Historically, the insurance industry has assessed its competition by looking at those companies within the industry that directly compete and sell in the same market segments, offer similar products, use the same distribution channels or have similar market size. But in today’s fast-changing digital economy, this approach has become outdated, and insurers are being blindsided by new challengers and competitors from outside the industry. The new challengers may not compete directly by offering and underwriting insurance, but they are competing in new ways to capture customer relationship, pocketbook and much more through innovative offerings and business models. Where are all of these coming from? This new breed of competitors is coming out of the technology and Silicon Valley companies.
There have been numerous articles and blogs regarding the potential of companies like Google, Apple, Amazon, eBay and other technology companies entering the insurance space, fueling speculation and, for some, even fear. Centuries-old industries and the companies within them are feeling the pressure to reimagine themselves, and insurance is one of them.
Most of these new challengers have emerged in the last 15 years, many in the last 5 to 10 years. But the impact of these technology and Silicon Valley companies is only beginning. Why? Because of the massive numbers of users they have as engaged and loyal customers. Insurance companies pale in contrast. This contrast illustrates why these technology and Silicon Valley companies pose a competitive threat to insurance.
The growth and influence by these industry challengers has greatly accelerated in the last three years. Adding fuel is their drive and commitment to emerging technologies and innovation.
The insurance industry is one of tradition, based on decades, even centuries, of business assumptions and models that have changed little within a culture of risk aversion – yet insurance is now operating within a world changing rapidly, creating businesses and new customer engagement models and embracing new and emerging technologies. The insurance industry, like so many other industries, is feeling the tremors of a coming quake of seismic change that will redefine competitive boundaries and customer loyalty.
We have identified and discussed key business attributes that detail the differences between these technology companies and insurers. The contrasts could not be more stark. The strategic vision of these organizations reflect the shifts and challenges of the new digital economy. The technology companies' focus is:
- Customers rather than products
- External rather than internal
- Customer power rather than company control
- Connecting people to an ecosystem rather than connecting people to the company
- Pulling and engaging rather than pushing and informing
- Selling an outcome rather than selling a product
- Creating an experience rather than processing a transaction
