Insurance Has Always Been a Virtual Product

There’s a joke in the insurance industry that insurance was one of the first industries to computerize. And they’re still using the same computers.?

It’s funny because it’s somehow still true. But instead of investing in the technological advancements that could transform the industry, insurers plunge large sums into their old systems just to keep them running.

The situation is baffling to me, especially when you consider how much insurance companies spend on offices, advertising, and agents. The fact is insurance has always been a virtual product. So why don’t traditional insurers treat it like one?

Would You Walk into a Store to Buy Software??

Hopefully you read that question and thought, “Can you even do that anymore?” Certain goods are inherently intangible and buying them virtually should be a given. Insurance, like most financial services, has never been a product you can touch beyond a piece of paper. It’s always been a virtual good.

Or as Matt Higgins once elegantly said, “Walking into a storefront to buy an insurance contract is the same thing as trying to buy a non-fungible token at your local grocery store. It doesn’t make sense because it’s virtual.”?

The work of assessing risk and providing home insurance is all done through software, yet traditional companies maintain huge workforces and expensive buildings they don’t need. It can all be done online with minimal overhead.

Instead of investing in expensive brick-and-mortar offices to house outside agents, we’ve built the technology that makes it possible to underwrite a complex product like homeowners insurance and sell it directly to customers online.?

That eliminates the agent commissions that account for 17 percent in customer acquisition costs that would otherwise get tacked on to premiums.?

If Insurance Is a Virtual Good, Why Are Legacy Companies So Bad at Tech?

If you look inside of any insurance company, you’ll see they’re actually software companies. But most of the time, they’re not really good at software.

Most of their employees are wrestling with technology from a decidedly different age. Why? Because the overhaul of their aging infrastructure would require a massive undertaking – loads of investment capital, a complete rethinking of proprietary work models, and rounds of onboarding and training.

Rather than rebuild a sprawling business from the ground up, legacy insurers are content to tweak their existing structures, making major changes only as a last resort. The trouble with this approach is that it leads to lasting inefficiencies that make it more difficult to accurately calculate risk and find savings for customers. As a result, many of the big providers drive up premiums, deny coverage, or in the case of some high-risk areas, walk away from markets altogether.

It’s Time for Insurance to Embrace Its Digital Roots for the Benefit of Customers Everywhere

Consumers prefer a digital experience, full stop. A survey from Accenture found that 72 percent of US consumers would rather get their home insurance online while 78 percent are willing to forgo an agent if it means saving money.?

That’s why Kin is direct-to-consumer –?it allows us to meet (and exceed) those expectations. In fact, 72 percent of our new customers switched to Kin from current carriers, and our Net Promoter Score is 85 in an industry that averages 42.?

It’s proof that realizing insurance’s digital nature isn’t just good for business – it’s essential for the customer experience, too.