Insurance Transformed by Michael Naylor

Author:Michael Naylor
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Insurance Policies

Most current insurance policies are technically complex, with the exact definition of terms having substantial weighting in terms of costs. Therefore, it can be vital that customers take time to read and understand policy detail, and possibly seek expert advice. This is necessary in a world where insurance is a permanent and serious purchase, where policy terms and premiums are static.

However, in the future world of digital real-time polices, the overwhelming bulk of customers will have neither the time nor the inclination to carefully read and understand small print - very few online customers read the ‘terms and conditions’ in a mobile phone tick box. Heavily reliance on policy terminology is also unrealistic from a customer viewpoint if polices terms and premiums are dynamic, ever-changing based on telematic feedback.

Customization of insurance to the needs of individuals is also vital. As non-Americans understand, Starbucks coffee is low quality and high cost. The reason why Starbucks is so popular is that customers can specify a range of choices, so they can get exactly what they want - not ‘Starbucks coffee’ but ‘John’s Coffee.’ In this kind of customer expectation world, insurers cannot continue to offer ‘life insurance,’ where the terms and conditions are standard across multiple customers. The future has to be an individualized policy, whereby customers can amend terms and conditions and thus premiums, until they get ‘John’s Life Insurance.’ Yet, it is unrealistic from an insurers’ cost viewpoint if policies are customized to individual clients.

The only solution in the more dynamic future is for policies to be offered as modules, with terms vastly simplified and standardized. There, however, also needs to be some flexibility within conditions or added options, so customers can go on a Web site and play around with adding or subtracting, and watching how the premiums change, until they are satisfied with their customized version.

The meaning or terms also have to be very clear. It is vital that what the average customer expects a term to mean is what the term is interpreted by the claims side to mean. It is vital that what the insurer seems to an average person to be offering is what they are actually offering, not what the underwriter thought the term meant. Polices will have to be explained in clear and simple terms and be able to stand up to a systematic public comparison with those of competitors. Insurers who do not distribute their policies online and allow them to be compared and reviewed in detail on social media will disappear from customer view.

Digital natives will not accept insurer’s defining policy terms based on legal rulings or long-established industry practice if these seem unreasonable. Thus, insurers will have to establish policy terms based on what seems reasonable to a wide range of the public. Premiums will have to be costed on the basis of a high level of customer goodwill and an understanding that long-term reputation and social capital are substantially more important than short-term gain by a strict claims policy.

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