High interest rates, currency depreciation, rising food prices, and other economic effects are affecting insurance customers with tight budgets. Both individuals and businesses with group policies are choosing inferior insurance cover, higher deductibles, or cancelling their policies altogether to stretch their limited budget. With less customers purchasing policies, the cost of insurance premiums is increasing to cover the risk calculated.
With insurance penetration levels already quite low, this is increasing pressure on insurers to keep insurance premiums low enough to encourage participation. To take account of the reduced income from insurance premiums, insurers are looking at other ways in which to reduce supply chain costs to keep insurance premiums affordable. According to Gari Dombo, Managing Director of Alexander Forbes Insurance, implementing technology can help insurers who are looking to ensure insurance is affordable for their clients.
Insurers use a range of data to estimate risk indicators. When an insured person takes out a policy they provide their own personal data relative to the policy they are taking out. Based on the different risk indicators a policy premium is determined. The more accurate these indicators the more accurate the premium calculated.
Technology enables insurers to collect more real-time data from the consumer of today. Telematics is commonly used by motor insurers to track drivers behavior and braking habits to rate their driving behavior, providing more accurate risk indicators to the insurer.
Wearable technology, such as health and fitness devices like the Apple watch or the Fitbit, are being used more often today to allow insurers to use this information to reduce premiums for low-risk customers or to increase premiums for high-risk customers.
Insurance customers who are willing to share data with their insurer are experiencing lower policy premiums as their risk is more accurate to their lifestyle. This reward type system enables policyholders to benefit from adhering to risk-reducing behavioral patterns with regards to their health and fitness.
The cost of policy premiums is affected by the costs applied throughout the supply chain. Offering internet-based self-service portals allows clients to take charge of their own transactions over the internet, hence reducing the cost of claim submission and monitoring of claim progress.
Self-service portals, such as mobile apps, enable insurers to increase market penetration. This can be hugely beneficial to remote areas in particular, where insurance brokers can sell policies and provide the insured with mobile app access. Once the policy has been purchased, all claim details can be submitted through the app. Claimants can watch the progress of the claim through the app as well, avoiding the need for agents in a large call center.
Ultimately, insurers need to aim to keep the cost of policy premiums low enough to encourage greater uptake of these policies, bringing about bigger profits in the medium to long term.