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Fintech Lessons Applied to Insurtech

Having worked in fintech since 2005, I witnessed the fintech wave forming, cresting and eventually crashing into the financial ecosystem. If there is a fraternal twin to banking, it’s the insurance industry. Both industries are built on managing risk, capital, compliance and distribution. Not everything in fintech will apply to insurtech, but there’s a lot we can learn by assessing the impact of fintech on the banking system.

The insurtech revolution will likely be more of an evolution–a more gradual shift and less of a big bang. The proof is the banking system. While it has clearly been affected by fintech, the tsunami of change has been less violent than what some predicted at the height of the craze.

Technology Is an Arms Race

Technology can be transformative, like the computer, the internet, the iPhone and many other examples. But, oftentimes, technology is iterative: One widget is replaced by a more efficient or lower-cost widget.

Advantages are often short-lived. Look at small dollar lending within fintech. Putting the entire application process into a digital format and with instant funding was incredible, but this has become the industry standard. Billions of dollars have been pumped into that space. In just a few short years, the software was commoditized.

Short of a truly defensible business model with unique intellectual property or network effects, most companies will find themselves in an arms race. No single technology will be the holy grail. Instead, a company’s ability to continually innovate rapidly will become the goal.

A lot of variables dictate how well an institution innovates, but here are some common mistakes that I have seen in fintech and now within insurtech as a potential technology partner:

  1. Carriers cannot always articulate what problems they are trying to solve and what success looks like
  2. Decision makers aren’t involved enough or don’t provide enough support in the innovation process
  3. Failing fast or testing concepts is cumbersome

Over the course of a year, innovation teams probably meet hundreds of startups. At Verikai, we have had the most success with innovation teams that are well-versed in the problems of the business. The challenge for startups is that we don’t know what we don’t know about your business. It’s difficult enough to sell a young technology but almost impossible to sell something to a client that can’t articulate its own problems well. It feels like some innovation teams are browsing instead of shopping; at Verikai, we believe that’s because there isn’t always alignment or support from the decision makers. By contrast, an innovation leader started off our meeting the other day by articulating all the problems he was responsible for solving and how solutions would help the business. He had me at hello.

See also: FinTech: Epicenter of Disruption (Part 1)  

Even if you create alignment, it’s incredibly difficult to push an insurance carrier into simple tests. There are a ton of valid reasons for why on-boarding is slow, but you have to find a way to cut through these barriers. Even the banks eventually found ways to re-engineer their internal processes to accommodate startups. Whether for contracts, audits, compliance, certifications or whatever, I would encourage carriers to find a way to “yes” rather than “no”.

Half the battle is accelerating your discovery process. Obsession over the latest technology craze is understandable, but what teams should really focus on is creating structure, culture and process that allow a company to adopt all of the relevant technologies in the coming years.

Sandboxes: Not Just for Kids

More data has been created this past year than all the previous years combined. There’s no way that any regulator can keep up with the proliferation of data and technology. While fair lending may not exist within insurance, the concept of disparate impact is shared with the industry, as is the concern for safety and soundness. In banking, regulators began creating sandboxes and town halls to encourage dialogue and learning. In addition, the fintechs began pushing regulators and Congress to change regulations to accommodate new business models. As the insurtech movement matures, I’d expect to see a lot more interaction with regulators.

It’s important that each carrier understands the shifting sands. Startups are more likely to lead with regulators, but it’s important that they not be the only voice at the table. Working with regulators is an incredibly important aspect of long-term planning for insurers.

Direct-to-Consumer Is Difficult

There are only so many people looking for financial products at any given time, and they’re not always in the digital channel. Fintech lenders, over time, became incredibly adept at customer acquisition through digital marketing. But even the digital market had an upper limit. The obvious place to then hunt for customers was through the banks themselves.

At first, fintech was the sworn enemy of banks, but now they are often partners. Insurtech, like fintech, will find a pain point that big insurance companies cannot address efficiently. Insurtechs will exploit it for what it’s worth, but will need to broaden their distribution over time through partnership. Certainly, there are MGAs that already write on behalf of their carrier partners, but I suspect an even deeper partnership is possible in many cases. While digital channels are incredibly appealing, brokers/agents are still relevant to many people. The point is that the digital market is a growing pool, but that there’s still a much larger body of water to fish from. Don’t be surprised if competition moves to cooperation over time.

