobile and other remote devices is rapidly reshaping the insurer-customer relationship, making it more personal and enabling insurers to be more useful to people in their day-to-day lives “When we see the emergence of connected homes, Google rolling out driverless cars and mobile devices hitting scale, it suggests a very different future for insurance,” Mr Hudson says “In this emerging world, insurance will be about individual protection generally, rather than

a policy for your car, house, etc.”

In the meantime, mobile is causing insurers to rethink their distribution and service models, according to Rick Roy, chief information officer (CIO) at CUNA Mutual Group, a North American provider of insurance and financial products to credit unions “Even insurers who haven’t considered themselves direct-to-consumer in the past should engage the consumer directly, taking advantage of the fact that everybody has three devices,” he says “In some cases, this is an incremental change, in others a transformation.” CUNA Mutual has instituted a policy that prioritises mobile functionality for both internal and external users “This has meant a big change in our application-development approach” to use more agile methodologies that involve rapid prototype development, Mr Roy says CUNA recently launched a mobile service for customers

Insurer capabilities and success stories

“That could take

the form of text

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and distributors called ZONE, an iPad-optimised app that enables financial advisors and credit-union members to customise a “zone” of risk/

reward that aligns with investment goals and is associated with the company’s Members Zone annuity

CUNA Mutual’s AskAuto mobile service supports the cross-sale of credit insurance and loans when credit-union members visit an auto dealer to purchase a vehicle “Credit unions have generated over $1bn in loans, and we have been able to offer members credit-insurance options to protect their debt,” Mr Roy says

The company has also implemented a your-own-device policy for its associates “We still have corporate devices, but we allow employees choice,” he explains “We want our employees using the same technology our customers are using, which helps us understand devices better and gives us ideas on opportunities to use mobile.”

bring-Combined Insurance, a Chicago-based global

provider of supplemental insurance, recently undertook a sales-enhancement programme to increase adoption of mobile capabilities by its US agents and eliminate inefficient paper-based processes “We selected the iPad as the mobile device to enhance agent productivity and provide for electronic submission of applications and other documentation,” says Seamus Fitzpatrick, the company’s senior vice-president for mobile sales technology integration “Our goal was to boost sales by improving efficiencies of sales agents, field management and back-office operations.” Now sales agents and marketing field personnel have electronic versions of sales presentation materials, up-to-date underwriting guidelines and other frequently used documents that they can use both online and offline More than 200 agents are enrolled and active users, and the company has seen significant improvement in speed-of-business and policy-issue rates and more timely payments, according to Mr Fitzpatrick

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To the extent that mobile brings insurers closer to policyholders, it raises the spectre of

“disintermediation”—a direct business model that takes intermediaries, such as agents, out of transactions—a model that has already been realised to a significant extent in personal lines property insurance and some types of individual life insurance

More direct sales are likely as insurers offer convenient transactions and services via mobile

Two-thirds (67%) of insurance executives surveyed

by the EIU agree that consumers expect insurers to provide mobile services with the same

personalisation and ease-of-use provided by retail giants and trendsetters such as Amazon.com Only 12% believe that they can get away with services below this standard

Two-thirds (66%) of executives see mobile as suitable for simple activities, such as ordering ID cards or contacting customer service, but believe mobile is inadequate as a platform for explaining the complexity of insurance products or properly documenting insurance transactions—a belief belied by the experiences of industry leaders USAA and CUNA Mutual Only 13% agree with the concept that mobile devices can handle the complexity of the insurer-insured relationship

Whether sales are direct or mediated, mobile will become important for both learning about insurance products and buying them Consumers currently access many channels for these purposes, including brokers and agents, aggregators, insurer

websites, call centres, mobile devices, social media and word-of-mouth recommendations None will disappear, but their roles will shift as mobile matures

Today, eight out of ten executives say that customers primarily reach insurers through brokers and agents In five years’ time, mobile and social will take on bigger roles Indeed, mobile will rise to the top, though it will not dominate in an

omnichannel distribution model Customers will likely use many channels, for example, speaking to

an agent, browsing a website, seeing a story on social media and using a price-comparison app—perhaps all at the same time

Yet only one-quarter of insurance executives say their companies currently have an integrated, omnichannel strategy This will soon change: almost six in 10 (58%) say that five years from now all channels will be managed through an

integrated set of processes

Mobile’s implications for direct selling go beyond a question of distribution to include product innovation and custom markets For example, Japanese insurer Tokio Marine & Nichido Fire (TMNF) offers “One-Time Insurance” products

in partnership with Japanese telecom company NTT Docomo The products, which can be purchased anytime and anywhere via mobile devices, cover potential risks from sporadic and short-term events

Policyholders can buy coverage casually whenever they feel the need, says Michael

The changing insurer-agent relationship

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Fitzgerald, a senior analyst at research firm Celent

“One-Time Insurance aims to cultivate the untapped market for small-amount, short-term insurance and attract a new customer segment that typically does not have an interest in insurance.”

