Insurance has for decades been a simplistic, One Size Fits Whether You Like It Or Not cash cow. Until now, not much has changed but prices, and the insurance issues have been entrenched in legalistic rituals. Some of the strangest documents imaginable are old type car insurance policies. One venerable old insurance company has a complete section detailing specific instances in which the insurer won’t pay claims. Not exactly an incentive to buy a policy and it’s indicative of the level of vulnerability of the old style insurers.
The old style insurance sector is ripe for being undercut, thanks to these archaic practices, bureaucracy, and “premium creep”. Competition has now arrived in the form of new predators, the New Economy insurance businesses which are gouging out huge new market shares in all sectors.
Custom insurance- What it is and how it operates
The new approach is based on custom insurance. This is a simple idea in theory, but its practical aspects have been cutting swathes through the established businesses. Custom insurance is based on simply insuring specific instances. For car insurance, if you use the car less, you pay less insurance. If you have special requirements, there’s a “check list” of options, tailor-able to your needs. For home insurance, the same thing, with a range of options.
Now the clincher: the insuring party, not the insurer, can modify these policies at will, and online. If the insured person needs advice, these businesses have a sort of help line/advisory service. This is like a phone plan option, and it works.
The reasons for their success are very clear:
– The new insurers operate online, doing all their business without a massive organization and overheads adding costs.
– They have practically no overheads, relative to the old style businesses.
– They can outsource insurance claim checks on a needs basis, and cherry pick the best claims checkers because they’re doing a lot of business.
– They charge like companies trying to get market share, ultra competitively.
– Everything is paperless, verifiable at both ends and through third party payments. No loose ends and bureaucratic slip ups.
– They can afford to be comparatively generous in payouts, because they’ve already saved millions in costs.
The future and custom insurance
One thing is becoming very clear as the custom insurance and New Economy business models interact- They’ve only just started to evolve. It’s quite likely that the insurance models will expand into other modes, as many other types of insurance, notably life insurance, have developed.
These policies have huge implications for the insurance market as a whole. A No Frills, No Questions basic set cost cover on preset premiums, for example, could be a category killer, particularly at the lower rates New Economy businesses can afford to charge.
If you’re in the industry, now is the time to start paying close attention. Everything from car insurance quotes to home, life and fire insurance can be turned into packages, and the commercial realities are unavoidable for those going against this new methodology.
Source : www.youi.com.au
