With operational efficiency, customer retention and cross-selling opportunities firmly in the sights of rental companies, now is the time to launch a comprehensive insurance service offering, says Simon Ball, CEO of insurance technology specialist Quotall.
“By being slow to adapt, and by having little or no affinity with the end customer, traditional insurers have created a gap for equipment rental companies to go straight to their customers with a more relevant insurance offering.”
In line with many other industries, the equipment rental sector is showing an increasing interest in developing and enhancing digital relationships with customers. But while many rental companies have already spotted and capitalised on the opportunity to provide short-term insurance covering rental periods pertaining to the particular piece of equipment being leased, there is a bigger opportunity before them.
The insurance sector has been slow to evolve, but its technology partners have taken the bull by the horns. Rental companies now have the possibility to provide a wider and more relevant service for their customers, encompassing all SME commercial insurance types.
There is a recognition that success for rental companies – which face constant pressure to improve margins – means having multi-channel relationships with customers, anticipating seasonal equipment needs, and meeting demand for more joined up, relevant services. Offering commercial insurance is particularly attractive in an industry where margins of around 30% are typical, and some property products commanding margins as high as 50%.
Providing additional products and services to rental customers is nothing new of course, and the rental sector has in many ways pioneered the enterprise-wide use of customer data to improve cross-selling opportunities and margins.
More customer data is available now than at any point in the past, from individual seasonal tool hire patterns to comprehensive historical fleet data – this data represent a unique and leverageable resource for the design and pricing of insurance products for rental companies to sell. Indeed, this wealth of data is not only a key USP for a rental company but also puts them at a competitive advantage against insurers when it comes to understanding their customers.
Data, data everywhere
In order to protect their own assets and the risk register of their customers, one of the first questions rental companies should ask is whether they are insured to use the equipment they are seeking to rent. But is a simple confirmation from a customer really good enough?
For a rental company, knowing your customers have the appropriate insurance in place to operate your equipment is no brainer, and usually a contractual obligation where the burden is on the customer. In most cases, rental companies require – or at the very least encourage – their customers to take out product guarantee insurance, or to present a tradesman’s insurance policy that covers them for the most common risks and liabilities they face.
And yet there is huge scope for rental companies to further harness the existing close relationship they have with their customers and deliver an even better service through an online insurance proposition offering a range of comprehensive annualised policies that match their customer needs.
Leading rental companies continue to build their customer data and digitise their operations deploying advanced telematics and remote machine monitoring options to track and analyse equipment usage, for instance.
And many rental customers are already aware that having telematics technology installed on their machines can lead to more accurate client usage behaviour date, which in turn could lead to reduced insurance premiums. This makes the prospect of buying insurance from the equipment rental company even more attractive to customers.
Getting closer to the customer
Selling insurance to customers involves asking relevant questions about their business, from number of employees and turnover to seasonal equipment usage demand, and risk register – going through the insurance exercise creates a rich data set that can help with more targeted offers and services.
And because self serve business insurance platform technology already exists, this needn’t mean that adding a commercial insurance offering means significant additional resource and investment for the rental business.
Take for instance a small contractor, running an SME. He or she may currently buy 2-3 different insurance policies annually using disjointed on- and offline processes, and may never talk to the organisation they bought the coverage from.
There is little brand equity in the relationship, and this can be eroded further when the premium increases every year the contractor stays with them, even in the absence of claims.
The opportunities for a rental company to step in and optimise this for the contractor are clear, for instance, rewarding their loyalty, and even recognising their purchase of the correct safety gear etc with more tailored, cost-effective insurance. This way insurance could also feed into further potential cross selling opportunities. This type of joined up e-commerce can give rental companies a dramatic and significant competitive advantage.
Given that there is such strong potential for equipment rental companies to join the dots and add a more comprehensive insurance to their offering, what’s stopping them?
As far as the common pitfalls for international businesses are concerned – such as currency changes, tax issues and local regulatory challenges – the best ‘out of the box’ insurance affinity platforms offer multi-currency B2C eTrade and digital distribution as standard.
This means fast, efficient and flexible digital distribution through respected, regulated insurance entities, taking the regulatory burden off the rental business and allowing them to focus instead on the insurance products that would best suit their customers.
And to this end, issues over data ownership in particular have been a major sticking point for insurance companies – but why should insurance companies own your customer data when they have no real relationship with them? In a claims-free year, insurers will only tend to have one or two touch points at renewal, (and often at higher cost in spite of customer loyalty or claims record!).
The insurance sector has been slow to adapt, there is no denying that. But in being slow, and by having little or no affinity with the end customer, traditional insurers have created an opportunity for equipment rental companies to go straight to their customers with a more relevant insurance offering.
Customer ownership is key
The central question is who has end-to-end control of the customer experience for the insurance offering? Often we hear that rental companies have explored an insurance launch, but found the insurance community inflexible, particularly when it comes to this key issue.
Instead, they are told they must launch on a fixed platform, with fixed terms such as distribution costs and commissions, and very little control over data, renewal rights and wider ecommerce opportunities. But the experience that rental companies are looking to provide their customers demands a different solution to this.
Cutting a better deal that enables rental companies to effectively host an insurance proposition through a regulated insurance partner, and retain control of the customer experience and data is entirely possible. In our experience, there are forward thinking insurance partners out there who have seen the opportunity that being more flexible presents for them as well.
However, it is essential to work with the right partners to secure a commercial framework for launching an insurance proposition that makes sense for modern rental companies and their customers.
A clear opportunity
In an increasingly competitive market, adding a new high margin revenue stream to a rental operation is an attractive proposition. And at the same time, having a single, broader view of the customer is essential to succeeding as a modern rental business.
By selling insurance as part of the wider service offering, equipment rental companies are not only putting the customer first by offering a tailored service, but can also go above and beyond the standard tradesman equipment warranty insurance to offer a far more comprehensive, relevant product.
This article was first published in International Rental News – download the full issue here.