Reimagining Insurance as a Service, not a Product

An article from VP of sales, Geoff Keast

A business associate messages you on LinkedIn with a proposal. They invite you to become an early investor in a brand-new industry. They dazzle you with facts and figures about amazing year-over-year growth potential. But there is one huge problem: the entire industry is built around a product nobody wants to buy. Would you invest?

This example may sound absurd, however, in many ways it illustrates the core problem insurers have wrestled with for more than 100 years. The actual insurance product — a policy — is a need, not a want. Nobody fills their social media feeds with breathless posts about buying the newest homeowner’s policy or anticipating the latest commercial auto upgrade.

Yet, in the era of digital transformation, forward-thinking insurers are finding a way to flip the script. They are digitizing their operations and offerings, shifting their focus from product-centric to service-oriented. This insurance-as-a-service style approach moves the industry’s perception from reactive to proactive, delivering value to policyholders in new and exciting ways.

Where commoditization went wrong

Why transform to a service model? For starters, the traditional positioning of insurance as a product has hurt — not helped — the industry.

When a product becomes commoditized, as many insurance products have, it leaves price as the only differentiator. This unfortunate reality encourages insurers to set their premiums at the lowest levels possible, resulting in less coverage and fewer protections for consumers. And when policyholders learn their actual coverage doesn’t meet their expectations, it wipes away the very value — peace of mind — that insurance is supposed to deliver.

Additionally, traditional product-centric insurance models have created huge communication chasms between insurers and their customers. Typically, policyholders only engage with their agents or brokers on two occasions: when they buy a policy and when they file a claim. This alarming lack of touch points leads to the negative, and often incorrect, perception that insurance lacks transparency and trust.

Many tech incumbents have used this product-centric view of insurance to their advantage. They developed inflexible, hard-coded systems that locked insurers into traditional product lines and coverages. Most of these legacy systems are incapable of bundling insurance products for maximum value. Alarmingly, we have even seen solution providers hard-code rate factors within each coverage, leaving their customers absolutely no room for product or underwriting innovation. Thankfully, the emergence of no-code platforms has put the power of innovation back into the hands of insurers and MGAs, empowering them to create new offerings without limits.

Equally exciting is the fact that many other industries have already completed their reinventions, providing insurers with plenty of inspiring examples. Software transitioned from one-time licenses to software-as-a-service, opening doors to ongoing updates and support. Music and media went from in-person and mail-order CD and DVD purchases to streaming platforms that offer vast libraries of content. Even retail is moving from brick-and-mortar, episodic transactions to “subscribe and save” e-commerce experiences. Insurers can follow the lead of these industries to give their internal and external audiences greater value and transparency.

The four pillars of insurance as a service

What might insurance as a service look like in real life? While examples will vary based on the type of insurance a brand offers, an optimal approach embraces these four pillars:

1. Enhanced customer experience. In December 2023, INSTANDA surveyed 2,000 consumers (1,000 in North America and 1,000 in the UK). The results showed, among other things, that the younger a person is, the more important a better digital experience becomes. Consumers today — especially those from younger generations — expect robust online experiences from their insurer, much like they receive from other brands. Having user-friendly and mobile-responsive websites and apps is table stakes. Insurers should also work toward creating simplified policy management and claims processing features, including self-service options, wherever possible.
   
2. Engaging educational content. While older generations buy insurance for peace of mind, younger generations expect insurers to be proactive. They want insider tips explaining how they can reduce their risks as well as costs. Consider the power of a health insurance app that offers educational videos showing consumers how to reverse their Type 2 diabetes through diet, exercise and other lifestyle modifications. Imagine the positive brand perception a life insurer might create by offering blogs explaining the vital role of insurance in financial planning.
   
3. Value-added features. Insurers cannot force customers into channels they do not want to use. But innovations like embedded insurance empower insurers to meet customers where they already are. According to the INSTANDA survey, 54% of U.S. consumers say they are already comfortable with the idea of embedded insurance. With a service-oriented mindset, insurers can satisfy this growing demand by bundling products and offering them in partnership with other companies, similar to how ride-share companies already embed insurance offerings to their passengers.
   
4. Added trust and transparency. As insurers transition from a product-centric to service-oriented focus, they will need to engage their customers at every step. Start by making simplicity a goal. Use easy-to-understand terms when explaining policies, coverage and pricing. Understand what your competitors offer so you can differentiate your brand in new and dynamic ways. Commit to a culture of constant innovation so you can continue developing new solutions that will strengthen your customer relationships.

A smarter approach to homeowners’ insurance

Homeowners’ insurance is just one area of insurance ripe for innovation that also offers a great case study in this service-based approach. The basic products — dwelling coverage, contents coverage — have not changed in decades. But technology has changed, including the rise of smart devices inside many homes.

A newer market entry, Savvi Insurance , founded just seven years ago, used a service-oriented approach to disrupt the market. The unique Savvi solution includes a 10-point smart home kit, at no extra cost, with items like leak sensors, a smart smoke detector and security cameras. It also includes an AI-enabled risk prevention app. Using the app, policyholders can walk through their property, perform a self-inspection and gain insight into proper placement of leak detectors based on the home’s layout.

Savvi has built proactiveness into its app, too. When one of Savvi’s leak detectors spots a leak, the app notifies policyholders immediately. If the policyholder can’t be located, Savvi sends a third party to shut off water, potentially eliminating or at least reducing the severity of the claim.

Savvi's IT team created this forward-thinking all-in model in just 18 months using the INSTANDA no-code platform. And they enjoyed dramatic results: The new service-oriented experience enabled Savvi to double its written premium month-over-month while also helping their policyholders prevent claims before they even happen, a true value-driven insurance approach.

Make insurance less obligatory

Nobody gets excited about buying a product seen as mandatory, which is partly why insurance has a reputation problem among consumers. Companies that begin embracing an insurance-as-a-service model will move beyond the transactional nature of customer interactions and make insurance far more accessible, relevant, transparent and even desirable.