Innovation within insurance is moving towards using the functionality of smartphones and capitalizing upon ‘always connected’ customers, which could see mobile network providers disrupting the market.
The UK is a smartphone society. They are the most popular personal device and are held by 81% of UK adults, according to Deloitte’s 2016 Mobile Consumer Survey. Not only are smartphones popular in general ownership, but they are also carried everywhere we go.
Insurance providers have long been looking for ways to capitalize upon the rise of the mobile and the opportunity to reach ‘always connected’ customers anytime and anywhere. The initial focus of mobile was in optimizing services for devices. More recently, however, the ability to reach a customer through their smartphone is becoming a feature embedded within insurance products themselves. Within the motor insurance market, for instance, the Aviva Drive app lets customers monitor their driving skills through their phone and can help them save money on a premium.
O2 is the latest company to use the opportunity of always connected customers to develop a product. In the Czech Republic it has launched smart travel insurance which ‘knows’ when to switch itself on. Customers sign up and activate their policy using their O2 number, but won’t be charged until they go abroad.
The smart element of the policy uses the functionality of mobile technology. When the phone gets connected to an international operator’s network, the travel insurance policy switches itself on. It then automatically turns off when the customer returns back to the Czech Republic and connects to their usual network.
In addition to customers not having to actively switch on or organize a policy, O2’s proposition adds a pay-as-you-go element which ensures that customers only pay for the period in which they travel. This is beneficial for customers who don’t travel very often, and is a new spin on single-trip policies. The payment system is also streamlined where the additional cost of insurance is simply added to the next billing of the customer’s phone.
O2 is notably not an insurer. In future more mobile network providers may enter the insurance space by making use of the existing connection they have with customers through their mobile phones. It could provide a new element of market disruption as more policies are developed that use the functionality of a smartphone to provide cover. However, while it is a competitive disruption, forming partnerships could also be an opportunity for traditional insurance providers to innovate.
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