Island hopping for insurance premiums - an unexpected journey
26 July 2022
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4 min read
Intro
If the insurance market was a landscape, it might be a vast group of islands. Some smaller, representing independent brokers, and some larger, representing networks, MGA’s and insurers. The only way to get to and around those islands is by boat. A boat can be seen as any form of data transfer — in our case, a payment transaction. And many boats are going every day between the islands and the mainland.
Part 1
Now, put yourself in the shoes of a traveller ready to embark on a month-long journey of island hopping in a beautiful tropical location. Having arrived, your tour operator allows you to stay on the mainland anytime from 0 to 30 days for free. Sometimes, this only starts after you have been sent a friendly welcome letter with your travel details. In many cases, the production of this letter takes 30 days. If you decide to stay longer and forget the maximum stay, that is often not a problem. Your tour operator might then remind you after an unspecified amount of time that it’s now an excellent time to embark on your journey.
So, the day has come, and you go on a short boat trip to your first island. Excited, you pick a convenient boat model and are being transported individually to the island. Upon arrival, you realise you are on the island with several other travellers. Regardless of your day of arrival, the travel operator generally lets you relax until the end of the month. They then spend a few days with you to put you in different groups and arrange a boat transfer to the next island. You make it on this boat, but your friend who arrived at the same time on the island doesn’t. Supposedly the tour operator can’t agree with the next island on your travel details. Unfortunately, nobody can provide precise information. You finally head off the island with a queasy feeling, hoping to be sent to the right destination.
After a cramped journey with multiple other travellers on a small boat, you arrive at the next island. When checking in, you realise that nobody wants to see any documentation from you. You are now an anonymous part of a large group and carry the same reference as all of your fellow travellers — the number of the boat you came on. Only occasionally, somebody tries to find you in the crowd, but that is often unsuccessful. It takes until the end of the month until the local tour operator spends some time with your group to figure out what is coming next. At this stage, you are pretty fed up with the travel life and would like to stay where you are. If you’re lucky, you can remain on that second island. If you’re not, and this is one-third of your cohort, you must continue the journey. Your destination might then be island three, four or five. This long and laborious journey is not how you imagined your island hopping to pan out.
Part 2
The story aims to illustrate the journey of an average insurance premium graphically. Starting at the original insured, a pound travels through often multiple intermediaries to the insurer, their provisional destination. Due to complex payment processes, many delays and data losses occur. While flexible initial payment terms can bring immense customer benefits, “island hopping” — the payment processing — is causing unnecessary disruption. Market participants currently absorb the cost of this process in their expense ratio and ultimately pass it on to their clients.
We at Diesta believe that each intermediary plays a valuable role in the distribution of insurance policies. We believe that regardless of the size, a personal connection with clients and business partners is essential. But we also believe that each pound of premium deserves a more pleasant journey than the one described above. Customers deserve not to have their policy cancelled because of a lost or unmatched payment. Intermediaries deserve not to lose valuable sales opportunities because they are held up by reconciliation and payment processing. And ultimately, insurers deserve not to be in the dark about their insurance premium and when it’ll arrive.
Tell us your payment story and how it affected your experience with insurance. What has gone wrong when paying for your or your company’s insurance policies in the past? How do you, as an intermediary or insurer, respond to the challenge of unrecognised payments? Which processes are particularly wiry, and what do you do better than others to untangle those? We would be delighted to hear from you! Don’t hesitate to contact me at julian@diesta.co.uk or via our website www.diesta.co.uk.