Unbundle to Bundle

Fintechs were incredibly strong at finding niche markets that could be easily exploited under the noses of the banks. The same will hold true within insurance, but the demands of investors and capital will drive insurtechs to go after an even greater share of the consumer wallet.

All companies fear the Amazons and Apples entering the financial services market. However, it’s fintechs like SOFI, Marcus, Chime, Varo, Robinhood and countless others that are beginning to bundle multiple products to create modern, digital banks. The most expensive thing in fintech has been acquiring customers in high volumes. Naturally, companies can justify higher costs if they can increase customer lifetime values through cross-selling. And, there is a potential network effect for the winners. Whether insurtechs do the same thing or possibly some giant fintech player enters insurance, I suspect it’s a matter of time before someone will try to create the Amazon of the insurance space.

See also: What Gig Economy Means for FinTech  

The Early Days

It’s certainly going to take a while for all of these predictions to play out, but it’s important to have a long view. So far, I’m not sensing any panic in the industry. But, at the height of the mortgage crisis in 2008, no one paid too much attention to the peer-to-peer lenders lurking in the background. Somewhere around 2015, the banks went into high alert.

Depending on who you are and how you are positioned in insurance, the hindsight of fintech may be prescient for your company.

What Amazon, Netflix Can Teach Insurers

What insurers face now, digital giants like Amazon and Netflix faced when they moved to operate exclusively in the digital marketplace: transactions increasingly shifting to digital, and operations affected by an unprecedented wave of automation. Let’s explore the lessons these companies learned as they confronted the challenges that insurers face as they adapt to the digital marketplace.

One critical change for Amazon and Netflix was making a fundamental shift in the way their core systems and architecture were developed: they evolved – out of necessity – to migrate to a more flexible and responsive architecture by incorporating microservices. The factors that led to this shift sound strikingly similar to those affecting the insurance world. Here are five key factors for insurance companies to consider when planning their future technology directions, with examples of how Amazon and Netflix addressed similar issues.

  • Availability is a fundamental need when designing a digital user experience. Streamlining customer journeys depends on having technology and data at the point of the transaction. Netflix’s big availability issue was with its video library – which is a key selling point of the service. From a customer perspective, being able to watch thousands of movies and other content is less attractive if the customer can’t access the catalog any time. Netflix brought microservices to bear on this challenge, isolating the library functionality and running it independently from the rest of the user experience. This provided the capability to continually and frequently upgrade the catalog. For insurers, intermittent outages – especially on nights and weekends, when consumers and small business owners shop for insurance and digital agents are still working – are equally unacceptable.
  • Scalability and availability go hand in hand. When the volume of transactions goes up, processing power must be able to scale up, too. Monolithic tech stacks struggle here, especially because the points of failure can be so small – as insurers well know! Amazon’s shopping cart functionality had plenty of capacity for regular traffic but was challenged when required to scale up for the incredible volume of purchases on Black Friday and Cyber Monday. Inventory control is critical because you have to understand what products are in shoppers’ carts, what inventory can still be offered and when to cut off the sale of a specific item. Amazon decoupled the cart functionality from its monolithic tech stack and deployed a microservice that ran alongside the rest of their tech environment. The shopping cart microservice had the much simpler task of checking the inventory and maintaining customers’ carts. It could access additional processing power as the volume went up without relying on the same servers running the rest of the Amazon architectural stack. And because the shopping cart service was decoupled from the main system software, it could be continually updated and enhanced.
  • Speed is critical for scalability, and microservices have a lot to offer here. Both Netflix’s library and Amazon’s shopping cart experience are changing rapidly, with requests coming from thousands of users at a time from different front ends. Digital giants are known for providing a responsive user experience that is highly scalable without the need for serial data processing. Using microservices to support multi-threaded requests have given both companies an edge. For insurers, the support of an increasingly complex maze of distribution outlets requires rating capabilities that can consistently deliver sub-second responses. The ability to decouple this from core processes while dynamically scaling based on the needs of the front end is critical, regardless of line of business.
  • Maintainability and upgradability are significant areas of consideration for all insurers, based on the current state of their technology environments. As we look to the policy, billing and claims systems or the front-end user experiences, etc., insurers need the ability to increase the speed of software upgrades to be a more continuous, less disruptive and therefore higher-value undertaking. As we look at the dynamically changing user experiences needed in today’s digital world, the ability to upgrade these components and reuse discrete services at a greater frequency than back-end functionality is becoming a critical capability.

