Ecosystems — our take on future of insurance
Insurance brands do not inspire satisfaction or loyalty within their customer base, resulting in high acquisition and retention cost. High claims threaten the bottom line. The digitalization, and the rise of price aggregators means that different insurance products including car insurance become a commodity leading to price erosion and price wars.
In addition insurance companies have very low engagement with
their customers.
Car insurance companies have around 4 interactions per customer per year as compared to 400 by social media companies — according to McKinsey study.
This is extremely low especially if a company wants to engage digitally-savvy customers. It is time that insurance companies reinvent the way to interact with their customers and introduce disruptive business ideas that help rethink some building blocks of the car insurance — customer acquisition, retention, brand loyalty and claims.
New mobility patterns, including car- and ridesharing, mobility budget in combination with connected cars and self-driving vehicles are changing the mobility landscape, which is also relevant to the insurance industry.
Ecosystems — best way to survive the collision with new digital revolution
An excellent report by BCG and Morgan Stanley suggests that new emerging ecosystems could threaten insurers all along the value chain. Authors took a deep dive on digital ecosystems, which are a network of companies, individual contributors, institutions and consumers that interact to create combined services and mutual value.
Ecosystems will become pivotal in ‘future’ insurance.
Discovery Vitality Loyalty program
That is what we fully believe at VivaDrive. Our favorite example is a Vitality wellness program offered by South African insurer, Discovery. In exchange for access to a significant volume of personal data, customers get a better value proposition like insurance discounts, cash-backs or cool rewards. The data collection is operated through a loyalty program, and Discovery has built an ecosystem of different providers and partners (healthcare providers, shops, …) that assures a viable business model.
So far Discovery has 5.5 million members worldwide (RSA, UK, Germany, Japan,…), and thanks to Vitality it achieved lower claims costs and higher customer retention. The same principle is applied to car insurance, where Discovery operates Vitality Drive program . In Europe, Discovery partnered with Generali group, and the first Generali Vitality programs are already operating in France and Germany.
Allstate Drivewise program & 22nd century corporate
Another great example is Allstate’s Drivewise program , a telematics program that rewards Allstate customers for smart driving. Innovation is critical to Allstate to provide a complete customer experience that emphasizes service, connectedness, safety, preparedness, and value. Allstate created a smartphone-based telematics product and integrated it with the company’s loyalty program − Allstate Rewards resulting in more frequent and positive interaction touch points with their customers, better and
more positive customer experience. By the end of 2015 the Drivewise program had about 1 million active users.
Drivewise is one of the critical elements for Allstate’s future vision to become a 22nd Century Corporation that has broader and more meaningful relationships with customers, employees and business partners, and brings a positive change in society. AllState is strongly convinced that in order to thrive in the future they need to invest in building a long-term strategic platforms.
According to Allstate there are multiple benefits of investing in platforms:
- Platforms are broad and flexible, and create multiple business uses for a range of cases by customers and partners;
- They are flexible and adaptable;
- Platforms integrate third parties into a company’s business model;
- Platforms support a wide range of customer relationships and interactions;
- They are scalable and additional growth generates high incremental margins;
- Platforms become more valuable over time, as the information and intelligence that is part of them grow and create new learnings;
- Companies that control strategic platforms have higher inherent valuations than product-based businesses.
VivaDrive — build your own ecosystem
VivaDrive is built on a philosophy that a network of connected businesses pursuing a shared goal — called ecosystem — adds a great deal of value. VivaDrive’s goal is to build better drivers and more loyal customers.
VivaDrive solution provides a combination of driving feedback, gamification, rewards and the power and impact of social media that helps insurance companies create vibrant driver communities leading to lower customer acquisition and retention cost, brand loyalty improvement and claims reduction. VivaDrive is a solution for insurers willing to transform to customer-centric and trully-connected organizations, and create products and services that meet changing consumer needs.
VivaDrive allows car insurers quickly launch a vibrant driver community combined with an engaging loyalty program and a business ecosystem.
The complementary nature of the ecosystem means that each of the partners will help achieve the goal based on its own expertise and strengths, and will strengthen ecosystem business model. Featuring:
- insurer, who offers a tailor-made insurance offer for drivers;
- lifestyle partners with high level of customer engagement, who make the community concept ‘sexy’;
- loyalty partners, who share the community cost by providing part of the reward budget;
- road safety/mobility stakeholders including NGOs, government or corporates, who make the concept engaging and ready for the future challenges.
Build your own ecosystem — step by step
1.Start with a community
It’s easy said than done. Building communities is one of the hardest thing to do as it requires a great deal of effort in the beginning and have the right communication and marketing strategy along with providing the right incentives. But it is worth the effort. It allows you to deliver personalized, targeted offers based on deep customer insights and also improves customer retention.
Start with drivers community built around the concept of good driving. VivaDrive facilitates creating a vibrant communities that makes it simple and fun to connect with each other, where people experience full-on engagement and collectively improve road safety, in their private and professional lives. It allows to address different people’s motivations, both intrinsic such as becoming a better driver and extrinsic such as being rewarded for improvements.
As a result you can provide to your customers:
- Feedback — VivaDrive harvests driving style data and driving risk information, and generates private, personalized feedback;
- Engagement — good driving behavior is rewarded with benefits and incentives offered by partner networks that can cover the whole range of mobility and lifestyle services and products (insurance, public transport, entertainment, etc.);
- Improvement — thanks to smart incentives, and world class engagement tools VivaDrive motivates progress and behavior change;
Setting up the community with other organizations that have a high degree of customer engagement, increases chances of your success.
