Insurance Is Not Being Disrupted

There is a difference between incremental innovation and disruptive innovation, and many are confusing the two.

It seems all the talk and all the buzz around insurance these days is how insurance is being disrupted; that insurance disruption is the hottest and newest area of tech startup focus and of venture capital. While all of this is true, it’s my belief that insurance is not being disrupted. Here’s why… 'Innovation Stops Here' Insurance is a several-hundred-year-old phenomenon. Without boring you with all those several hundred years of history, suffice to say, it is a massive global industry – many estimate it to be $5 trillion globally! So, the first question is how do you disrupt a multitrillion-dollar industry? The answer can be found in the adage that goes, “How do you eat an elephant?” Answer: “One bite at a time.”  See also: Which to Choose: Innovation, Disruption?   This “one bite at a time” analogy is appropriate for what is happening in the insurance startup ecosystem. Don’t get me wrong, I believe insurance startups and innovation are transforming insurance. But to say that insurance is being disrupted seems a bit strong from my vantage point. The real truth lies in the difference between incremental innovation and disruptive innovation. Disruptive innovation is the game changer. It is what most think of when they hear that an industry is being disrupted. It means very large, old, stodgy and outmoded businesses will fail because a disruptive innovation has changed the game. Incremental innovation means just that, smaller bets with less risk. I often refer to this approach as innovating on the margins. It is much like the “one bite at a time” approach to innovation. The insurance industry is much like this – slow and steady wins the race. It always has been and in my opinion likely will be for many years to come. When we think about all of the startups and innovation that are working to innovate in insurance, most everyone is focused on building incremental innovations. Most are not focused on building all new types of insurance companies. Why? Because the amount of capital required to start a new type of insurance company is a very large barrier to entry. Most estimate that to start an insurance company today would require several hundred million dollars, if not a billion dollars or more. That’s why. So where does that leave us? It leaves us with incremental innovation, not disruptive innovation. And that’s okay. It’s quite a good thing, in fact. Many new solutions will be developed in the years ahead that will move the insurance industry forward in ways that even five years ago we could not have imagined. It’s an exciting time in insurance. But for now, one bite at a time will have to do. See also: FinTech: Epicenter of Disruption (Part 1)   I’m interested to hear from you. Do you think insurance is being disrupted or is it being transformed through incremental innovation?Leave me a comment below or take the conversation to social media with the hashtag #denimrivet. This article originally appeared Denimrivet.,/em>

Gregory Bailey

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Gregory Bailey

Gregory Bailey is president and CPO at Denim Social. He was licensed to sell insurance at the age of 20, continued as an agent in the industry for the next nine years and then stepped into the corporate world of insurance.


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