Home insurance coverages are getting digitalized, too

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Why does buying home insurance feel like a trip to the eye doctor’s office? While the patient is thinking about the cool new frames they plan to get, the doctor expects them to be an active participant while calibrating their prescription, asking “can you please read line Z of the eye chart?” or “which lens is blurrier?” Similarly, insurance companies ask numerous questions, like “where did you go to college?” and “what do you do for work?” when a consumer is simply looking to protect their most valuable asset and family from financial ruin. In this age of advanced hardware and software and ubiquitous data, why can’t all the gadgets in the eye doctor’s office determine a prescription without any input from the patient? And why can’t an insurance company crunch all the relevant data out there to figure out how much the consumer should be paying for insurance? Because, let’s face it, consumers would much rather spend their time picking out flattering eyeglass frames and choosing coverages that will truly protect themselves and their family.

Any product that has the same user experience as the eye doctor is ripe for disruption. At this rate, a human will walk on Mars before an eyeglass wearer can get a new prescription without answering a ton of questions. Fortunately, there is hope for homeowner insurance consumers as providers have realized the need for change. In 2019, according the J.D. Power U.S. Home Insurance Study, homeowners insurance consumer satisfaction dropped for the first time since 2015, driven primarily by year-over-year declines in positive interactions with insurance companies. In fact, 74% of homeowners insurance customers indicated in 2019 that they believe that the home insurance industry needs improvement.

Incumbents and start-ups alike have started to chip away at the old norms of homeowners insurance that were particularly burdensome for the consumer. While still ripe for improvement, some innovative offerings have included:

  • Fast Quotes: This usually means the consumer is able to get a quote for insurance after simply providing their name and address. This is great and a huge step in the right direction, but let’s remember it is really only improving the onboarding process, which is a fraction of the overall homeowner insurance product. If consumers shop for home insurance every 5-10 years, the “share of time” is miniscule.
  • Improved Pricing: Insurance innovation has been so focused on advances in developing the most sophisticated price—there is a whole sub-industry supporting insurance companies by selling data and analytics that helps improve the accuracy by which an insurance company can assess the risk of a consumer. Estimating the cost of goods sold at an insurance company is very important, but it still falls short of product improvement.

Consumers will be best served in a future where home insurance companies talk about advances in the insurance product itself—not the price, and not the onboarding process. Insurance product managers will benefit from thinking about insurance as something the customer can touch and feel. It’s the peace of mind consumers derive from protecting the stuff they value most and the experience delivered during every service interaction that providers should be focused on. As insurance companies look toward making home insurance better, advancements will come in two forms:

  • Improvements to the core coverages we’re all familiar with. Most insurance companies are naïve to why consumers own the house they own or drive the car they drive. Context matters in insurance. The insurance companies that contextualize the stuff they are protecting for their customer will deliver an outstanding experience at the pinnacle insurance moment of truth, when the customer filed a claim. This means insurance providers need to fully understand why the customer owns the items they want to insure in the first place and how they use it. For example, if you are displaced from your home and you have three young kids, wouldn’t it be great if your insurance company found an Airbnb around the corner from your house with cribs available immediately? Rather than the current experience of giving you some money to find a hotel and then leaving you on your own to do so. We all know this is possible, insurance companies just need to invest in data that helps them understand this context, even if it means asking the consumer.
  • Investments in coverages that are consistent with modern priorities. The contracts that form the base of most insurance policies have not kept up with the on-demand digital lives people lead today. Some start-ups have tried to introduce new, niche coverages that better fit our modern lives, but they have yet to breakthrough in a meaningful way. Since scale matters a lot in insurance and understanding the ins and outs of insurance contracts and regulations is gained by experience, it will be the insurance incumbents who make the most progress here. Carriers will pivot from using data for risk evaluation to finding data that helps them offer better coverages that can be delivered with little-to-no overhead cost and that cover our most important assets like time. For example, imagine a snow day coverage parents can buy that pays out if their local school district is closed for more than four days during a given winter. The parents can then use the money for backup daycare or a trip to the museum. This kind of investment will not only create new markets, but will be a lot more head-turning and value-laden for consumers.

Like so many industries before it, home insurance is being upended by disruptive competition and changing customer expectations. The carriers that use data and customer feedback to improve their products, as opposed to developing an awesome onboarding process or pricing scheme, will delight consumers today and will be ready to take on the challenges of tomorrow. Personally, I am excited to see where insurance will be in 10 years.

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Homeowners insurance Customer experience Digital transformation