What Happens When Insurance Truly Goes Digital?

As I've watched industry after industry go digital over the past 35 years, I've seen that the process looks a lot like the camera in your phone. I'll explain. 

a blue and black illustration that represents digital movement and technology

At the Insurance Europe conference in Prague last week, I closed the event with remarks on what will happen when insurance truly goes digital. Yes, I'm sure I'm partly just making certain you know that I spoke in a palace in Prague last week -- in the ballroom of the beautiful Zofin Palace on an island in the middle of the Vltava River, if you must know. But the talk seemed to go over quite well, so I thought I should share. 

I tell people I've been watching the same movie for more than 35 years, ever since I started covering IBM for the Wall Street Journal in 1986. In that movie, industries go digital -- and things blow apart, then reassemble.

As the center of the computer industry and arguably the most dominant country in the world in the mid-1980s, IBM was the focus the first time I witnessed the "what happens when an industry goes digital" movie. It was slow to adapt to the faster metabolism of the industry once personal computers came along and went through a tumultuous decade that saw the ouster of the CEO and massive layoffs. Then the rest of the computer industry followed IBM into digital disruption. When a commercial version of an internet browser became available in the mid-1990s, just about every industry could be affected -- retail sales, books, newspapers, music, you name it. 

In watching the "movie" over and over again, it has seemed to me that going digital looks a lot like the camera in your phone.

I'll explain.

The technology that allows photography developed for centuries, starting well before Leonardo da Vinci's camera obscura, and continuing through George Eastman's experimenting with film and chemicals that he baked in his poor mother's oven in the late 1800s. Once Eastman founded Kodak, the technology made great strides -- rolls of film instead of big sheets, smaller and smaller cameras, color, quicker and quicker exposures and eventually one-hour labs that churned out little yellow boxes of prints. But everything about the process was still analog. Photography still required a dedicated camera, film, lots of chemicals and paper. 

Then Philippe Kahn's wife had a baby.

Philippe is a fascinating guy, whom I've known since he founded and ran an early personal-computer software company, and it occurred to him as he paced the halls at a hospital in Santa Cruz, CA, in 1997 that the process of sharing photos with friends was what computer-types call a kludge. Digital cameras were starting to be available, and he had one, but he was going to have to go back home after the baby was born, take a card out of his camera, plug it into his computer, sort through the photos and, only then, email them to friends. Why couldn't he just connect his camera to his phone and send the photos right from the hospital?

So he did. And, in that moment, photography truly went digital. 

Philippe's phone camera got us soon enough to the point that few felt the need for a dedicated camera. The film, chemicals and paper disappeared, too. Photography had been stripped down to its simplest elements: capturing an image and sharing it.

Those who write about photography going digital tend to focus on Kodak, which actually invented the sensor that enabled digital photography but still bungled the transition to digital. It's an instructive story. I wrote it myself, in a book with Chunka Mui on lessons to be learned from failure that came out going on 15 years ago. But there are other lessons, too.

The stock market value that Kodak had didn't just disappear. It moved to other companies, many of which have achieved valuations that Kodak never dreamed of. Meta (with a market value north of half a trillion dollars even after all of Facebook's recent problems), Pinterest, TikTok and a host of other companies became possible because of the ability to capture and share images, free of the old, clumsy requirements of analog. Software and services have sprung up around the new world of photography, too -- we have to look good in those vacation photos, right, Photoshop?

The lesson I take from photography is this:

Going digital means eventually stripping an industry down to its barest essentials. And, once that happens, those bare essentials can be rearranged in all sorts of new ways -- hello, Facebook; goodbye, little yellow boxes. 

When I think about insurance, I see three bare essentials. There is a customer. There is a yes/no mechanism that decides whether a payment is triggered. There is capital. But that's it.

Sure, there are plenty of other things that have to happen: contracts, underwriting, claims processing, etc. But all those happen in support of one of those three essentials: the customer, the yes/no mechanism or the capital. 

We're still a good ways from being fully digital, and for at least one very good reason -- customers are making clear that they value advice that can't just come from a computer and that they value human contact. But you can start to see the three bare essentials taking new forms: embedded insurance that reaches customers in new ways, parametric insurance that can render a yes/no decision instantaneous, private equity bringing both its capital and its hard-edged expertise to insurance, etc. And I believe we're just beginning the digital disruption that the industry will see. I'm not sure we'll ever have that complete aha! moment that photography had when Philippe Kahn's wife had their baby, but we'll get there.



P.S. I also shared with the Insurance Europe audience a tool that Chunka and I have developed over the years that can help greatly in organizing your strategy for where digital will take you, but I'm going to set that aside for next week. I've already gone too long, and I'm actually on vacation. I'm catching up on Berlin, traveling with my younger daughter, who is chronicling the trip with her phone camera and, yes, giving me a little digital grooming via Photoshop, lovely child that she is.