An inefficient network for distributing insurance products makes for a frustrating ride for consumers. Nikolaus Suehr, CEO and Co-founder of Kasko, plots an alternative route.
The transcontinental railroad linking the east and west coasts of America, the trans-Siberian railway between Moscow with Vladivostok and the more recently completed line between the eastern Chinese trading city of Yiwu and Madrid in Spain (let that one sink in for a moment)… railways have connected the world more than almost anything else in history.
They have done it along one piece of track at a time, allowing multiple parties to use each line at a small cost. Each company sending a package didn’t have to lay their own individual rails, did they? So why does the insurance industry insist on doing so?
Insurance is intermediated as an industry; it doesn’t matter if they are businesses or individuals, customers rarely buy directly from an insurer, but through brokers, price comparison sites, tied sales agents and so on. Each insurer has to build up these networks, which takes time and a lot of money. That is the same as building your own private railway lines to connect the same cities.
Typically, as much as 40 per cent of insurance premiums go into distribution and operations/IT. That is a huge amount, considering most of the networks are there already. They just seem to get rebuilt each and every time someone launches a new product offering or onboards a new distribution partner. In fact, it gets worse than that as the insurance ‘tracks’ are so old and brittle that the ‘cities’ actually stop the insurer’s train at the gates and request the train passengers board a new service for the final part of the journey. It’s truly mad!
Much like the UK’s rail networks, it’s the consumer that pays the price – twice. They end up having to pay for a ‘railway’ to be built alongside a perfectly good pre-existing one in order to buy the ticket they want, and, to warrant the building of said tracks, the products are standardised to make them ‘off-the-shelf’. In a world where customers want all the choice and personalisation, be it a car or a neobank offering, is it any wonder they won’t board the insurance train? It’s dull, the opposite of personal, and the price of riding it extortionately expensive. I mean, with life insurance, there is a strong argument for people not to bother, a steady investment in ISAs and some safe shares will provide a better payout.
At Kasko, we are already fixing the problem. We have successfully validated and deployed a modular insurance operating system that’s fully equipped with an integration layer, allowing for fast, collaborative products to be built, distributed and even managed at a fraction of the cost. We can pull the freight (products) from all the suppliers on our network and, through our shared distribution channels, provide personally requested offerings to customers wherever they are, when they want them.
But our current insurtech as a service (a term we created) offering is really just the starting point. It’s the building block for creating a shared railway and train station network, if you like, because what we really aspire to is building a truly connected insurance network by opening up these tools to anyone with a licence to use them. It is one thing providing new products at one tenth of the speed and cost it once took for insurers, it is another to offer flexible products from everyone on-demand at the point of sale. We’re sharing and thus massively reducing the costs of distribution networks and even point-of-sale operations, and granting access to these tools for the market to use. This has never been done for insurance –even with things like Lloyds’ marketplace, people have to go to that aggregator and buy something built for it, within it.
If you are a product person or partnerships lead at an insurer, an MGA (managing general agent), a broker, re-insurer, bank, car manufacturer, retailer or travel operator, we want you to come on the journey, too. Help make insurance cool (which means pretty much invisible and ‘lean’) for you, your partners and, most of all, your customers.
A golden age of insurtech railways is approaching. Please stand behind the yellow line.