January 8, 2019
A New Year’s Resolution for Insurers
by Paul Carroll
Looking back on the recent push for innovation in the insurance industry, I’d say that 2017 was the first year that insurtech truly piqued the curiosity of a lot of executives and companies. At the beginning of 2018, I predicted the industry would shift from talking to doing. So, where do we stand a year later? And where should we be going in 2019?
We’re not as far along as I had hoped we would be. Companies talked a lot about innovation during 2018, but most were content if they could check a box marked “innovation” and haven’t yet forced themselves to do the hard work that comes with the task. More companies designated an innovation leader, joined an incubator, provided some money to update legacy systems to prepare for innovation somewhere down the road, took an executive group to Silicon Valley to see what radical innovation looked like, etc. There was less actual innovation, however, than I expected and more of what I’d call “innovation by press release.”
These more limited actions in 2018 likely satisfied senior management and the board—which was the principal, if unstated, goal, I suspect—but the day of reckoning is still coming, and it’s now a year closer. There are some, including people I respect deeply, who don’t think the day of reckoning for insurance will be that severe. They think the industry is too tightly regulated, requires too much capital and has too much legacy infrastructure and knowledge to be upended through a technological transformation. Change has certainly been evolutionary, not revolutionary, to this point. Insurtechs are mostly trying to work with incumbents, not replace them.
But I keep thinking back to conversations I had in the late 1990s and early 2000s with a friend who had a C-suite job at a Fortune 500 company. I kept telling him that the company faced an existential threat, to which he replied that the company was changing as fast as it could and that the day of reckoning was off in the distance. I argued that the market was going to change at its own pace, whether his company could keep up or not. It didn’t. It filed for bankruptcy protection.
I also keep thinking about all the tech giants, including Amazon and Google, that are sniffing around insurance. Yes, Silicon Valley companies like asset-light businesses, not businesses that require as much capital as insurance, but they’ll go where they see opportunity, and the operational inefficiencies and poor customer experience in the insurance business reek of opportunity. When I suggested to a brother-in-law, who runs a programming group at Amazon, that something like health insurance might be prohibitively complex, he just smiled and said, “We do complex.”
So, I suggest we step up the pace in 2019. We may be going as fast as we can—but still not be innovating fast enough.
The will to innovate is clearly there. I see it all around. I also understand the regulatory and legacy factors that seem to require a measured pace. For added complexity, a wave of mergers and acquisitions may well arise and consume a great deal of management attention.
But we need to get innovation past the press releases and into the market. Consumers are demanding change, and we either have to deliver, or we’ll get pushed out of the way so that someone else can. We’ll wind up with a bevy of patents for buggy whips just as some guy we’ve never heard of rolls out the Model T.
Have a great week.