TMNF maintains that One-Time Insurance products do not conflict with current distribution channels because the premium amounts are too small to interest agents Premiums start at ¥300 (about $2.50)

The One-Time Insurance programme uses Docomo customers’ smartphone GPS functionality

to make location-specific insurance recommendations For example, it recommends travel insurance at airports, golf insurance at golf courses and sports and leisure insurance at ski resorts, according to Mr Fitzgerald The system can differentiate between a user’s place of work and a location that the user is merely visiting, thus avoiding redundant recommendations

Since the debut of One-Time Insurance in 2010, TMNF has released new product lines, some which involve data-sharing For example, an inexpensive medical-insurance product features a health-promotion programme that uses a policyholder’s mobile device to monitor steps walked or miles run Policyholders can use points won to purchase

Docomo products An auto-insurance product aimed at those who have a driver’s license but do not own a vehicle provides damage coverage for as little as ¥500 or ¥1,000 a day

TMNF and Docomo Healthcare also offer a service called “How My Body Feels” designed to promote wellness and the taking of preventive measures among women Using a smartphone and connected thermometer, Docomo Healthcare monitors users’ daily body temperatures and other health data; if it detects symptoms of disease, it alerts them to strongly consider a visit to their doctor Women who receive a diagnosis from a doctor receive money to help cover the cost of the visit The companies say they have found a novel way to boost prevention, thus reducing overall healthcare costs, boosting customer loyalty and attracting new customers

TMNF’s mobile successes are partly attributable

to strong mobile demand among Japanese customers, says Mr Fitzgerald Indeed, Asia could

be a bellwether for mobile insurance developments “Because of the difference in privacy concerns and the advanced adoption of mobile by consumers in the region, Asian insurers can lead the way for the rest of the world in unlocking digital value for insurers,” he says

insurers can lead

the way for the

rest of the world

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Given that mobility increases customer knowledge and convenience, insurers have legitimate concerns about it also increasing customer attrition A significant proportion of executives (38%) fear that the proliferation of mobile services will increase customer churn Half of respondents who fear increased attrition (48%) also believe that mobile will exacerbate the trend towards

commoditisation of basic insurance services One-third (31%) say mobile will remove barriers to entry for potential competitors, especially on the distribution side where aggregators have already increased customer churn

However, about one-quarter (23%) of respondents believe the opposite: that mobile will reduce attrition They base their opinion on a

Customer loyalty

5

How will the migration of customers to mobile technologies affect customer attrition (eg, churn, defection to competitors)?

(% of executives)

Why will attrition decline?

Insurers will have more ways to differentiate themselves Greater efficiency will allow insurers

to lower costs for customers Insurers will gain scope for personalisation

using customer data Insurers will gain scope to address niche markets Many customers will prefer self-service over interacting with personnel Insurers will get better at predicting which customers are likely to leave and making offers to get them to stay

Insurers will offer advisory services, becoming more than just insurance suppliers Insurers will be able to build loyalty

by providing innovative features Managing and renewing insurance will become easier and faster

Why will attrition rise?

Human interaction will decrease Security concerns will increase Barriers to market entry will fall, leading to more new providers Basic insurance services will become even more commoditised Switching to new providers will become easier

31 38 38 38 38 42 46 54 58

24 24 31 48 81

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number of factors, especially the idea that mobile makes it easier for customers to manage their insurance (58%) If an update or renewal is required, a customer can act instantly from any location

Insurers plan to expand the mobile features and services they offer policyholders over the next three to five years, according to the executive survey

Cigna, of Bloomfield, Connecticut, has incorporated wearable technology into the various services it offers, including Cigna Health Matters, a suite of health-coaching tools that uses mobile, online, social media and gamification technologies that is designed to help employer health-plan customers set and meet health goals

“Cigna Health Matters integrates the latest insights and practices of the sociology of engagement, motivation and rewarding behaviour change with the latest health tools and

technology,” says Eric Herbek, vice-president of product development for Cigna’s Consumer Health Engagement unit

Cigna’s vision involves the “instrumentation of the individual”, or the use of wearable devices that collect and transmit medically relevant

diabetic monitor blood glucose levels and share those readings with a health coach who helps co-ordinate dietary adjustments Transmission of this personal information is anonymised to protect

an individual’s privacy, says Mark Boxer , the insurer’s executive vice-president and global CIO.The insurer has formed an exclusive alliance with Samsung as a co-developer of the S-Health platform for the manufacturer’s smart devices S-Health enables users to track health statistics, such as blood pressure, glucose levels and weight,

as well as environmental conditions and details of

an individual’s exercise programme

Perhaps within five years, consumers will have the option to use implanted devices to transmit accurate readings on important physiological factors like blood glucose levels, heart rate and blood pressure, says Kevin Murray, group chief operating officer and CIO for the UK unit of AXA, a French financial-services firm However,

consumers’ willingness to adopt such devices and share these data will require clear value in return, for example, useful medical advice or discounts on insurance premiums

AXA is looking for ways to deepen customer bonds through engaging apps like its Gate Who

Which mobile features can your customers currently use, and which do your company expect to support five years from now?

Please select all that apply in each column.

(% of executives) Now Five years from now

Access and manage accounts,

ID cards, policy documents Purchase and manage policies,

pay premiums Document and provide information about properties and assets, damages; file claims Locate third-party support partners (authorised service/repair centres, healthcare providers)

Submit and update documents (eg, via device-based cameras) Access customer-service representatives via email, text message and social media Access personalised risk-management tools (eg, via mobile-data analytics) Receive personalised information and/or offers on products, prices, agents, brokers (eg, based on behaviours, preferences, history, location)

Receive personalised recommendations about risky and healthy behaviour (eg, lifestyle, health, driving) Receive, view and share information with insurance companies via sensors (eg, in cars and wearables)

68 42

51 45 46 44 41 42 34 46 52 45 25

49 45 48 37 44 38 48

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