We didn't intend to write a series on the symposium that Insurance Thought Leadership hosted at Google last week for C-suite executives of major companies and for regulators, but I want to build on the wonderful post yesterday
by Iowa Insurance Commissioner Nick Gerhar
t, about the insights he picked up there. For me, the symposium underscored a crucial point about the pace of innovation -- how it can be faster than we expect at times but can also be slower.
And it's crucial to get the timing right.
The faster-than-expected part comes from a partner at one of the major Silicon Valley venture capital firms, which we visited as part of the symposium. All these firms track where entrepreneurs are seeing possibilities and where investments are happening, and the partner said that in all of 2014 the firm had been visited by exactly zero people hoping to innovate in insurance. Yet, just in the fourth quarter of 2015, the firm met with 60 companies looking to innovate in insurance.
Even as innovation has surged in fintech, in general, investment in insurtech start-ups has been minimal, about 1% of the total for fintech. But that may now be changing. Start-ups may accelerate the disruption in insurance.
You've been warned.
The slower-than-expected (at least for me) part comes from a consensus about driverless cars at the symposium. The group discussions at all five tables reached almost identical conclusions: that fully driverless cars will be feasible technologically in roughly four years but that it will be 10 before they are a major presence on the road.
In Silicon Valley-speak, saying something is 10 years out means it verges on science fiction. After all, 10 years at a pace set by Moore's Law means that you have some 30 times as much computing power available to you at no increase in cost -- if you need that much more power to make something happen, it's hard to know for sure that it works 10 years ahead of time.
But the concerns of the insurance C-suiters and the regulators were more prosaic. They felt that anyone who might be left behind because of driverless technology would kick up a fuss and that state governments, likely led by the legislatures, could intervene on behalf of constituents to slow the transition.
Perhaps insurance agents would fear the shift of auto insurance from a personal responsibility to a corporate one, shouldered by the manufacturers of the driverless cars or by operators of fleets of the cars -- if no person is involved in driving, how can an agent sell personal lines insurance?
Maybe car dealers, already fighting a rear guard action to prevent direct sales by manufacturers to consumers, would fear further loss of their intermediary role -- why would a fleet operator need a dealer to purchase of tens of thousands of cars?
Basically, think of anyone who might lose business because of driverless cars and the promised reduction in accidents -- parking garages, emergency rooms, whatever -- and you can see an obstacle. Not everyone will be explicit about their complaints. It's hard for an operator of prisons or funeral homes to demand more business. But our discussion groups were sure that opposition would surface in lots of ways and that politicians, always running for reelection, would lend support.
In fact, some technical concerns about driverless cars have surfaced in recent months. It turns out that Google cars have more accidents than human drivers do
, albeit only minor accidents thus far and, most importantly, not because of any fault by Google -- careless people seem to bump into Google cars a lot at stoplights. Google also acknowledges that the cars would have caused at least some accidents
if not for intervention by the highly trained humans sitting in the driver's seat. So, the technology still has a ways to go.
The pace of technical progress has still been faster than I expected when Chunka Mui and I published Driverless Cars: Trillions Are Up for Grabs
nearly three years ago, and we staked out what was then a very aggressive position. The federal government recently stepped on the gas, if you will, by announcing a plan to spend $4 billion on driverless technology over the next decade and to reduce regulatory hurdles for adoption
. The rationale -- which we have long predicted the government would have to adopt -- is that 25,000 lives could have been saved last year on U.S. highways if a mature form of the technology had been in use.
For me, then, the fundamental question from our symposium is: How do you position yourself for a technology that may be wildly important, yet whose timing is uncertain?
--A line that carries considerable currency in Silicon Valley is: "Never confuse a clear view with a short distance." Even if you're sure that something will happen as part of the transition to autonomous vehicles, keep in mind the issue of timing.
--Then think big, start small and learn fast -- a dictum that just happens to come from another book Chunka and I wrote, The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups.
That means you get in the game now, with as big a vision as you can conjure up for yourself or your company. Then you start experimenting to see what works and what doesn't -- while spending extremely little money. You make sure you can kill the experiments as soon as you gather the needed information -- no pilot projects allowed, at least not in the early days, and certainly no grand plans to go to market. And you keep iterating until both you and the market are ready. Then you start cashing checks.
Actually, one more thought: Consider coming to the Global Insurance Symposium
that Nick and the fine folks in Des Moines (my dad's hometown) are putting on in late April. Nick is as forward-thinking a regulator as I've met, and there will be lots of people there who can help you on your journey, whether that involves driverless cars or something else entirely. I'll be there....