Tag Archives: Bob Dylan

Insurance Disruption? Evolution Is Better

A significant part of the insurance industry and consumers have forgotten, for the most part, about why the industry exists. The policy holder pays into a pool through the insurance company and, if a certain event occurs, expects a claim to be paid. Very simple, right? So how has the insurance industry strayed so far from this simplest of concepts? And how have so many consumers purchased insurance products that have added so many complex layers to basic risk protection?

Yes, it is time for change in the insurance industry. Change is a part of life. And change is coming. The insurance industry needs to adapt to the current technological environment. At the same time, insurance consumers need to take advantage of all of the information available to them and increase their insurance literacy. Almost every single person in the U.S. has some form of insurance, but very few people have more than a general idea of what each of their insurance policies is and what it covers.

See also: Which to Choose: Innovation, Disruption?  

There is a constant buzz in the insurance industry about “disruption.” Why disruption? Is it because the term is trendy and has happened in other industries, or is it because disruption is actually needed in the insurance industry?

Is it more appropriate to say that the insurance industry needs to evolve, similar to how the investment world has already started to evolve?

Let’s look at the words themselves for the necessary direction, which will show why so many high-tech firms have failed in the insurance space and will continue to fail:

Disrupt: to cause disorder or turmoil in; to break apart; to radically change (an industry, business strategy, etc.), as by introducing a new product or service that creates a new market.

Evolve: to develop gradually or to gradually change one’s opinions or beliefs.

(Definitions are from dictionary.com.)

High-tech firms are focused on changing insurance like they have other industries, and it’s not going to work the same because they are focused on disruption rather than evolution. The insurance industry is one of the oldest industries in the world, with the concept tracing back centuries. Insurance is also a highly regulated industry. So just as it’s really difficult for a huge oil tanker to change course, it is equally challenging for an industry with the size and history of the insurance industry to change course or be subject to disruption. A slow evolution is what makes sense for the insurance industry.

The investment industry has evolved in many ways, and the technology firms that are entering the investment world are not focused primarily on disrupting the industry; rather, they are focused on more effective ways to provide advice, manage investments and gain greater efficiency.

The investment world is already further along than the insurance industry because there is already a fiduciary standard, with a greater expectation that the investment industry act in the best interest of their clients. Partially, this is because most investment advisers are compensated through some sort of fee arrangement rather than a commission.

The insurance industry has not changed in many ways and is just starting to adapt to our mobile society, new technologies, “big data” analytics and blockchain technology, among other factors. Currently, changes have been mostly limited to basic tasks like claims processing and some distribution activities. But really, most of the high-tech firms are still just selling insurance, rather than changing insurance. What is really needed is a change in the overall thought-process, including underwriting, policy servicing and home office operations.

Consumers expect and deserve more transparency, more efficient processes and more accurate results. When the insurance industry can deliver these, everyone will benefit. Insurance consumers also deserve advice that will help them best meet their insurance needs. Which is why The Insurance Bill of Rights was created.
What is really needed is to find a way to deliver insurance to the consumer in a way that makes the process more seamless, with optimized pricing for insurance products. Helping consumers become more insurance-literate and manage their insurance portfolio is where technology can help.
Compensation is a part of this and why I’ve written in the past regarding how the Department of Labor fiduciary rule will have a major impact long term on all insurance products, in addition to the ones it addresses inside qualified retirement plans. Major financial service firms such as Merrill Lynch are no longer offering commission-based products inside their retirement plans. While commissions in and of themselves are not necessarily bad, they can lead to market conduct issues and can increase unnecessary replacement of insurance products (and lead to churning of investment products).
Optimized insurance products and pricing are what will ultimately be of benefit to all. Consumers will be able to access insurance products that fit their needs and are priced more closely to their risk profile. Insurance companies will benefit from being able to have better data, which will help with their ability to price insurance products more efficiently. Insurance companies have had issues in pricing different types of insurance products, including long-term care insurance and life insurance. Technology and better use of data will help.
And where does that leave insurance agents? Insurance agents will still be necessary, as are investment advisers. Perhaps someday artificial intelligence will be able to replace a human, but that day is still not near. Consumers can benefit from the experience of a professional, dedicated insurance agent just as they can from the experience of other trained professionals. If Turbo Tax has not eliminated every tax preparer, then why would it be expected that insurance agents will be replaced by an automated process?

As Bob Dylan once sang, “The Time’s They Are A’Changin,'” and the next few years will bring a long-needed evolution rather than a disruption to the insurance industry.

