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Insurtech: An Adventure or a Quest?

Insurtech making your head spin? Perhaps it’s because of the confusion whether insurtech is a “there and back again” project or more of a paradigm shift?

No one can deny the great impact that J.R.R. Tolkien’s books and movies have had on our culture. He’s been called the father of modern high fantasy literature. Not that money has the final say on one’s success and impact, but in 2009 he was ranked by Forbes as the fifth top-earning dead celebrity.

From my perspective, Tolkien’s books are fabulous and intensely engaging. I was listening to a literature professor talk about Tolkien, and he made a most interesting observation on how very different his books were. He described “The Hobbit” as an adventure, while “The Lord of the Rings” was a quest.

He went on to say that “The Hobbit” is a “there and back again” adventure story, where you go out, experience thrilling events and then come home again. But “The Lord of the Rings” was a quest; you leave home and are fundamentally changed by the events you experience. In a quest, you may physically return home, but you are so altered that in a real sense you never return home.

I had never thought of the books in this way before. As a matter of fact, “The Hobbit’s” official title is “The Hobbit, or There and Back Again.” At the end of “The Lord of the Rings – The Return of the King,” Frodo Baggins returns to the Shire but never quite feels at home and eventually leaves Middle Earth with the elves and Gandalf.

See also: Core Systems and Insurtech (Part 3) 

Insurtech can be looked at in a similar way. Do we view insurtech as a journey, or is it a quest? Is insurtech a “there and back again” project that has a start, middle and end, or a more fundamental paradigm shift in our thinking?

Is insurtech to be bandied about as yet another consult-speak hype-phrase added to web pages, slide decks, articles, polls and white papers so we can be 100% buzzword-compliant? Is it hurriedly tacked on as yet another topic on an already bloated agenda of items to be covered? Or is it something substantially more?

There are more insurtech lists, companies, conferences, accelerators and analysts than you can shake a stick at. There are more than 1.2 million results when you Google “insurtech.” You could make it your life’s work just tracking insurtech.

Using the “there and back again” definition, the vast preponderance of what is labeled today as insurtech is a journey, and there is nothing wrong with that. Within the insurance industry, we definitely need incremental new products, ideas and solutions that gradually move the needle when it comes to process streamlining, reducing costs and greater customer engagement. We applaud their efforts and wish them all success.

But the number of insurtechs that can earn the quest moniker is much smaller. While many web sites and brochures purport to be a game-changing quest, most are actually a journey in quest’s clothing.

So, how do we make sense of it all?

First, figure out if the insurtechs you are working with are on a journey or a quest. Here are six marks of an insurtech that is on a quest. You don’t have to exhibit all six to be on a quest, but four is a minimum:

  • Big Audacious Dream – Sometimes referred to as the BAD idea, this visionary and emotionally compelling future state is dramatically different than anything yet proposed.
  • Multiple Directors – There are not only numerous users that employ the solution, but it directs multiple stakeholders both inside and outside multiple organizations.
  • Revenue Diversity – Income comes from numerous different users, stakeholders and sources; the quest is not tied to traditional license/use fee revenue streams.
  • Elongated Delivery – Because the quest is by nature long and complicated, quick deployment is not possible; delivery will take time and significant investments.
  • Lots of Data – While functionality is important, large amounts of data from various sources are brought together in new and compelling ways that transform traditional tasks into new opportunities for customer satisfaction, additional sales and revenue opportunities.
  • Numerous Detractors – Few will understand or initially identify with an insurtech quest, thinking it outlandish and outrageous; most will immediately dismiss it or continually poke fun at it.

Second, it’s more than OK to be engaged with multiple insurtechs that are on an adventure. As a matter of fact, it’s wise not to put all your insurtech eggs in a single basket. Some will make it, others will not, so hedging your bets is a good thing.

Third, an insurtech on a quest is not for everyone. You can probably only deal with one at a time. They will take longer to develop and deploy than an adventure insurtech.

Fourth, you should periodically reevaluate the insurtechs you’re involved with, eliminating some, adding others.

P.S – if you are an insurtech that is on a quest, welcome to the club!

See also: Why #Insurtech Doesn’t Matter  

It’s easy to become discouraged and think you will never succeed. Take heart. Here are five encouraging Tolkien quotes from “The Lord of the Rings”:

  • “The quest stands upon the edge of a knife. Stray but a little, and it will fail, to the ruin of all. Yet hope remains while the company is true.” Galadriel, “The Lord of the Rings: The Fellowship of the Ring”
    • There will be days when you are convinced that your quest is teetering on the edge of failure. It’s at times like this that you need to seek encouragement from your team and supporters.
  • “The Ring-Bearer is setting out on the quest of Mount Doom.” Elrond, “The Lord of the Rings: The Fellowship of the Ring”
    • There will be days when your quest seems destined for financial failure and industry embarrassment. Listening to your detractors is a recipe for certain defeat. If necessary, recalibrate your goals and move forward with your team and supporters.
  • “This quest may be attempted by the weak with as much hope as the strong. Yet such is oft the course of deeds that move the wheels of the world: Small hands do them because they must, while the eyes of the great are elsewhere.” Elrond, “The Lord of the Rings: The Fellowship of the Ring”
    • Leadership is vital on a quest, but more is accomplished not by the great or brilliant, but by average people. Do not overlook their value or contributions.
  • “What is to be my quest? Bilbo went to find a treasure, there and back again; but I go to lose one, and not return, as far as I can see.” Frodo, “The Lord of the Rings: The Fellowship of the Ring”
    • To succeed in your quest, you need to have an attitude of abandonment, willing to lose to win. You will need to hold loosely those traditional things that have given you stability and success.
  • “But do you remember Gandalf’s words: Even Gollum may have something yet to do? But for him, Sam, I could not have destroyed the Ring. The quest would have been in vain, even at the bitter end. So let us forgive him! For the quest is achieved and now all is over. I am glad you are here with me. Here at the end of all things, Sam.” Frodo, “The Lord of the Rings: The Return of the King”
    • When you have succeeded, you will look back and remember people whom you thought were your supporters and friends but turned out to be your enemies. Don’t harbor anger and bitterness.

