True Evolution in Insurance? Not Yet

Disruption won’t occur until 80 cents out of every dollar in premium is given back to the policy holder, instead of the 50 or 60 cents given back now.


More insurtech startups were launched in the last two years than in the previous 10. The brightest minds are developing new ideas and forging new paths in the insurance industry, but the reality is that significant change is a little further down the line. We need structural change long before the process of buying and selling insurance can adapt to the needs of modern consumers. This will take several years, maybe even a decade.

In my 30-plus years investing in fintech and insurtech and operating both digital and legacy insurance companies, I have seen first-hand the changes required to reduce costs and create better customer experiences in the industry. Many people approach innovation with the goal of improving existing products or procedures. That’s a good start, but, in the digital world we live in today, it’s not enough. Tweaking the product isn't a significant change, and the process will be repeated within a year or two.  

Innovation requires duality: You must innovate for the needs of the business while innovating for the needs of the consumer. It’s no longer solely about business processes and controlling the lion’s share of the distribution channels. It’s about figuring out how to be more consumer-centric. We must be motivated by creating a great experience that makes customers want to come back every day. 

Unfortunately, this is easier said than done. Take Lemonade. They launched a few years ago with a completely different user experience, which is amazing; but because the regulatory environment in which they operate is still not very bespoke to each individual consumer, they did not really change the product—but we’ll get to that later. 

We are witnessing a significant shift in consumer expectations and desires, but we must also manage the longstanding and tradition-holding customers we have today. While we wait for structural transformation in the insurance industry to come, there are a few smaller changes that will bridge the gap in the meantime. 

See also: The Evolution of Telematics Programs

Embrace Digitization

Insurance is, for the most part, digital in nature: and, given that tech is more available and accessible than ever before, it’s only natural that insurtech is becoming so prominent in the industry. Technology is less expensive, easier to use and more ubiquitous than it’s ever been, and many companies want to digitize their business. This, of course, would include the user experience.

Many are missing the mark here. Though technology has advanced significantly in the last few years and we have seen rapid increases in digitization across industries, it is still a real headache to change your insurance, even though it’s been digitized. Part of the problem is the archaic nature of insurance regulation, which requires constant approvals every time you want to amend the insurance provided. Insurance company’s rules and regulations make dynamic pricing virtually impossible in their historic form, especially when you compound that by 50 state regulators within the U.S. These processes must be made easier for us to see real growth and change in the industry. 

Understand the True Meaning of Disruption 

Many people believe that they have the chance to be a disruptor or play a role in disruptive innovation. But why does that matter? If you can be the disruptor, you win the prize and get the 10-digit valuation. But many are missing a more simplistic way of running their business because they have not embraced innovation and are making things more complicated for themselves. They also aren’t focused on the value proposition. Disruption won’t occur until 80 cents out of every dollar in premium is given back to the policy holder, instead of the 50 or 60 cents given back now. So how do we get there? We have to focus on making it the best possible experience for the customer, in every way possible. 

Tech is now more available and accessible than ever before. It’s only natural now that people have a go at it. Some of the companies that were started seven to 10 years ago, such as Oscar, Clover Health, Root Insurance, Next Insurance, Metromile, CoverHound and PolicyGenius, now have enough traction that they are becoming more widely used in the marketplace—you are hearing or reading about them even though they have been around for a while. Many companies know by now to invest in data and analytics and create more processes. But to truly disrupt things, companies will need to come up with entirely different business models than the ones that exist today. This won’t happen without embracing digitization combined with a new level of customer-centricity. 

See also: Digital Revolution Reaches Underwriting

It is time to go beyond embracing tech and innovation and into tailoring bespoke experiences to individual consumers, especially in an industry as personal as this one. The Lemonade example teaches us the importance of this; without this balance, we aren’t achieving true optimization. A lot of companies claim that they are innovative and are disrupting the industry but have yet to embrace the actions that will get them there. We need to focus on changing the narrative to where it’s more about serving the policy holder as opposed to the product nature of the industry historically. It is time for the insurance industry to change and grow to accommodate a new generation of consumers.

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