Macroinsurance enables you to take out multiple types of insurance through a single process in a single plan with a single provider. It differs from typical insurance by starting with you as a customer and building a service around you – not creating a range of ‘one size fits most’ products for you to buy essentially off-the-shelf.
With macroinsurance, you don’t have to fill out separate forms across multiple sites for home insurance and car insurance and travel insurance. Instead, you just add new information when you want to add on a new type of cover. Each insurance policy you take out is connected to each other, and to you.
What’s more, artificial intelligence and real-time data can play a huge role in the development of macroinsurance products, enabling far higher levels of personalisation and flexibility compared to traditional insurance policies. In turn, this could result in greater transparency, faster claims management and the flexibility to change levels of cover quickly and easily, as life demands.
So why haven’t we been able to take out macroinsurance before?
Let’s look at each point in turn.
As consumers, we now have more access to information than ever before. This means more ways to find out all our options and more ways to communicate to companies what we do – and don’t – want.
Our lives can no longer be divided into separate buckets. For example, we don’t just have one job anymore. The McKinsey Global Institute found that 90 million people across Europe and the USA earn extra income through ‘independent work’. (Our own co-founder, Darius, teaches martial arts on evenings and weekends!)
We share homes. We share cars. And now, we have a growing number of tech innovators saying we should be able to share insurance.
However, for large insurers to change the way they work is a challenge.
These traditional insurers are big, with established customer processes and decades of legacy tech. The best option for these insurers may not be to try to build this technology themselves, but to support the tech companies nimble and ambitious enough to build and test these new products quickly. So that’s exactly what they’re starting to do.
The most innovative tech companies in insurance right now aren’t, strictly speaking, disrupting the industry. Many are actually backed by insurers. Munich Re, the biggest reinsurer in the world (and one of Wrisks’ partners), has set up Munich Re Digital Partners to actively nurture these technology companies. They’re far from alone.
The insurance industry knows this isn’t temporary. People aren’t going to have less access to information, or start segmenting their lives more cleanly again. This isn’t just a wrinkle; this is a widespread and permanent societal change to which insurers must adapt.
People don’t have to ask directly for a change to express an appetite for it. Think of Henry Ford’s famous quote: “If I had asked people what they wanted, they would have said faster horses.”
Challenger bank Monzo is on track to reach 1 million customers this year. It’s a lofty goal – which another challenger bank, Revolut, hit last year. The smooth customer experience of mobile-first banks like Monzo and Revolut couldn’t be further from traditional banking, and customers are voting with their (virtual) wallets.
What’s this got to do with insurance? Well, banking and insurance have a lot in common. Like a savings account or credit card, insurance is just another way of managing your money. It helps you mitigate the unexpected peak expenses when disaster strikes, whereas banking helps you manage expected everyday costs. Insurance should sit alongside banking products as part of your personal finance toolkit.
Instead, more and more people are opting out of purchasing insurance. Even for car insurance, a legal requirement for drivers, the Motor Insurance Bureau last year reported the first increase on claims for uninsured accidents in over a decade. Where it’s not a legal requirement, the numbers are huge – for example, the 61% of tenants who don’t have contents insurance.
Insurance serves a genuine need: assistance to mitigate unexpected expenses when the worst happens, will always be valuable. The concept of insurance is solid. The model needs to change.
It’s early days for tech companies in this space, but customers are already adopting more flexible, on-demand and usage-based insurance services managed by mobile. While not asking for macroinsurance specifically, customers are voting with their wallets for the kinds of changes that would fit macroinsurance well.
Macroinsurance isn’t just about buying multiple types of insurance from the same place. Some insurance companies already do that, perhaps offering a discount to take out multiple policies with them. However, behind the scenes these policies don’t interact at all. They are built and managed entirely separately – with a heavy reliance on longstanding ways of doing business. It’s almost impossible to connect products which are that isolated.
For insurance companies starting today, there are no traditional models or legacy systems to deal with. Instead, the fusion of modern technology, immense pools of data and a passion to flip the traditional insurance model on its head, has given rise to ‘insurtech’ companies. Like Wrisk, most insurtechs have one common goal – to build a better insurance service that is fit for today – focused on the customer and not policies.
The insurance industry is in the earliest days of this transition, and it’ll take time to get to a true macroinsurance outcome. So far, some insurtech companies have made existing processes smoother, while others have innovated within specific lines of insurance. Few have opted to offer multiple lines of insurance themselves, let alone to try connecting those products.
This is unsurprising – there are good reasons for new companies not to jump straight into macroinsurance. You can’t just build a platform for car insurance then just drop contents insurance into it without significant modification. Each type of insurance is highly complex in its own right, and the way traditional insurers rate risk and structure pricing is opaque at best.
The “easiest” way to offer macroinsurance (easiest, not easy) requires you to build the right product from the ground up, with that vision in mind from day one.
This is the challenge Wrisk and other companies are beginning to tackle. Over the next two years, as companies like ours launch, grow and refine our propositions, we plan to change the landscape of personal insurance to give people more options suited to real life today.
After decades of theorising, macroinsurance is, for the first time, possible – and a perfect fit for a society of sharers, independent workers and digital natives who want to feel prepared for anything.