The Future of Insurance

As seen on Disruption Magazine.

How can an industry that creates a mandatory product be disrupted? This is a question that has plagued Canadian auto insurance providers for more than a decade. Auto insurance is a legally required product across Canada that is heavily regulated and extremely slow to change. From outdated laws that require notifications to be sent out by snail mail to one-size-fits-all pricing, the regulations that were created to help customers have now become inconvenient and a barrier to progress, affordability, and accessibility.

“What we’ve seen is regulations that are not just protecting consumers from risk, but also protecting them from change,” says Celeyste Power, the Vice President of the Insurance Bureau of Canada. Power is a key advocate for offering products that are customizable and fit with consumers’ lifestyles.

When Power first started in the industry five years ago, the lack of progress and updates were instantly apparent. As nearly all other major industries were offering digital user interfaces that could be accessed from any device, people were still required to mail in items for their insurance.

“You still need to use registered mail for cancellations, so the consumer can’t choose the way they want to interact with their insurer,” Power says. She highlights just how behind the insurance industry is by pointing out that consumers now have the option to skip physically going to places like the bank, post office, or even grocery store thanks to disruptive technology that has allowed for virtual banking, shopping, delivery, and more.

What’s In It for the Insurance Companies?

However, unlike those other industries, insurance is a legal requirement. If everyone needs insurance, what incentive does the insurance industry have to change and to disrupt itself? As Power explains, the incentive is bigger and more important than one would expect.

“Customers are our number one stakeholder. That is who we care the most about in the industry. At the same time, we are regulated by the government and the government’s number one stakeholder is their voter. Our customers and their constituents are one and the same so we all have a reason to work to create products that will keep them happy.”

Power goes on to say that while insurance is a legal requirement, some individuals may choose to forgo it if it is too expensive. This is something she and others want to avoid because uninsured drivers pose a public health risk which is something everyone should be concerned about. Creating customizable products at different price points could help alleviate this.

Power says that the industry is receptive to change, and that it takes only a matter of weeks for a company to roll out new products like an app or good driver discounts. Regulations at the federal level, unfortunately, create red tape that holds up the process for years.

“Insurance companies can’t simply go and fix their own products. In most other industries you can go in and tinker with your product, tweak it, fix it, and provide it back to the customer. But because the government is regulating it, it takes a little longer.”

Ultimately, it is the consumer who suffers in this process, says Power. Because the insurance companies must wait for regulations to change, they cannot offer personalized rates that will lower costs for people with clean driving records or for those who do not drive as frequently.

Cutting Through the Red Tape with Technology

“Customers don’t care about the red tape or burdensome regulatory markets. If I heard about that from a bank, I wouldn’t care about their red tape problem. Consumers want to know how it will affect them,” Power says.

Most recently, she and other consumer advocates have helped affect positive change by offering apps that allows people to get and submit their proof of insurance, AKA their pink card, electronically. Digital proof of insurance is now accepted in Ontario, Alberta, Nova Scotia, Quebec, Newfoundland and Labroador.

Applications like this, and the ability to interact with auto insurance electronically, start to bring the industry into the current era. This is the type of speed and interaction consumers have come to expect and that makes it important for the survival and growth of the industry.

A Future of Affordability and Availability

Disruption in the insurance industry means a future of “affordability and availability,” which Power says are the key goals when it comes to a mandatory product. “Without availability, there is no insurance that covers what I need and that is going to impact my life significantly. And if it is available but not affordable, then I may have to give up something else in my life that I really enjoy, or some may even choose to go uninsured.”

Currently, Canadians only have three options when it comes to auto insurance: basic, collision, and comprehensive. In other countries where there is less government involvement, drivers can get highly-customized discounts, down to specific discounts for “a young person living in the city, or a young person going to school, or a senior citizen who rarely uses their car, or a veteran.”

Personalization is a big part of what Power sees coming to the Canadian market and emphasizes that keeping customers happy and affecting positive changes is the best way to stay viable with a mandatory product. “Everything improves from a sustainability, profit, and company perspective when your customer is happy. When your customers are coming back to you every year and when they’re referring their friends and family to you, we are much better able to be successful overall.”

More Care, Less Court

Along with personalization and discounts directly to consumers, Power also sees disrupting the way money is allocated at the government level as a major priority. “With a mandatory product, there’s a limited pool of money that you can work with. You could have incredible, amazing benefits, but it will be pricey. You can also have tons of options on lawsuits. That will also cost money. What we’ve been bringing to government is the question of: what is the best way to use this limited pool of money? On lawsuits and legal options, or on care?”

“We’re really focusing on more care and less court, less wait time, and reduced cash settlements. These changes are really making sure customers have what they need to get better and get back on their feet while also getting more customization and choice in their insurance.”

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