Tag Archives: Guy Weismantel

Traditional Insurance Is Dying

Finance. Taxis. Television. Medicine. What do these have in common?

They’re all on the long–and growing–list of industries being turned upside down by disruptive technology. 

The examples are legion. Once-sure-bet investments like taxicab medallions are at risk of going underwater. Bitcoin is giving consumers the power to bypass banks. Traditional television is at risk from online streaming.

Insurance Is No Different

In fact, innovative players have been disrupting the insurance market since before “disruption” was the buzzword it is today. 

Look at Esurance, which in 1999 rode the dot-com wave to success as the first insurance company to operate exclusively online. No forms, no policy mailers–it didn’t even mail paper bills.

By going paperless, Esurance told customers that it was the kind of company that cared about their preferences–and established itself as a unique player in an industry that places a premium on tradition. Insurance isn’t known for being innovative. 

Most insurance leaders operate under the assumption that if it ain’t broke, you shouldn’t fix it. And in a heavily regulated industry, that’s not totally unreasonable. 

But you only have to look at the scrappy start-ups that are taking down long-established players to understand what awaits the companies that aren’t willing to innovate.

Thinking Outside the Box

Take Time Warner–profit fell 7.2% last quarter as industry analysts foretold “the death of TV.” Meanwhile, Netflix’s profits are soaring beyond expectations–even as the risks it takes don’t always pan out. 

Remember the “Marco Polo” series that cost a reported $90 million? Neither does anyone else. But for every “Marco Polo” there’s an “Orange Is the New Black.” Highly successful programs on a subscription model show that Netflix’s willingness to take risks is carrying it past industry juggernauts.

The market is changing–and if you want to stay competitive, you need to use every weapon in your arsenal. Millennials aren’t buying insurance at the rate their parents did

To a consumer population weaned on technology like Uber and Venmo, the insurance industry seems positively antiquated. Facebook can advertise to you the brand of shoes you like–so your insurance company should be able to offer a product that you actually want.

The Information Importance

According to Accenture, “Regulated industries are especially vulnerable” to incumbents. When there are barriers to entry based on licensing requirements or fees, competition is lower. Decreased competition, in turn, leads to less incentive to innovate. This can leave regulated industries, such as insurance, healthcare and finance, in a highly vulnerable position when another company figures out a way to improve their offerings.

Other attributes that can make an industry vulnerable, per Accenture’s findings, can include:

  • Narrow focus: If a brand focuses entirely on cost savings, convenience or innovation, it isn’t effectively covering its bases. A disruptor that manages to offer two or three of these factors instead of just one has a near-immediate advantage.
  • Small scope or targets: Failing to expand offerings to all demographics can mean that industries or service providers aren’t able to replicate the broad reach of disruptors.
  • Failing to innovate: Disruptors don’t always get their product right on the very first try. Companies must innovate continuously and figure out ways to build continuous improvement into their business model.

Tech start-ups use information as an asset. How can you tell if information is a valuable weapon in the battle you’re fighting? 

“Big data” isn’t just a buzzword; industry analysts are calling it the wave of the future. At Citi, they’re talking about “the feed”: a real-time data stream that leverages the Internet of Things to reshape risk management. 

Auto insurers are turning to connected cars to let them reward safe drivers. Some life insurers are even offering discounts to customers who wear activity trackers.

It Can Happen to You

For most insurance companies, incorporating an unknown element into the way they operate is daunting. 

But talk to any cab driver, grocery store clerk or travel agent, and they’ll tell you that the only way to survive in a technology-driven world is to innovate.

Look at the insurance technology market to see what improvements you can incorporate into your organization, and think expansively about how you can use information: for agency management, to attract new customers and retain old ones, to expand your profit margins or to streamline operating costs. 

Your survival depends on it.

Will Policies Break Down Into Apps?

With the news that Uber is partnering with Metromile to offer Uber drivers “pay-per-mile” insurance, along with AirBnB announcing host protection insurance to supplement existing insurance policies on rooms and houses, we may be seeing the first cracks in the decades-old marketplace for all-encompassing insurance policies.

And really the change should not surprise us. After all, it was just a few years ago when an airline ticket bought you everything: the seat you wanted, free drinks and hot meals even in the economy cabin and transportation for your luggage. These days, your ticket buys you admittance to the inside of the airplane-and basically nothing else. Every other option is now on an a la carte menu-Wi-Fi, beverages, meals, bags, preferred seating, movies. The whole experience is an upsell by the airlines.

Now that the door has been cracked a bit, what might be next? Well, as seen with the awesome app MyFitnessPal being acquired by UnderArmour, in industry after industry the advantage is all about the apps and the data. And if apps in cars can now track how far we drive and how often we’re slamming on the brakes, to save us money on our auto insurance, might we also be able to save some money on our health insurance by providing our health data to our carriers as well?

Fitbit

After all, when I step on my Fitbit Aria scale, it knows my weight and body mass index (BMI). MyFitnessPal knows what I’m eating and drinking, and, if I’m lying, the scale will catch me. If I go paleo and lose 10 pounds or complete an hour of CrossFit every day, shouldn’t I be rewarded with a lower health premium? Previously, you’d have to take a blood test and tell the underwriter if you were a smoker. But what if my rates could vary based on how healthy a lifestyle I’m leading?

And once you drive your health through this gap, you can disaggregate any part of our lives into the proverbial Chinese menu of costs. Might I pay more for life insurance if I drive my family vs. flying, which is inherently less safe? What about feeding my travel itinerary into an app and getting personalized travel insurance based on what I do on vacation? And don’t get me started on the “Internet of Things.” We already provide our thermostat and carbon dioxide levels to Google through their Nest products-shouldn’t we get a rebate from our homeowner’s policy for keeping the house at a cool 68 degrees?
Digital Thermostat

What’s interesting about these scenarios is how easily they flow once you get started. Which is how the whole apps market works-you break down a process into pieces and start to handle the individual parts.

So why wouldn’t we want to do the same with our insurance?

As younger people continue to lead the movement toward the sharing economy, showing less propensity to care about exchanging data for cost savings, it’s an increasingly interesting question. In a recent survey by the National Association of Insurance Commissioners (NAIC), 43% of drivers between the ages of 18 and 29 said they would consider enrolling in a pay-per-mile insurance policy-and that’s with only a few carriers offering such programs. There’s no doubt that the world is moving to this model.

Of course, the $100,000 question is, “when is enough, enough?” Will altruistic motivation among younger people to lower greenhouse gases and pollution triumph? Will $200 a year less in health insurance premiums be worth the cost of sending your Fitbit data to your health insurer? Will I choose to let someone track my movements in my house in exchange for preferential rates on my homeowner’s policy?

While we can’t say for certain right now, it’s not a huge leap to expect that, at some point, we’ll all be asked to “name our price.”