Work hard and enjoy the quest.

How to Find Distribution Payday

Even before venture capitalists started funneling resources into insurtech, insurers were aware that channel development and effective distribution management was one of the keys to driving growth. Pipelines or channels have a way of either facilitating sales or impeding progress. They were governed by the same rules a decade ago that still apply today, with the exception of some new and innovative digital differences. More routes into the organization and faster journeys from quoting through policy issue have always made for better business.

An examination of the significant venture capital invested in new insurtech startups leads many to believe that the world of insurance is on the verge of a revolution. And the most logical place for disruption is in distribution. This is evident in the changes taking place with how and why people buy insurance, largely now influenced by digital technologies and ease of doing business via the internet.

See also: Are Crypto-Currencies Money or Property?  

As further evidence for the viability of channel development, insurtech investors have gravitated toward distribution and distribution-related activities. Investors may see a quick ROI. They may perceive a low-risk investment. They must also see an opportunity for increased flow into the sales pipeline.

In Majesco’s new report, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value, we trace recent insurtech developments and match them to parallel market changes. Rapid changes in customer behaviors, technology-driven capabilities and market boundaries are putting pressure on the insurance industry to adapt, and a key pressure point is distribution.

Beyond optimizing and aligning digital front-end with core distribution management back-end and enhanced data and analytics to create operational efficiencies that accommodate all chosen channels, insurers must implement an approach to designing, developing, solidifying and protecting valuable distribution relationships, including agent and broker relationships. Further, they must be able to manage those day-to-day relationships with modern, innovative technologies and processes.

In other words, channels aren’t something that insurers should build and then consider “built.” They are in need of constant change and optimization because much channel growth will happen in areas where relationships are just as crucial as digital preparedness.

Majesco dispels some common business thinking surrounding channel expansion. For example, direct online sales are still reasonably slim in the marketplace compared with agent-led closings. Yet, a high volume of agent-led closings were started through online research, quoting and information-gathering. This kind of customer journey must be supported by a flexible channel structure that will allow for a start/pause/switch/close sales process flow. If it isn’t enough that the customer is clamoring for omni-channel service, agents themselves (once wary of digital preparedness) are also interested. Agents are waking up to the realization that they stand to benefit by gains in both end-customer service and agency service.

While insurance companies and agent/brokers continue to dominate the customers’ research, buying and service experience, lines are blurring across all lines of business within distribution. There is strong interest among forward-thinking insurers in working with new, alternative sources and channels. These channels will work as new revenue streams, culling growth from additional markets and new products.

A great example of this would be SafetyNet, a new product/channel coming out of CUNA Mutual Group’s innovation lab. SafetyNet customers pay a small monthly fee to receive a lump-sum payout in the event of a job loss or disability. The distribution channel is entirely digital, the market is entirely new (targeting individual low/middle income workers with low savings) and the product was built to fit.

Viewing distribution through ROI glasses

In this new and ever-changing business landscape, insurers must rethink distribution-related strategy and execution; namely to one that requires a digital, multi-channel focus—from back to front office, and from an internally focused business model to one that considers the ecosystem across the entire distribution network.

Insurers need to integrate and align the right technologies, data and systems to improve existing channel development as well as to approach new channels and partnerships that leverage the insurer’s ability to properly service all stakeholders. We look at this as growing the channel ecosystem. Randomly adding channels, however, cannot work without an understanding of how that particular channel contributes to greenfield growth or additional revenue. It is best to use speed to value as a criterion for launch, with standard ROI opportunity as a gauge for prioritization. Long-term investment is no longer a viable standard. All channels are subject to frequent adaptation, expansion or closing — based on the ever-changing requirements of customers.

“Show me the product!”

Customers don’t think in terms of “channels.” They don’t care how a purchase happens. They just want the process of finding and purchasing to be seamless, consistent, intuitive and painless. If an insurer can become adept at being everywhere customers may want them to be — a true omni-channel environment — then they are likely to keep churn to a minimum while optimizing growth. For many insurers, this also means upgrading agent capabilities as well as data analytics. The goal is for the face of the organization, whether online or in-person or by phone, to show a consistent understanding of the customer and a predictive knowledge regarding their needs. Just as Amazon can use algorithms to auto-populate related products, insurance channels can use AI and robo-advisers to anticipate customer appetites for new products or supplemental services.

See also: Distribution Debunked (Part 1)  

As the channels blur, the “brand view” must be prepared to lead customers to their intended destinations. For example, the customer may wish to initiate an application on an insurer’s smartphone app, or begin on a comparison site. The customer may want to later make changes to the application using a laptop or tablet. At some point, the customer may have questions and wish to enlist a chatbot or human agent. Finally, the customer may wish to complete the app with a smartphone or in an agent office. To accomplish this fluidity, an insurer needs access to policyholder data in real time, with a complete alignment in customer, channel partner and back-office core systems.

To bring this all back to where we began, an analysis of the JOURNEY and FLOW is the key to distribution growth. We see clearly where insurtech investment is headed. We see uniformly that customer behaviors are dictating an omni-channel approach. We understand the need to improve agent service while building digital direct channels. All of this leads us to one conclusion — succeeding in a multi-channel world is a matter of smart investment.

For further evidence on the importance of distribution strategies, be sure to read Majesco’s white paper, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value.