By Neer Rama, Force Solutions Product Manager at thryve
The arrival of Ontario’s Financial Services Regulatory Authority (FSRA) is a welcome change for the province’s beleaguered motorists. The FSRA has oversight over financial services in general. But there is a particular hope that it will address the ongoing problems of local vehicle insurance, a point even raised in the release announcing the authority.
Fixing auto insurance in Ontario has been an uphill battle. Despite a decade’s efforts, it still feels like the problem is right where it began. Historically, Ontario has the most expensive auto insurance in Canada, which remains so despite several interventions.
In 2013, the state enacted significant cuts to insurance premiums. Yet these weren’t enough, and some argue they have instead made it harder to do things such as claim compensation or benefits. The issue became even more acute as different funds were cut to manage the changes. Overall, support for customers has been eroding, not improving. Even though the initial cuts saved money, the shortfall eventually landed back at customers and their wallets. In 2019, Ontario’s insurers raised their rates yet again in response to higher claims numbers, and customers are the unhappiest that they’ve been in a long time, according to J.D. Power.
The problem, I believe, is that the old dynamic of insurers is not shifting. Insurance is not traditionally a customer-centric business. It is a rare industry where customers are as much risks as they are contributors. To maintain the sanctity of their balance sheets, insurers have sometimes taken adversarial positions to protect themselves against fraud and other unscrupulous customer practices.
This pressure has led to a greater focus on shareholder value than customer satisfaction. Not an issue if everyone is happy and rates are low, but a major existential crisis for insurers when things aren’t going well. They end up being loathed by the very people they are trying to attract. Hence why the FSRA, and its call for creative regulatory ideas, is a welcome change.
I’ll dive into some regulatory suggestions in a future column. But today, I want to point out that this impasse doesn’t need to exist. It’s no longer necessary to treat every customer as a number and to make risk-based decisions weighed against the majority of the customer pool. Doing so might stop the bad customers, but also often punishes the good ones. We don’t need to do that anymore.
The answer is technology. I’m sure you’ve heard that before, but trust me – this is truly revolutionary. Modern technology is much simpler and more affordable to deploy a technology service (no more buying big servers and expensive multi-year licenses), and it is far easier to aggregate data from different sources. Both are realized by cheap and abundant cloud computing power, opening the door to artificial intelligence. And the platform nature of technology makes it easy to provide data and services on different devices to remote-working employees, and create customer-facing portals such as apps or services such as telematics.
Combine all those factors into one effective solution, and you can create a single view of a customer and spin a golden thread of their information, behaviour and potential. They are no longer a number. It’s now possible to separate the good and bad customers, and to treat each customer as an individual without increasing the insurer’s burden.
Such individualization is also a very effective way to reduce pressure on balance sheets, especially during record periods of rising claims. Having an accurate and complete view of their client allows insurers to create better pricing discrimination, and other value-adds that will help to improve the insurance purchase experience in the eyes of the consumer.
At thryve, we implement Salesforce, Riskonnect, and other market-leading services to accomplish this for our clients. Additionally, we provide data analytics/machine learning services to bring our customers’ insight journeys full circle.
If you need evidence, simply look at insurtech startups. Practically all of them follow a customer-centric engagement model that still meets the demands of managing the insurance business. Everyone wins in this approach.
The arrival of the FSRA is a clear signal that the impasse between auto insurers and their customers has reached a fever pitch. The sudden slump in driving activity during the pandemic has shown how stark this gap is. Customers aren’t happy, yet insurers aren’t totally to blame. It’s more a case of an unstoppable force meeting an immovable object.
Well, now insurers can move without compromising their position. Modern digital platforms, combined with business expertise and insight, are the answer. They offer a low-risk and highly-flexible approach to change how insurers engage with customers, and vice versa.