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How technology is bringing insurers and policyholders together

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How technology is bringing insurers and policyholders together

By Matt Poll, co-founder & CEO of Neos

Like a pile of laundry or stack of dirty dishes, traditional home insurance can feel like a chore. Home insurance seems detached from everyday life and its role as a supposed ‘security blanket’ is paradoxical because of the stress caused by drawn out admin and unexpected T&C’s.

Today, things are changing – technology has created an opportunity for insurers to step outside of their restraints and provide policies that encourage an authentic relationship between policyholder and policy provider. By utilising smart home technology, such as cameras and sensors, new innovative insurtech businesses are able to offer customers access to ‘smart home insurance’ which renders tangible value not only for the customer but also the insurance provider.

In order to fully understand why the insurance industry is ripe for disruption, we must first take a look at the issues underpinning traditional home insurance in its current form.

A look at the industry pain points

In the current landscape, the distrusting and distant relationship between the consumer and insurer is a major industry pain point. Having worked in the corporate world of insurance for over 15 years, I have seen first hand, the underlying problems that are contributing to the breakdown in the relationship between consumer and insurer.

 It is influenced by a number of factors that stem directly from the structure of the traditional home insurance offering. Namely, stand-alone insurance policies promising protection only after damage has occurred.

This means that, for the majority of cases, the only interaction a customer has with their insurance provider is following a negative experience, such as damage to their house through fire or flood, or perhaps theft. As such, it is not uncommon that a customer making a claim may feel vulnerable and upset during this time. The complexity of making a claim and a perceived lack of sensitivity can ultimately add to the sense of distrust between the two parties. Ultimately, this is the last thing a customer wants and needs.

On the flip side, for customers who never make a claim, their insurance provider is completely detached from their everyday life. Customers pay money for a piece of paper that is left in a drawer to grow dusty and untouched until they need to make a claim or renew their policy. In an age where technology has connected so many services and people, the feeling of remoteness is no longer acceptable. Home protection should be built into our lifestyle, not simply a forgotten accessory that we occasionally look to once damage has been done. With technology, our relationship with insurers can feel more personal.

Sense of distrust

Another pain point is that although traditional loyalty rewards sound like a favourable bonus to insurance offerings, the reality is far from exciting. Some incentives, such as a ‘no-claims discounts’, pressure policyholders into not claiming, as they look to secure a discount the following year. Ultimately, this restricts rather than empowers customers, making a claim when they need to, especially as with no claims discounts there’s usually no difference between fault and non-fault claims.

An added disadvantage for loyal customers is evident when it comes to loyalty penalties. Research from Citizens Advice found that 1 in 3 home-insurance customers could be paying up to 70% more than a new customer. Last year, Citizens Advice issued a “super-complaint”, calling on the Competition & Markets Authority (CMA) to bar companies from unfairly ratcheting up premiums charged to loyal customers whilst offering low rates to incoming customers.

Insurance should make you feel safe, not as if the insurer is there to catch you out with hidden schemes and penalties. Loyalty should truly be rewarded, without any T&Cs attached.

 Welcome home Insurtech

The good news is that, thanks to technology, the relationship between insurers and policyholders is changing. By leveraging smart home technology new insuretechs are able to provide customers with real value throughout the relationship – not just a piece of paper and a promise – by installing devices such as smart fire alarms, window sensors, leak detectors and smart cameras that enable customers to monitor their home’s activity.

Unlike traditional home insurance, this allows a more proactive approach to insurance that is more beneficial to both the policy holders and insurers themselves. For the policyholders, making use of these devices empowers them to be alerted of oncoming threats before extreme damage has been done and act upon this knowledge. For example, a leak sensor will be able to pick up a slow leak early on. This will alert customers before it becomes a serious issue and can lessen the shocking £707million Brits spend each year to repair damage caused by water leaking into their home from their neighbour’s property.

Other products like smart cameras can be linked to an app on a smartphone, allowing users to keep an eye on what’s going on at home no matter where they are in the world. This equips people with the peace of mind that their home is safe when they’re out and about – whether working late, away on holiday or just out socialising. Rather than feeling like a detached accessory, technology allows insurance to take the form of a hands-on protector that users are constantly interacting with.

Furthermore, insurers who encourage their policyholders to make use of the added protection that smart home technology offers, are positioning themselves at an advantage. With increased preventative measures in place, policy holders are more likely to be alerted and report damage before it happens. This means insurers will spend less money on damages because fewer incidents occur.

Insurers and policy-holiders alike need to recognise the benefits technology is providing to this industry. The insurance industry has the opportunity to step out of its old skin as a complex and far-removed industry for customers, and form an exciting and personal relationship instead. It is time for us to celebrate the mutually beneficial friendship founded on technology which will ultimately deliver better value for customers, and result in fewer claims for the insurer.

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19 1

Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.

“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.

According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.

The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.

Key findings from the Deloitte global report include:

  • Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
  • 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
  • Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
  • Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.

“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.

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One in five insurance customers saw an improvement in customer service over lockdown, research shows

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One in five insurance customers saw an improvement in customer service over lockdown, research shows 2

SAS research reveals that insurers improved their customer experience during lockdown

One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.

This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.

However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.

Paul Ridge, Head of Insurance at SAS UK & Ireland, said:

“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.

“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”

Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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The power of superstar firms amid the pandemic: should regulators intervene?

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The power of superstar firms amid the pandemic: should regulators intervene? 3

By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business

Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.

Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.

Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.[1]

Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.

THE FORCES BEHIND THE SUPERSTAR PHENOMENON

The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else.[2] Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.

Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.

In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University[3], we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers.[4] For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.

Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.

THE POLICYMAKER’S DILEMMA

In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.

Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.

So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?

We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.

Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.

However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.

Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.

What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.[5]

We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’

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