Insurance as a service – Creating value through Insurance

Insurance as a service - Creating value through Insurance

Some may refer to it as “insurance as a service” or “shared value insurance” while others consider it “active insurance,” but the core idea is the same — focusing on reducing the frequency and severity of insurance claims. By linking data with technology and working with consumers and businesses to change behaviour to reduce their exposure to risks, insurers hope to reduce the frequency and severity of claims, prevent losses, and build closer ties with their insured clients.

Loss prevention has been part of the insurance industry for centuries. In the aftermath of the Great Fire of London, the property insurers of the 17th century operated their own emergency services, as they sought to protect their insured clients, according to a Forbes article.  From the promotion of home burglar alarms to wheel locks in cars, insurers have long urged clients to take greater safety measures to prevent and reduce insurance claims.

Loss prevention is becoming an area of heavy investment for insurance organisations. The purpose of these investments is to transform insurance from just paying out claims (many of which are preventable or reducible) to informing and educating people, communities and businesses about their exposures and risks, with the goal of reducing the frequency and severity of future claims.

The relationship between insurer/reinsurer and their insured clients is evolving and becoming more collaborative, inclusive and a mutual effort for the greater good. 

“The insurance customer of the future will expect his or her insurer to not only compensate them when those things happen but also to prevent those losses, helping them to become safer drivers, live more safely and securely, become healthier and achieve a longer life expectancy,” according to the Forbes article referenced above. 

Insurance of the future will see insurers connecting to an individual’s active lifestyle health data by integrating with platforms (e.g. Strava, Garmin), connecting to our cars and measuring driving performance (speed, braking, lane movement), connecting to our house and monitoring the property to pre-empt basement flooding, burglaries, fires, all in real time with real data and with the attainable goal of reducing our exposure to risk, preventing losses and protecting our well-being and property. 

Boxx Insurance, a Toronto-based MGA, provides small and midsized enterprises with solutions to protect themselves from cyber threats, which forms a critical part of their insurance solution. “For too long cyber insurance has waited for the disaster to happen before it responds. That’s totally the wrong call for digital threats. Cyber insurance should be there to help customers predict, prevent, respond, and recover – not just wait for the disaster to happen,” according to Vishal Kundi, CEO and co-founder of BOXX Insurance. “No-one buys car insurance so they can smash up their car, and we think the same goes for cyber. Our mandate is to help companies be digitally healthy so that they can prevent cyber incidents from happening in the first place.”

A Case of Vitality

Vitality – the world’s largest behavioural platform linked to financial services is an insurance program that rewards people and generates incentives, so they make better choices and adopt healthier behaviours.  

According to the Forbes article, when members join Vitality, they complete a thorough health assessment and select personal goals in which to improve health and fitness. Then, members earn points by working out in a gym, by positive check-ups at wellness centres, by quitting smoking and by eating healthier. Active participants are rewarded via ‘healthy food benefit’ incentives like 25% cash back on fruit and vegetable shopping. 

“As an added incentive, an Apple Watch is provided to members to track their fitness goals. Failure to meet those goals result in members having to pay monthly instalments to retain it,” according to Forbes. 

Interestingly, those behind Vitality did a deep dive into human behavioural theory and discovered that “losing a benefit already received is a stronger motivator than being offered future reward.” 

Manulife sums up the concept of “insurance as a service” in an excerpt from their website: “Insurance should be more than protecting your loved ones; it’s about living your life to the fullest. Manulife Vitality gives you insurance, plus the opportunity to earn rewards and save on how much you pay – all while improving your health.”

How this shared value concept plays out in insurance

As Forbes explains, healthier individuals cultivate healthier lifestyles within families and generate a positive influence within communities. The domino effect is a powerful one, and it is something the “insurance as a service” concept banks on. “When the society at large is healthy, the burden on its healthcare system is reduced,” according to the article. “With high productivity and a strong value chain, insurance companies gain with fewer policy lapses and lower claims. It becomes a win-win proposition.”