This is where microservices really shine. Each isolated process supports a small, discrete function. Therefore, it is easier to focus on a very specific capability with an update. There is flexibility gained in adapting to new integration points and integrating new services. The magnitude of the testing effort decreases significantly.

See also: What if Amazon Entered Insurance?

These are game changers for insurers that have been struggling with a monolithic architecture where everything affects everything else. And microservices give insurers the ability to ease pain points in their current technology environments and add capabilities without going through a full rip and replace.

We have much to learn from other industries’ successes and failures within the digital marketplace. But, let’s not reinvent the wheel. Let’s look at the lessons learned by the leaders in other markets and apply the knowledge they have gained.

New Entrants Flood Into Insurance

New entrants seem to be coming out of the woodwork in insurance. The insurtech movement, the advance of emerging technologies and the appetite of the global tech titans are all contributing to new entrants, new partnerships and new business models. A few recent examples illustrate the new interest in insurance from those both inside and outside of the insurance industry.

  • WeWork partners with Lemonade. In what seems like a very natural partnership, WeWork plans to offer its WeLive members renters’ insurance through Lemonade. WeLive members rent fully furnished apartments from WeWork for short-term situations.
  • Credit Karma enters insurance. This fintech intends to build on customer relationships to expand into auto insurance. While the initial focus will be education – helping Credit Karma customers understand how credit and adverse driving affects insurance rates – the longer-term goal is to provide yet another shopping/comparison site.
  • BMW and Swiss Re partner for ADAS scores. BMW Group and Swiss Re will collect telematics data from vehicles related to the use of ADAS (Automated Driver Assistance Systems) and build scores that can be used by primary insurance companies.
  • Lending Tree buys QuoteWizard for $370 million. Fintech Lending Tree, which has been on a buying spree, moves into insurance with the acquisition of insurance comparison shopping site QuoteWizard.
  • Travelers partners with Amazon for the smart home. Travelers will set up a digital storefront on Amazon featuring smart home devices for a discount (especially security-related devices) as well as discounts on homeowners’ insurance.
  • JetBlue invests in insurtech Slice. This appears to be a pure investment play, but it is still interesting that an airline would be following insurtech and seeking investment opportunities.

Something is going on here. It is not as if there have never been new entrants or that companies from other industries have ignored insurance. But the flurry of activity and innovative partnerships, investments and market approaches may represent a bigger trend. Insurance is transforming, and, despite some of the doom and gloom warnings, a case can be made that there is more opportunity than ever for the industry. Even in the examples provided above, the emphasis is more on new opportunities than displacing incumbent insurance players. Indeed, in the Swiss Re and Travelers cases, the incumbents are part of the new partnerships – and these are just two of many examples.

See also: 5 Cs of Transformation in Insurance  

One of the main themes of the examples highlighted above is the attention on distribution and customer relationships. While insurtechs are working with insurers on many opportunities to improve underwriting, claims, and other areas, so far the new entrants from outside the industry don’t appear to have the appetite to underwrite risk and handle claims. This may change, but it is likely that there will be even more interest from outside insurance in capitalizing on customer relationships. Above all, these new entrants and innovative partnerships serve to accelerate the transformation of insurance.

In Age of Disruption, What Is Insurance?

“Somehow we have created a monster, and it’s time to turn it on its head for our customers and think about providing some certainty of protection.” – Inga Beale, CEO, Lloyds of London

In an early-morning plenary session at this year’s InsureTech Connect in Las Vegas, Rick Chavez, partner and head of digital strategy acceleration at Oliver Wyman, described the disruption landscape in insurance succinctly: while the first phase of disruption was about digitization, the next phase will be about people. In his words, “digitization has shifted the balance of power to people,” forcing the insurance industry to radically reorient itself away from solving its own problems toward solving the problems of its customer. It’s about time.

For the 6,000-plus attendees at InsureTech Connect 2018, disruption in insurance has long been described in terms of technology. Chavez rightly urged the audience to expand its definition of disruption and instead conceive of disruption not just as a shift in technology but as a “collision of megatrends”–technological, behavioral and societal–that is reordering the world in which we live, work and operate as businesses. In this new world order, businesses and whole industries are being refashioned in ways that look entirely unfamiliar, insurance included.