If you would like to be a part of this positive change, please support the Insurance Bill of Rights and sign the petition at Change.org (here). If you are a member of the insurance industry, take The Insurance Bill of Rights Pledge. Let me know your thoughts.

Change at the ‘Speed of Life!’

In my career, I’ve written hundreds of thousands of words on change. I was preparing another article for your consideration, when three articles, one invoice and one memory made my ramblings about speed unnecessary. Consider the following, then decide – is the market being transformed?

  1. The memory – In 1978, I represented the Famex Insurance Program through Fireman’s Fund. This was a property and casualty offering to GM’s dealers throughout the country. In those days, the No. 1 concern of GM and her dealers was that GM would reach 65% market share, and then Uncle Sam would break up “Mother GM” into Cadillac, GMC, Olds, Pontiac and Chevrolet. That fear was, of course, never realized. Back in the ’70s, the fantasy of GM was that she was invincible. Today, the bankruptcy of GM is reality…. Too big to fail is BS.
  2. The first article: Fast Company (November 2015) – “Hot Sauce U.S.A.,” by Elizabeth Segran. “Where once was Tabasco, there is now sriracha, gochujang and more. What the condiment aisle says about American consumers….While Tabasco accounts for 18% of the hot sauce market, there are now hundreds of varieties available in the U.S. – from Tapatio to Texas Pete – and more than a few of them with foreign roots.” Once, a “local” company controlled the hot sauce market worldwide — today, the global market is served by a much more diverse group of pepper pickers and processors. (In the name of full disclosure, I live within 10 miles of Avery Island, LA, the home of Tabasco. I love Tabasco and was able to enjoy this delicacy in every town I visited in Europe during my year [1972] of service with the Army in Germany.)
  3. The second article: The Week (Oct. 30, 2015) – “Issue of the Week: Walmart’s Wobbly Empire. “What would Sam Walton think if he were alive to see Walmart today?” Brian Sozzi asked. The founder of the behemoth would probably be shocked to see that his pioneering profit formula – low operating costs and extra-discounted prices – is now virtually impossible to maintain. “Walmart understands the challenges it faces, but its decline may be practically inevitable,” David Graham said in theAtlantic.com.
  4. The third article: The Week (Nov. 13, 2015) – Editor’s Letter. “I recently had one of those ‘welcome to the future’ moments that you think only happen in sci-fi movies and dystopian novels. I’d agree over email to get coffee with a friend of a friend, and he cc’ed his personal assistant, Amy, to set up a mutually convenient date. Amy and I emailed back and forth to find an available time slot. She was efficient and gracious, considerate of my schedule constraints and so polite in her responses that, with the meeting arranged, I began typing a brief thank you. Then I glanced at her e-mail signature. There, written in small type, it read ‘powered by artificial intelligence.’ That’s when it hit me: Amy wasn’t actually human. She was an algorithm. I’d been corresponding with a machine all along and hadn’t even realized it.”
  5. The invoice – Wired magazine. I received my 4th reminder to renew my subscription. The cover price for one year was $143.76. “Your special low renewal rate” was $20, plus a “second subscription to your friend for free.” I’m guessing the mailing costs alone for one year exceed the $20 price to me. Wired is a good magazine. I’ve enjoyed it. But in today’s easy access world I’m oversubscribed and under read.

Should we be Wired, too? Because competition and technology will allow innovators to deliver what we sell at a price below our costs? Is it now time to reinvent our organizations to compete in the world as it will be?

In closing, I acknowledge Bob Dylan, one of the first modern-day philosophers, who saw and spoke to the world of change. Our parents thought Dylan was a “flake” or a “fad.” In retrospect, he was right, and they were wrong. Ours is a world being transformed. Suggestions of incremental change are BS!

“The Times They Are A-Changin'” – Bob Dylan (1964)

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won’t come again
And don’t speak too soon
For the wheel’s still in spin
And there’s no tellin’ who
That it’s namin’
For the loser now
Will be later to win
For the times they are a-changin’.

Come senators, congressmen
Please heed the call
Don’t stand in the doorway
Don’t block up the hall
For he that gets hurt
Will be he who has stalled
There’s a battle outside
And it is ragin’
It’ll soon shake your windows
And rattle your walls
For the times they are a-changin’.

Come mothers and fathers
Throughout the land
And don’t criticize
What you can’t understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin’
Please get out of the new one
If you can’t lend your hand
For the times they are a-changin’.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin’
And the first one now
Will later be last
For the times they are a-changin’.