As the size of the subscription economy market continues to boom, we’re starting to see more and more industries embrace the concept of subscription services.
Subscription models are no longer being seen as a solution solely targeted at SaaS based products or traditional subscription services such as gym memberships and magazine subscriptions, but as a recurring billing solution suitable for any industry.
In recent years, luxury car manufacturers have been switching up their traditional business models by adding subscription-based options.
Volvo, for example, launched a subscription service to its full range of vehicles back in September 2020, promising it to be more flexible than any traditional car payment plan. The car subscription market is now set to grow by 71% in 2022 as more companies adopt the subscription model.
Seeing other industries experience success when adopting subscription models, has made subscription billing a hot topic of conversation in the insurance industry.
The COVID-19 pandemic has also accelerated discussions about subscription models in the insurance industry, by revealing that insurers should be interacting with customers more effectively, and insurance products should be flexible and adjustable to reflect the ‘new normal.
Furthermore, the pandemic has heightened customer interest in new and more personalized protections, especially associated with big life events.
Research has shown that 51% of US consumers aged 35-49 are interested in insurance-based subscription billing, more specifically associated with life events such as marriage, having children, etc. Similarly, the study found that 55% of UK consumers aged 35-54 were also interested in the adoption of subscription-based insurance products and policies.
Subscriptions have become an integral component of our daily lives, changing the way we consume media and purchase goods.
The remainder of this blog will dig into what an insurance subscription should look like, the benefits of subscription models being adopted in the insurance industry, and the considerations and concerns of introducing subscription billing to insurance products.
What an Insurance Subscription Looks Like
Traditionally, insurance products are billed on a lump-sum basis for pre-defined cover that's all rolled into one package.
These packages typically auto-renew on an annual basis, only giving customers the option to easily switch providers and policies when their current protection is up for renewal.
Monthly billing is also a common option amongst insurance products but is seen as a payment plan rather than a rolling insurance contract, with most underlying policies still being annually focused.
Subscription-based insurance products would instead be able to offer ongoing coverage billed and structured around a pre-defined cycle. For example, insurers could bill customers monthly for insurance products that are then only valid in months where payment is collected.
This gives both insurers and customers flexibility in deciding when cover is activated by pausing and resuming the subscription, a feature supported by most subscription billing software solutions.
Current insurance products also offer limited choices in terms of coverage packages and add-ons. Customers tend to need to either upgrade their entire package or take out an additional package, in order to include insurance for things such as extreme sports or extra family members.
More than just offering shorter, recurring billing that’s linked to the same cycle the insurance coverage is linked to, subscriptions are designed on highly intuitive digital experiences that facilitate on-demand product amendments.
This means both insurers and customers are able to turn coverage off and on or add additional coverage to their current package at the touch of a button.
This offers multiple benefits, such as adding or removing family members from a personal policy, expanding coverage to additional locations in a commercial policy, or including coverage for extreme activities on a travel policy.
Most subscription billing software can facilitate all of these policy changes through advanced billing options like add-ons, unit pricing, and usage billing.
Some, like Billsby, even support mid-cycle changes with pro-rated charges, giving the customer more flexibility but also making sure the insurer isn’t missing out on the additional revenue.
Limited communication and lengthy, confusing policy descriptions have always been common amongst insurance providers.
Communication is usually only facilitated during quote generation, policy agreement, initial payment, and claim generation, with the experience not typically seen as an enjoyable one for customers. This has created the consumer perception of shopping for insurance being an unpleasant necessity.
Subscription billing software has expertly merged cloud-based technology and recurring billing to overcome customer communication issues and long policy documentation.
By integrating with leading CRM systems, subscription billing software has made customer communication easy and enjoyable for both the customer and the customer service agent.
Their subscription checkout and management solutions can also facilitate immediate quote generation and provide access to all policy files and documentation at the click of a button (rather than scrolling through endless old email attachments).
Benefits of Introducing Subscription Billing Software
There’s no denying that as the subscription economy grows it’s inevitable that subscription models will make their way into insurance products. The adoption of subscription-based products and billing, using subscription billing software, can have multiple benefits for customers and insurers alike.