This kind of disruption requires that insurance undergo far more than modernization, but a true metamorphosis, not simply shedding its skin of bureaucracy, paper applications and legacy systems but being reborn as an entirely new animal, focused on customers and digitally enabled by continuing technological transformation.

In the new age of disruption …

1. Insurance is data

“Soon each one of us will be generating millions of data sets every day – insurance can be the biggest beneficiary of that” – Vishal Gondal, GOQUii

While Amazon disrupted the way we shop, and Netflix disrupted the way we watch movies, at the end of the day (as Andy G. Simpson pointed out in his Insurance Journal recap of the conference) movies are still movies, and the dish soap, vinyl records and dog food we buy maintain their inherent properties, whether we buy them on Amazon or elsewhere. Insurance, not simply as an industry but as a product, on the other hand is being fundamentally altered by big data.

At its core, “insurance is about using statistics to price risk, which is why data, properly collected and used, can transform the core of the product,” said Daniel Schreiber, CEO of Lemonade, during his plenary session on day 2 of the conference. As copious amounts of data about each and every one of us become ever more available, insurance at the product level– at the dish soap/dog food level–is changing.

While the auto insurance industry has been ahead of the curve in its use of IoT-generated data to underwrite auto policies, some of the most exciting change happening today is in life insurance, as life products are being reconceived by a boon of health data generated by FitBits, genetic testing data, epigenetics, health gamification and other fitness apps. In a panel discussion titled “On the Bleeding Edge: At the Intersection of Life & Health,” JJ Carroll of Swiss RE discussed the imperative of figuring out how to integrate new data sources into underwriting and how doing so will lead to a paradigm shift in how life insurance is bought and sold. “Right now, we underwrite at a single point in time and treat everyone equally going forward,” she explained. With new data sources influencing underwriting, life insurance has the potential to become a dynamic product that uses health and behavior data to adjust premiums over time, personalize products and service offerings and expand coverage to traditionally riskier populations.

Vishal Gandal of GOQuii, a “personalized wellness engine” that is partnering with Max Bupa Insurance and Swiss Re to offer health coaching and health-management tools to customers, believes that integrating data like that generated by GOQuii will “open up new risk pools and provide products to people who couldn’t be covered before.” While some express concern that access to more data, especially epigenetic and genetic data, may exclude people from coverage, Carroll remains confident that it is not insurers who will benefit the most from data sharing, but customers themselves.

See also: Is Insurance Really Ripe for Disruption?  

2. Insurance is in the background

“In the future, insurance will buy itself automatically” – Jay Bergman

Some of the most standout sessions of this year’s InsureTech Connect were not from insurance companies at all, but from businesses either partnering with insurance companies or using insurance-related data to educate their customers about or sell insurance to their customers as a means of delivering more value.

Before unveiling a new car insurance portal that allows customers to monitor their car-related records and access a quote with little to no data entry, Credit Karma CEO Ken Lin began his talk with a conversation around how Credit Karma is “more than just free credit scores,” elucidating all of the additional services they have layered on top of their core product to deliver more value to their customers. Beyond simply announcing a product launch, Lin’s talk was gospel to insurance carriers, demonstrating how a company with a fairly basic core offering (free credit scores) can build a service layer on top to deepen engagement with customers. It’s a concept that touches on what was surely one of the most profound themes of the conference–that, like free credit scores, insurance only need be a small piece of a company’s larger offering. This may mean embedding insurance into the purchase of other products or services (i.e., how travel insurance is often sold) or it may mean doing what Credit Karma has done and layering on a service offering to deepen engagement with customers and make products stickier.

Assaf Wand, CEO of the home insurance company Hippo, spoke to both of these models in his discussion with David Weschler of Comcast about how their two companies are partnering to make insurance smarter and smart homes safer. When asked about what the future of insurance looks like, Wand put it plainly when he said: “Home insurance won’t be sold as insurance. It will be an embedded feature of the smart home.” Jillian Slyfield, who heads the digital economy practice at Aon, a company that is already partnering with companies like Uber and Clutch to insure the next generation of drivers, agrees: “We are embedding insurance into these products today.”

Until this vision is fully realized, companies like Hippo are doing their part to make their insurance products fade into the background as the companies offer additional services for homeowners, “Can I bring you value that you really care about?” Wand asked, “Wintering your home, raking leaves, these are the kinds of things that matter to homeowners.”

