Canadian Underwriter

Does product innovation require a change in coverage?

September 13, 2019   by Jason Contant

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Remarkable product innovation can occur without really ever changing the core coverage of the product, Marc Lipman, chief operating officer at AIG Insurance Company of Canada, said Tuesday at the Connected Insurance Canada conference.

He used the example of travel insurance as one traditional, staid product that has gone through a “renaissance” in innovation.

Marc Lipman, COO at AIG Canada, speaking at Connected Insurance Canada.

“It wasn’t too long ago that if you wanted travel insurance you went to your travel agent and you purchased the travel insurance there and you purchased the coverage that they offered,” he said during a session titled How to Succeed Through Product Innovation to Deliver What Your Customer Actually Values. “That’s all there was from the carrier that they had a market agreement from and that was it.”

In a relatively short period of time, travel insurance went digital and travel companies and airlines starting added insurance as an ancillary service to their core product. Insurers started offering things like usage-based insurance.

“You would download the app, buy a bank of time and when you travel you enable it. You swipe right to enable your insurance,” Lipman said. “We would just charge you by the hour for the hours that you use – no more, no less.” Some products contain geo-fencing technology, so if a customer gets within a kilometre of an airport or the U.S. border, for example, the app would ping and say, “‘Hey, it looks like you are travelling. Would you like to enable your insurance?’”

On the back-end, analytics could track the number of trips, duration and location and “from all that, you could start to build consulting services and ancillary services,” Lipman said. “So, we could push out content to those users about where we think they’d like to travel and what’s going on to encourage more usage of the app.”

The latest evolution in travel product innovation is products built on blockchain technology. The products have an electronic trigger, so once trip cancellation or trip delay coverage is bought, the contract itself constantly monitors a flight status global database. If your flight is delayed or cancelled, pursuant to the terms of the contract, it automatically generates payment.

“That’s a claim,” Lipman said. “The customer never had to know; the customer never calls to file a claim. The customer is sitting in the lounge finishing their drink, lamenting the fact that the trip was cancelled and then they get a text on their phone saying, ‘Your claim has just been processed, payment is being effected.’”

Even though things like episodic insurance, coverages that shift form and UBI could be considered product innovation, “really at the core, you are delivering or offering the same insurance product, but in a manner that is more appealing our customers.”

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