Insurers should pursue "cocreation," engaging the instigators of the sharing economy to figure out how to transform risk-management practices.
As I read the considerable amount of press Uber is attracting, the level of negativity from the insurance industry is striking. Uber is free-loading. Uber is undermining consumer protections. Uber encourages drivers to engage in what amounts to insurance fraud. And on and on.
Reality is, Uber, Lyft and the many other start-up companies of their ilk are meeting a new set of needs reflected by the burgeoning sharing economy -- needs that traditional businesses with traditional business models and traditional approaches to connecting with customers are not satisfying. Functionally, these new entrants supply high-quality goods -- whether it’s an immediately available taxi ride in midtown Manhattan or a cozy apartment via Airbnb in Milan. Emotionally, they deliver good value for the money, competent service and a pleasant experience. These offerings also meet higher-order emotional needs that people have, e.g., for control, security, freedom, even independence. This ability to connect not only functionally but also emotionally suggests that the sharing economy sector is here to stay. These companies are firing on all of the cylinders that make for enduring offerings.
That said, the entrepreneurs behind these offerings are riding on the back of the long-established risk-management practices -- policies, pricing, product -- of the insurance industry while avoiding the burden of full, dedicated insurance coverage.
The reaction of the insurance industry has been to cry foul, call out the regulators and point to the consumer protections provided by traditional insurance.
Is this reaction ultimately productive?
Technology is pulling the rug out from under business models that looked quite durable even a decade ago. Customer habits and desires for discovering, investigating, shopping for, purchasing and servicing insurance bear less and less resemblance to those upon which the industry relied for the first two centuries of its existence.
As an alternative, I propose the insurance industry look at Uber, Lyft and their peers as a force for positive change and as inspiration to evolve the insurance sector toward continuing strength and relevance in the new economy. This approach can be a path to growth, profits and stability.
One way to achieve this vision is for leaders in the industry to foster cocreation platforms. Cocreation, simply put, is bringing together constituents from inside and outside your company to innovate and problem-solve around big opportunities and issues. Cocreation is a way to engage the instigators of the sharing economy in helping the industry figure out how to transform its risk-management practices to work in new sectors of the economy.
What does cocreation look like?
Imagine diverting the industry’s focus from what’s wrong with sharing economy companies, to seeing their emergence as the opportunity to create forms of insurance supporting new business models.
Next, imagine identifying all the constituents who might contribute creatively and with impact to figuring out how to realize the opportunity in a way that is sustainable. These might include experts on current insurance practices, but importantly would include heavy representation of “outsiders”; i.e., people who work for sharing-economy companies, users of their services, regulators, distributors and big data, digital, brand and customer experience experts. Constituents would include people with no connection to the insurance industry who bring totally different perspectives that can be applied to insurance -- for example, airlines (shared transportation), retail (mass market franchises and distribution), “experience” companies (innovators that elevate an offering beyond product features and price). What’s important is to include people for whom there is something to be gained by participating.
Now imagine giving these constituents a private forum -- possibly a 24 x 7 Facebook-type site -- where they can engage in dialog on topics relevant to the challenge, or on opportunities to come together for a facilitated meeting in a physical space where they might prototype solutions to the challenge.
Finally, imagine that you as the insurance carrier can listen effectively and glean insights about possible new offerings and use these findings to define alternative approaches that can be validated through an iterative process of test and learn.
Cocreation is another way to think about solving the “problem” of the Ubers of the world, harnessing the immense creativity that spawned the sharing economy to be a force for enabling new sources of value from which we can all benefit.