3. Insurance is first and foremost a customer experience

“The insurance industry has to redefine our processes… go in reverse, starting with the customer and re-streamlining our processes around them” – Koichi Nagasaki, Sompo

To many outside the insurance industry, the idea of good customer experience may seem unremarkable, but for an industry that has for so long been enamored by the ever-increasing complexity of its own products, redefining processes around customers is like learning a foreign language as a middle-aged adult. It’s hard, and it takes a long time, and a lot of people aren’t up to the task.

The insurance industry has been talking about the need for customer-centricity for a while now, but many companies continue to drag their feet. But customer-centricity is and remains more than a differentiator. It’s now table stakes. How this plays out for the industry will look different for different companies. Some will turn to partnerships with insurtechs and other startups to embed their products into what are already customer-centric experiences and companies. Chavez of Oliver Wyman would rather see the industry “disrupt itself,” as he believes it’s critical that companies maintain the customer relationship. In his plenary sessions, he cited the German energy company Enercity as a company that disrupted itself. Operating in a similarly regulated industry, rather than becoming just a supplier of energy, the company invested heavily in its own digital strategy to become a thought leader in the energy space, to be a trusted adviser to its customer and to deliver an exceptional digital experience that, among other things, leverages blockchain technology to accept bitcoin payments from customers. For Chavez, insurtech is already a bubble, and, “If you want to succeed and thrive in a bubble, make yourself indispensable.” The only way to do this, he believes, is to maintain ownership over the customer experience, because, in today’s digital economy, the customer experience is the product.

But to own the customer experience and succeed will require insurance companies to completely reorient their business practices and processes – to start with the customer and the experience and work backward toward capabilities. In the words of Han Wang of Paladin Cyber, who spoke on a panel about moving from selling products to selling services, “It’s always a questions of what does the customer want? How do they define the problem? And what is the solution?”

4. Insurance is trust

“The world runs on trust. When we live in a society where we have lots of trust, everyone benefits. When this trust goes away, everyone loses.” – Dan Ariely, Lemonade

During a faceoff between incumbents and insurtechs during one conference session, Dylan Bourguignon, CEO of so-sure cinched the debate with a single comment, calling out large insurance carriers: “You want to engage with customers, yet you don’t have their trust. And it’s not like you haven’t had time to earn it.” This, Bourguignon believes, is ultimately why insurtechs will beat the incumbents.

Indeed, the insurtech Lemonade spent a fair amount of stage time preaching the gospel of trust. Dan Ariely, behavioral economist and chief behavior officer at Lemonade, delivered a plenary session entirely devoted to the topic of trust. He spoke about trust from a behavioral standpoint, explaining how trust creates equilibrium in society and how, when trust is violated, the equilibrium is thrown off. Case in point: insurance.

Insurance, he explained, has violated consumer trust and has thrown off the equilibrium–the industry doesn’t trust consumers, and consumers don’t trust the industry, a vulnerability that has left the insurance industry open to the kind of disruption a company like Lemonade poses. As an industry, insurance has incentives not to do the thing it has promised to do, which is to pay out your claims. And while trust is scarcely more important in any industry as it is in insurance, save in an industry like healthcare, the insurance industry is notoriously plagued by two-way distrust.

What makes Lemonade stand out is that it has devised a system that removes the conflict of interest germane to most insurance companies – as a company, it has no incentives to not pay out customer claims. In theory, profits are entirely derived by taking a percentage of the premium; anything left over that does not go to pay out a claim is then donated to charity. The result: If customers are cheating, they aren’t cheating a company, they are cheating a charity. Ariely described several instances where customer even tried to return their claims payments after finding misplaced items they thought had been stolen. “How often does this happen in your companies?” he asked the audience. Silence.

And it’s not just new business models that will remedy the trust issues plaguing insurance. It’s new technology, too. In a panel titled “Blockchain: Building Trust in Insurance,” executives from IBM, Salesforce, Marsh and AAIS discussed how blockchain technology has the capacity to deepen trust across the industry, among customers, carriers, solutions providers and underwriters by providing what Jeff To of Salesforce calls an “immutable source of truth that is trusted among all parties.” Being able to easily access and trust data will have a trickle down effect that will affect everyone, including customers, employees and the larger business as a whole–reducing inefficiencies, increasing application and quote-to-bind speed, eliminating all the hours and money that go into data reconciliation and ultimately making it easier for carriers to deliver a quality customer experience to their customers.

