SafeSide: The Digital Revolution of Life Insurance

Where did the idea behind SafeSide come from?

Michael Klien: When I was expecting my first child, I – as a concerned father – wanted to take out pure term life insurance. But that was not so easy. The insurance websites were unclear and sometimes misleading, and aimed to organize meetings with consultants.

There was no one website on which you could take out life insurance completely digitally. And that is in spite of the fact that term life insurance is a very simple and easy-to-understand insurance product which anyone can take out on their own.

To solve this problem, I co-founded SafeSide together with Georg Liechtenstein. Any resident of Switzerland should have the option of getting insurance to protect those they love financially without having to first talk to an insurance agent.

The coronavirus crisis has given digitization another major boost. How does the insurance sector stand in this regard?

Georg Liechtenstein: The Swiss insurance industry has certainly taken some steps in the direction of better digitization – particularly where property insurance is concerned.

The digitization of the life insurance sector is still in its fledgling stage. The reason: Many insurance companies still rely heavily on their broker networks and paper-based processes.

But corona will be used as an opportunity to digitize some steps of the customer journey – particularly with regards to onboarding customer and reviewing applications.

What changes can we expect to see in life insurance?

Michael Klien: Pure term life insurance is the simplest and most flexible insurance product, and it should be possible to buy it without a big consultation process.

The key factors which play a decisive role in buying life insurance can easily be communicated clearly and comprehensively on a website. This is what SafeSide has done.

We also believe that the role of insurance brokers will be redefined, much like what we have seen in the travel industry. Insurance brokers and agents should only provide consultation when this is actually necessary. This is a new approach insofar as the Swiss life insurance market is concerned. Wie think that this will become the norm, as it already has in other countries.

Google and Apple are slowly but surely encroaching on the banking sector. Can we expect to see this happen to insurance as well?

Georg Liechtenstein: Absolutely. The Internet giants certainly have the means and the technical capabilities.

Tesla, for example, has already begun to sell car insurance to Tesla owners in the US. In China, the digitization of the insurance sector is being driven by Ant Financial, a subsidiary of Alibaba.

The big Internet corporations collect huge amounts of data about individual users. This enables them to offer highly-individualized insurance solutions. How far this approach can be taken in different insurance sectors with regards to legal regulations remains to be seen.

Which insurances are the most innovative from a digitization standpoint?

Michael Klien: Currently car insurance has seen the biggest consumer-relevant innovations. The regulatory requirements surrounding car insurance are not very high, so new technological opportunities like machine learning can be used. This means that, for example, insurance premiums can be more individualized.

But life insurance has also seen a lot of changes in recent years – particularly in the US and the UK. While several years ago applications had to be signed by hand, you now already have a broad offering of online term life insurance in those countries. You can get up to 3 million dollars of life insurance online.

What do digital insurers do better than conventional insurance providers?

Georg Liechtenstein: Conventional insurers operate primarily over historically-grown distribution networks. Consultation and personal relationships typically play a front role. This can be beneficial for customers when dealing with complex insurance affairs. A possible disadvantage is that customers may trust their consultants too much, and let them make all the decisions.

Digital service providers aim to provide clear information to customers and give them the opportunity to easily, simply and efficiently sort out their insurance affairs.
As a general rule, most digital insurers offer simpler insurance products which require less consultation.

A good example – as is the case with us – is life insurance (term life insurance). We are convinced that every person living in Switzerland should be able to take out straightforward term life insurance on their own.

A possible development is the use of individualized insurance premiums. Is this true in life insurance as well?

Georg Liechtenstein: From a technological standpoint, things are going in that direction. Personalized life insurance premiums are, to some extent, already being used in the US – using data collected from wearables, for example.

The potential for this in Switzerland is also significant – through the stronger linking of individuals with their fitness information, for example. This could even turn term life insurance into a lifestyle product. Policyholders protect their loved ones on the one hand, while on the other hand they have a motivation to remain mentally and physically fit.

Is the trend heading away from permanent life insurance towards term life insurance?

Michael Klien: Because of the current low interest rates, there is little sense in getting permanent life insurance with guaranteed interest. The fees associated with maintaining permanent life insurance will simply devour the little interest you earn on cash value – if you earn any at all.

We also generally do not recommend using life insurance as a saving vehicle. Permanent life insurance is inflexible, expensive and often has long contract terms. Surrendering a policy before it matures commonly results in financial loss for the policyholder. We recommend not mixing life insurance with saving.

The trend is moving towards straight term life insurance. That is a positive development for consumers.

How popular is term life insurance in Switzerland?

Michael Klien: The total amount spent on life insurance premiums in Switzerland has hovered at around 7 billion Swiss francs for several years now.

The portion of that which is spent on pure term life insurance is estimated to be between 300 and 400 million francs. In other words: For every franc spent on term life insurance annually, 20 francs are invested in permanent life insurance with cash value.

By looking at the total number of active policies we see that on average, every fourth resident has a life insurance policy. Just one out of every three policies are pure term life insurance. But we expect that total spending on pure term life insurance will increase over the coming years.

What target group could actually benefit from term life insurance?

Georg Liechtenstein: If you have dependents (children, for example) for who you provide financially, getting term life insurance can make financial sense. This is especially true in the case of romantic partners who are not legally married.

But term life insurance can also make sense for people who are primarily housekeepers. In many cases, housewives and househusbands underestimate the high monetary value of the work they do.

Where do you see SafeSide in 5 years?

Michael Klien: We want to add more insurance providers to our platform in the near future. Customers should be able to have more options in order to find the optimal solutions for their specific needs. Insurance premiums will be more individualized. Customers should be able to proactively influence their insurance premiums.

We also aim to expand SafeSide outside of Switzerland to other European countries. We see exceptional potential in Eastern Europe, because consumers their show a preference towards pure term life insurance.

More on this topic:
Go to the SafeSide term life insurance website now