Below we’ve outlined some of these from the perspective of the consumer and the insurer:
Consumers
1. Improved User Interface (UI) and User Experience (UX)
SaaS businesses have set the bar high when it comes to the overall customer experience. Consumers now expect a seamless transition from signup to activation, as well as an effortless way to manage their products and services.
Subscription billing software has all of the tools to provide this to customers without the need for costly and time-consuming development.
2. Flexible Billing Options
As mentioned above, insurance policies are not known for being flexible with most charging a lump sum amount for annual-based coverage, that can only be amended on the next renewal date.
Subscription billing software typically has built-in advanced billing options. These can give customers the option to add more members to a policy or add additional coverage for a trip or event without having to negotiate a new policy entirely.
3. Clearer Product Understanding
Whilst many subscription providers tend to have long contracts or terms and conditions filled with legalese similar to that of insurance policies, this is never usually the first thing customers see.
Subscription billing software offers checkout solutions that focus on the critical product information, and then provide all of the additional policy and legal documentation via links for the customer to access when they choose.
They can also store this in their subscription management solutions, which would give customers a place to access their insurance policy and claim procedure without having to scroll through endless email attachments.
Insurers
1. Upsell and Cross-Sell Possibilities
Flexible billing options not only benefit customers but also provide insurers with a quick and easy way to upsell and cross-sell additional cover.
Due to the flexibility provided by the advanced billing options found in subscription billing software, insurers will be able to promote additional coverage on current policies, or even sell extra products covering a completely different area of a customer’s life.
In most instances, these can also be advertised to customers on the automated communications that are sent to them via the subscription billing software, so they can sign up as and when they please.
2. Better Access to Customer Information
Subscription businesses are known for leveraging IoT devices to gather valuable customer information. For insurance companies, customer information is vital. It’s what determines the policies they’re offered and the price they have to pay for their desired level of coverage.
Subscription billing software can seamlessly store customer information, whilst keeping GDPR compliant. They can also use high-level customer and subscription data to produce reports on customer value, revenue, and churn.
In some instances, subscription billing software can use lifestyle and behavioral-based questionnaires to direct customers to the products most suitable to them, without the need for an in-person consultation.
3. Automation
Subscription billing software is known for automating everything it can, from activations to notifications and billing.
Many also integrate with third-party software solutions for additional business tasks, such as CRM and accounting, where the relevant information is sent to the third-party tool automatically.
We all know that automation saves on time, but it also saves on resources and reduces the risk of human error which can lead to costly ad hoc adjustments.
Considerations and Concerns
The road to introducing new and innovative solutions isn’t easy, especially for established businesses with complex or legacy-based products.
For some leaders in the insurance industry, the prospect of subscriptions becoming the dominant model for engaging customers and delivering their products and services engenders serious concern about opening the door to new competitors.
More specifically, this concern is related to companies in the banking or tech industry that are more established in being able to adopt flexible billing models immediately.
This being said, it’s inevitable that other industries are going to start realizing that they already have the tools to provide the subscription-based insurance policies that consumers are yearning for so this should not stunt its adoption by legacy firms.
These traditional firms can leverage subscription billing software, such as Bills, to introduce subscription-based products almost immediately.
They can even support the migration of customers previously on dated insurance policies to new subscription-based policies, reducing the risk of customers leaving for competitors.
Even though subscription-based insurance policies offer a number of benefits to consumers, not all consumers will want to move away from the traditional lump-sum policy agreements.
Although these aren’t the most flexible option, some consumers like the prospect of annually paying for pre-defined coverage and then forgetting about it until renewal.
This means a hybrid approach with subscription products as well as traditional insurance products should be the preferred method for insurance companies going forward.
Most will already have the capabilities to continue billing for their traditional products, but if they want to bill everything through the same system subscription billing software can also support annual or one-off billing for these traditional product types.
Summary/Conclusion
As subscription models become more common across industries, insurance providers would be wise to start introducing subscription-based products as soon as possible to feed consumer needs.
With Billsby, one of the leading pieces of software in subscription billing, companies can set up an account and start billing customers in a matter of minutes, so why not sign up for a free trial today!