See also: Disruption of Rate-Modeling Process  

While the progress in blockchain has been incremental, the conference panel demoed some promising use cases in which blockchain is already delivering results for customers, one example being acquiring proof of insurance for small businesses or contractors through Marsh’s platform. With blockchain, a process that used to span several days has been reduced to less than a minute. Experiences like these–simple, seamless and instantaneous – are laying the groundwork for carriers to begin the long road to earning back customer trust. Blockchain will likely play an integral role this process.

5. Insurance is a social good

“We need insurance. It is one of the most important products for financial security.” – Dan Ariely, Lemonade

For all of the the naysaying regarding state of the industry that took place at InsureTech Connect, there were plenty of opportunities for the industry to remind itself that it’s not all bad, and its core insurance is something that is incredibly important to the stability of people across the globe. Lemonade’s Schreiber called it a social good, while Ariely told his audience, “We need insurance. It is one of the most important products for financial security.” Similar sentiments were expressed across stages throughout the conference.

In fact, in today’s society, income disparity is at one of the highest points in recent history, stagnating wages are plaguing and diminishing the middle class, more people in the U.S. are living in poverty now than at any point since the Great Depression, the social safety net is shrinking by the minute and more than 40% of Americans don’t have enough money in savings to cover a $400 emergency, so insurance is more important than ever.

For Inga Beale, CEO of Lloyds of London, insurance has a critical role to play in society, “It goes beyond insurance–it’s about giving people money and financial independence,” she said during a fireside chat. She went on to describe findings from recent research conducted by Lloyds, which determined that, by the end of their lives, men in the U.K. are six times better off financially than women. When designed as a tool to provide financial independence and equality for everyone, insurance can play an important role in addressing this disparity. While this has been a focus in emerging markets, financial stability and independence is often assumed in more developed markets, like the U.S. and Europe. In reality, it is a problem facing all markets, and increasingly so. Ace Callwood, CEO of Painless1099, a bank account for freelancers that helps them save money for taxes, agrees that insurance has an important role to play. “It’s our job to get people to a place where they can afford to buy the products we are trying to sell,” he said.

You can find the article originally published here.

A Contrarian Looks ‘Back to the Future’

A recent week started with reading a page by Paul Carroll from his Innovator’s Edge platform. The title question was: “Will Apple enter insurance? Google? Microsoft? Amazon?” His opening statement was, “Apple’s market value crested $1 trillion last week, and its big tech brethren Google, Microsoft and Amazon aren’t far behind, all are valued north of $800 billion…”

I wasn’t shocked until he said, “All have extensive data about customers. And all have the size to tackle mind-bending problems that insurance faces – by contrast you’d have to combine AIG, Prudential and Allstate just to surpass $100 billion in market value…”

A day later, someone sent me Reagan Consulting’s “The Golden Age of Insurance Brokerage.” As I read through this short update, I could almost hear, “Happy days are here again” playing in the background for the brokers. The following captures the essence of this document: “We are living in the Golden Age of insurance brokerage. There are so many good things happening, it is hard to keep track of them all.” This was followed by six bullet points providing evidence of why the brokers are so happy. (No mention was made of insurance buyers, who may not be as HAPPY!)

A friend then sent me a link to “The Death of the Old School Agency,” by Michael Jans. This is a more in-depth view (30-plus pages) of the world as it may or will be.

From the executive summary, we learn that today’s agent faces a new world of:

  • Rapid changes in consumer behavior and expectations
  • Emerging, existing and well-funded competitive channels
  • A rising millennial generation with different expectations, both as consumers and workers
  • A pace of change unlike anything they’ve ever seen before.

Depending upon who, what and where you are, this report will bring good news or bad news, but nonetheless – it is news that (I believe) every agent needs to hear, consider, ponder and then decide on.

Agencies tomorrow are not “your daddy’s Oldsmobile.” Ask someone older than 40 to explain the phrase. This was the beginning of the end of a legendary line of General Motors automobiles and probably a foreshadowing of the collapse of General Motors.

I encourage you to study all three of these documents – they are well-written by very successful folks. Their ideas should be carefully considered, and, if properly adapted to your circumstances, all can improve your results. That is – as long as the world goes as “we the people” in this industry think it should. What follows is my contrarian view – less “raining on your parade” and more clearing the air as you look to the horizon in tomorrow’s consumer-driven economy. We are not in charge. We today are wagering on our individual and industry’s future. Place your bets. The market will pick the winners.