VivaDrive’s main show-case is Road Skippers, a community of drivers with a goal to promote good and safe driving in a rewarding and engaging way. We launched Road Skippers with support of Mobile Vikings, the most disruptive mobile operator for young people in Belgium, who helped us reach their young and tech-savvy Mobile Vikings customers. As a result, in the first 12 hours after the launch, we have attracted 2.000 active users.
2.Create a vibrant network of reward providers
Drivers earn points by driving well and being mobility conscious. Then those points give them access to cool rewards and discounts on their premiums.
When we were building Road Skippers community we realized that perception of value is often not directly related to money. A 25 euro may not be perceived same value as 2 cinema tickets will be. Because cinema tickets are not just the money, it’s also a quality time spent with a friend or family and creating some memories. Such kind of incentives and rewards help build the brand loyalty.
Very cool concept but how to afford it? You need to attract partners & suppliers who can contribute to your success and share rewards costs.
Thanks to an automated loyalty platform, VivaDrive allows you to orchestrate broad set of loyalty partners, who provide car-related, lifestyle and entertainment rewards.
It is possible to make the program self-funded by charging members a monthly subscription fee, which covers marketing and administrative expenses including the subsidized discounts and rewards.
3.Integrate community into your insurance product experience
It’s time to link your insurance business with the community and offer personalized and interactive insurance products which are very differentiated from competitor propositions.
VivaDrive allows you to address different market segments, both retail customers as well as business and commercial fleets. Therefore it’s a great opportunity to deliver innovative products to both business lines. For instance:
- personal lines: start with linking your traditional insurance product with a rewards program offered by the community and reward your good drivers and customers. In the next step you can offer personalized insurance products including PAYD/PHYD or contiextualized spot insurance, among others. Thanks to integrating the community-driven approach (mobile apps, driver improvement and loyalty program, and power of social media) into your insurance product experience your company will benefit from lower claims rates, improved loyalty and retention and boosted brand awareness;
- commercial lines: business and commercial fleets struggle with employee engagement to improve operational excellence and fleet safety. The sector leaders admit that the key to changing driver behavior is making the fleet safety message personal and engaging. That is where you can step in and offer special ‘Driver Improvement and Engagement Program’ that helps companies reward employees for good driving and to reduce operational fleet cost. It can well be integrated with your commercial vehicle insurance offer. As a result the fleet segment integrates with the ecosystem business model providing additional revenue.
4. Engage your drivers and customers
Most people have a very standard life. They are always looking to be associated with something exciting but it has to touch them emotionally. That is why it is crucial that your brand plays a significant part of a customer’s social experience.
For example, in Road Skippers we linked the rewards with some sort of good behavior and encouraged people to drive well. Thus keeping the roads safe, saving lives and also personally benefiting from it through getting rewards. Such kind of campaigns (helping the society + benefiting personally) goes well with people and they relate to be part of a community.
For instance, we organized a campaign ‘ Where football meets road safety’, where Road Skippers in collaboration with P&V Insurance, Volvo cars and BIVV (Belgian Road Safety Institute) rewarded Belgian drivers for being cautious on the road on the days, when Belgian football team played in the Eurocup 2016. It created a lot of engagement and attracted a lot of new community members.
5. Enjoy all the benefits
Strong marketing and brand proposition
We are convinced that an independent community and ecosystem has a great potential to help insurers to strengthen its brand position thanks to highly relevant and unique approach to car insurance for drivers, increased emotional connection with the insurer and world-class consumer interaction process.
Positive selection
We observe that almost 75% of Road Skippers members are good and excellent drivers. They are happy to share their driving data in exchange for discounts and rewards. As a result VivaDrive helps insurers gain a largest market share of the better drivers and hence they will benefit from improved risk selection and reduced claims.
Improved retention
VivaDrive gets customers something valuable — thanks to entirely new approach i.e. combination of community and ecosystem, an insurer benefits from higher level of customer satisfaction, loyalty and retention. Market study by LoyaltyOne found that despite privacy concerns over sharing and contributing personal data, two-thirds of consumers would provide more information in return for relevance. We are convinced that with VivaDrive, insurers will build the relevance by supplementing traditional telematics
monitoring with world-class customer service, relevant feedback, gamification, and personalized incentives — addressing various customer needs. Different studies and business projects prove that the loyalty improvement through telematics/UBI is in the range between 10% and 40% .
Improved claims ratio
Thanks to the combination of driving insights, personalized driving feedback, engagement features (gamification & incentives) and a personalized and regular interaction with drivers VivaDrive technology is
able to help people improve driving behaviour. We work with top-notch specialists from Transportation Research Institute (our R&D partner) from Hasselt, who have more than 10 years experience in road safety, mobility and driver improvement. Thanks to their input, our algorithms and models are deeply rooted in scientific research but also thoroughly tested in real-life conditions.
As a result, almost 60% of VivaDrive platform users keep improving their driving behavior. Top 10% of the learners on average improve as much as 0.39 points per week (for 0–10 score scale). Different business telematics projects prove positive reduction in crash rates (between 10% and 70%). Of course 50% improvement in driving scores does not lead directly to 50% improvement in claims but there is a positive correlation. The higher the driving score, the lower the forecasted loss ratio. According to LexisNexis study, drivers with lowest driving score have a loss ratio of approximately 135 percent, compared to a loss ratio of approximately 38 percent for the top scorers. Better drivers would be expected to have higher UBI driving scores — and accordingly, fewer claims, less severe claims and lower loss ratios. It is safe to assume that the reduction in claims could range between 10% and 30% .
We are convinced that building powerful business ecosystem around drivers community, where different stakeholders share costs and share benefits is a successful way forward. This approach is also not easy to be copied given that different parties that participate in the service, and importantly it
assures a positive ROI in a short and long-term for all the ecosystem stakeholders.
Please feel free to leave your comments below.
Co-Founder, VP Product
mat@vivadrive.io
