"Nobody has stepped into the insurance sector and said what do people want, and what is a fairer way of pricing insurance."
- James Lovett, CEO & Founder of Lovethorn
Speaking exclusively to Protection Reporter, James Lovett, CEO & Founder of Lovethorn, said the industry is “full of conflict between insurers and the insured, and that fundamentally makes it a disgustingly inefficient place.”
James believes that if the industry understood people properly and incorporated the right technology, “we could make everything fairer, efficient, and more sustainable […] that’s what we’re working towards.” Over the last ten months, Lovethorn has been conducting extensive research & development (R&D) around people and their relationship with risk, insurers, and products to uncover new ways to improve the insurance ecosystem. “We’ve started with people first rather than insurer, speaking with the public about their attitude, belief, and experience with insurance, both on a philosophical and incident level,” James explained.
When asked if a people-led approach has been pushed to the wayside by the industry, James said it’s often spoken about, but “I can’t remember the last time I saw substantial change that was people-led.”
“Often, it’s people asking about sensible add-ons for a protection product and how do we make those numbers work, as opposed to, genuinely almost starting again.”
James believes discussing the people-led approach has been encouraged by Consumer Duty; “everyone will make a nod towards it but if you asked them to genuinely state a time when they started with a real need that was against their current business model, I can’t remember a time when that’s happened.”
“At the moment, our research focuses on underwriting and how people are on risk.”
Often advisers will secure underwritten policies that don’t consider behavioural factors. James emphasised that although “we’re starting to work out how to flag these behaviours […] this is not to completely change underwriting but to refine and improve it.” For example, analysing behaviours to spot those looking to make an immediate claim rather than purchasing a policy to insure against ill-health or injury in the future. This initial R&D phase has been crucial to Lovethorn’s growth.
“We’re trying to match up fairness with what works for insurers, a balance between efficiency and happiness.”
Lovethorn’s immediate focus has been the Income Protection (IP) market, for several reasons. “Firstly, the data on widening underwriting was screaming at us, with a segment of people out there who’re getting excluded but are decent risks,” James explained. Similarly, they wanted to look closely at mental health which is often an IP exclusion – even when conditions are medicated. Not to mention, 30+ years of life & health insurance experience between them, making IP a comfortable product.
“Not everyone but a lot of people who’re open to getting cover are bluntly excluded, yet with a slight tweak or higher premiums, they represent a decent risk.”
James believes the rigidity of the process - from reinsurer, to insurer, to broker, to customer - is to blame. “There are plenty of people out there getting ‘computer says no’ and at the same time, everyone is asking how to lower the protection gap,” he highlighted. Why is nobody trying to improve the process that’s stopping people getting cover?
One of Lovethorn’s founding products is set to improve and widen underwriting access as well as proactively lower claims on income-related financial products. James described the app as “very much about measuring, monitoring, and proactive preventative measures for mental health.”
“The app tracks someone’s mental health and looks for early warning signals around conditions that might be coming down the line.”
This app should accompany a policy, acting as an added-value service. A unique feature of Lovethorn’s app is the use of metadata. “If you usually walk 8k steps and that starts to go down, if you usually exercise, if you usually sleep for nine hours and that changes, we can turn that data into actions,” he explained.
Since Lovethorn won’t be selling policies, these products have now entered a validation stage in association with prospective insurers. James said he didn’t want to say too much but “we’re looking to go live on underwriting with the next 1k customers looking to purchase IP so we can then flag behavioural differences amongst customers on risk.”
Trialling the app, Lovethorn will be exploring value in terms of data exchange. “We must give back to customers to collect that data, so we need to run live trials to decide whether customers prefer a premium rebait, reduced deferred period, or additional added-value services for sharing their data with us,” James clarified.
“In five years, it will be like Strava and other tracking apps; the trend towards measuring and monitoring mental health is without doubt there and I think it’s time to build on that properly.”
Ultimately, Lovethorn recognises that mental health tracking isn’t new, but there’s very clear value in linking it to a policy. Offering tangible value to an entirely personalised policy which inevitably improves customer understanding as they can see exactly what they’re paying for.