See also: 3 Myths That Inhibit Innovation (Part 3)  

This contrarian will offer his ideas by looking “back to the future.”

There will remain great opportunities in our future, but these will require transformational change. From today’s selling in an industry that is product-defined and product-driven, to a new client-defined and client-driven marketplace where we will facilitate our client’s buying – solving their problems and meeting their needs. In the competitive nature of tomorrow’s world – we’ll have to use artificial intelligence (AI) to anticipate these needs and deliver solutions before our clients “go shopping.”

Some of the people, gifts, expertise, disciplines, skills, etc. we’ll need will be much different than the mechanical process we use today. We will need communicators (verbal and nonverbal), empathizers, artists, inventors, designers, storytellers, caregivers, consolers, big picture thinkers, storytellers, caregivers and “techies.” This is not an all-inclusive list. (Consider reading “A Whole New Mind,” by Daniel Pink.)

Warren Bennis offered the following wisdom decades ago: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.”

Consider the following – brief observations from one man’s experience:

  • In 1978, Fireman’s Fund/Famex Agents offered a GM-endorsed insurance program for dealers. I was the SW Louisiana agent. In those days, the No. 1 concern of GM and its dealers was that GM would reach 65% market share and the federal government would break GM up into separate companies, Chevrolet, Pontiac, Buick, etc. GM’s arrogance, the dealers’ complacency, foreign competition, a poor product and a marketplace wanting change reshaped their world. GM never made it to 65% market share. I believe the insurance industry is ripe for a similar transformational experience.
  • In 1994, I was speaking to a bank in St. James Parish (Louisiana) about change. I said, “Today, GM, Sears and IBM are the kings of their respective jungles. I believe, in my lifetime, one of these companies will fail.” I was laughed off the stage. Fourteen years later, I was vindicated with the bankruptcy filing by GM. I personally believe that I’ll also prove right on Sears.
  • In June 2008, I was an instructor for attendees in a risk and insurance class at the KPMG Advisory University in Chicago. This was a continuing education week for KPMG consultants. A rookie consultant asked, “How does an insurance company fail?” I explained with the Champion Insurance story.

Then he asked for an example of a “rock solid” insurance company. I said, “AIG.” The KPMG senior partners in the room nodded in agreement. Less than 100 days later, AIG was functionally bankrupt, requiring a $182 billion bailout by the government. None of us saw that coming. (I’ll bet you were surprised, as well.)

As I wrap up this article, hoping I’ve stimulated a much more important discussion about the future, consider the following:

  1. Companies valued at $100 billion are “big” until measured against trillion-dollar operations in a world in transformation – especially if the giants have better technology and data!
  2. Apple, Google, Microsoft and Amazon (AGMA) are kings of their respective jungles. Yet these companies are not even as old as the majority of readers of this column (with the possible exception of Microsoft and Apple, founded in the mid-1970s). Why would we think that our “old and stoic” industry is “safe” and “promising” for tomorrow? Are we celebrating our past when we should be planning our future?
  3. Do you think that any of your clients who have recently received a rate increase will be as enthusiastic about the profitability of our industry and the future of the world of brokers as stated in the article offered by Reagan? I’ve rarely (if ever) heard a client celebrate the profitability of our industry when it is an expense to theirs…
  4. Generational changes, social media and our societal rethinking of issues of race, gender, ethnicity, family, values, economic models (socialism / capitalism), etc. may result in our going in directions that we, 10 years ago, would have never considered possible.
  5. Has our industry let the government get its nose into our tent/economic system. NFIP has been in this industry as long as I have. The private sector didn’t want to address the flood risk. Now, these nearly 50 years later, the flood program is a government program and not sustainable. Unfortunately, the government may be ready to have the camel stand up in the tent? Medicare for everyone is no longer a crazy idea. It may not work, but….
  6. If the insurance industry was being designed today to do what it does, do you really believe it would be what we have? If you answered yes, please reread the question!

See also: What Is Really Disrupting Insurance?  

Bookstores, travel agencies, video stores, etc. were important in our communities of yesterday – UNTIL THEY WEREN’T. Should we begin redesigning our own operations and industry and future before a competitive innovator does it for us?