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Insurtechs Are Specializing

Money has been pouring into insurtechs, reaching a record of almost $2 billion in Q4 2019. Since 2018, investors have put more than $1 billion per quarter into companies seeking to shake up the industry. Not a single market segment has been untouched.

In 2020, the focus will be on innovating with insurtechs that enable incumbents. One report found that 96% of insurers said that they wanted to collaborate with insurtech firms in some way. Those surveyed favored partnerships and the software as a service (SaaS) approach to developing new solutions. There’s a rapidly growing list of insurer and insurtech partnerships.

See also: An Insurtech Reality Check  

Insurtechs are developing to solve niche problems, and most aren’t aiming to tackle every vertical or every phase of the process. We all know the saying, jack of all trades, master of none. Insurtechs are focused on being the master at very specific parts of the value chain. Allianz has partnered with Flock, an insurtech startup offering pay-per-flight drone insurance; Aviva partnered with Digital Risks in the U.K. to develop insurance for startups and small and medium-sized enterprises (SMEs); and State Farm partnered with Cambridge Mobile Telematics to deliver usage-based insurance to drivers in the U.S.

One big driver of these partnerships is the inability of one company to do everything at once. Synergies can be realized when combining complementary skills. In Germany, Generali formed a partnership with Nest to offer homeowners insurance that leverages Nest’s smart home technology. Nest’s technology detects smoke and carbon monoxide and sends alerts to customer’s phones, reducing the risk for the insurer. Nationwide’s partnership with sure.com allows it to sell renters insurance through an app; Nationwide is still handing the underwriting and policy management separately. 

More and more, incumbents are working with several insurtechs that integrate to bring change to every aspect of the industry. 

Insurtechs bring the speed, agility and technological skills that incumbents need.

As Deloitte’s 2020 Insurance Outlook pointed out, “Despite some attempts to upgrade legacy marketing and distribution systems… carriers continue to struggle to drive more effective connections with consumers accustomed to online shopping and self-service.” Trying to bring legacy systems into the current age of digitization simply isn’t working, and, if incumbents try to build in-house, they face a longer time to market and higher costs.

Partnering with an insurtech company allows incumbents to quickly bridge the innovation gap, where technology changes faster than their ability to keep up. The estimated timeframe to develop solutions in-house is around 18 months, whereas you can be up and running in as little as three months if you partner with an insurtech. Moreover, incumbents that partner can respond more quickly to changing customer demands and lessen their risk of losing market share to a competitor. 

See also: How Tech Makes Sector Safer, Smarter  

For their part, insurtechs have realized that seeking to disrupt and replace incumbents can be too costly. To run a successful insurance company, you need significant capital, which is difficult for startups to raise. The insurance industry is also regulation-heavy, making it difficult for newcomers to find a place. Startups struggle to access the complex networks that support insurers. The industry presents too many barriers to independent disruption, but partnership benefits everyone involved.

Insurers are ready to innovate and have the data and distribution networks to support large-scale rollouts. Insurtechs have the technology and the agility to come into a large organization in the midst of change, work with its legacy systems, partner with insurtechs solving other problems in the supply chain and provide immediate value in moving them into the digital world. Both sides of the equation are ready and willing to realize the benefits of working together.

Sensors and the Next Wave of IoT

Spies and “bugs” have made frequent appearances in movies, books and television. In the James Bond movie series, we see an array of devices that were designed for 007 by “Q.” In the 1997 movie, Tomorrow Never Dies, Bond’s BMW car and mobile phone provide the first glimpses of the potential of the Internet of Things (IoT). He remotely starts and drives the vehicle to escape the villains, while operating a number of built-in devices from the phone as the car views and senses issues. Q was always on the leading edge of new technology for Bond.

Fast forward 20 years, and we now have sensors and capabilities in so many things … in our appliances, automobiles, mobile phones and a host of common wearables. You may not think of these as “bugs,” but they are. They are mini- and micro-technology components employed to see, listen, learn, assess and respond. The only difference between today’s sensors and yesterday’s is that today’s sensors are infinitely better at reading and recording data — and they may be used for the common good.

To prove that they are still considered “bugs,” however, you only need to look at a bill introduced recently by U.S. Sens. Mark Warner (VA) and Cory Gardner (CO). The Internet of Things Cyber Security Improvement Act is aimed to protect the federal government from cyber intrusion through the Internet of Things. Their bill raises a great point — sensors need built-in security measures that will allow for the good features to be used without introducing new risks.

See also: Insurance and the Internet of Things  

Good Bugs Eat Risk

In the insurance industry, we understand the implications of sensors and their ability to lower risk. “Bugs” and sensors are now our best friends. In our Future Trends 2017: The Shift Gains Momentum report, we examined how IoT experimentation and implementation is reaching into every area of insurance. Here is a short list of innovative ideas introduced by early adopters of IoT in insurance:

  • Progressive, via the Snapshot usage-based-insurance telematics offering, monitored how customers drove using an OBD plug-in device from Zubie.
  • Liberty Mutual partnered with Google to use NEST connected smoke alarms in the home to help customers reduce fire risk and carbon monoxide poisoning while also reducing their homeowners insurance premium.
  • Beam Dental began pricing dental insurance based on smart toothbrush usage data.
  • John Hancock used wearable devices to track the well-being of customers, lowering life insurance premiums and offering an incentive program through Vitality to shop for an array of things.
  • Oscar, a health insurance startup, used wearable fitness trackers and a mobile app to help track and encourage members to be fit, find doctors, access health history, access the doctor on call and connect to Apple Health.

In addition to the last two examples above, companies are using wearable devices and the data generated from them to better assess individuals for healthcare, life insurance, workers compensation and investment rewards based on their activity and lifestyle. Innovative insurers are using wearables to provide improved underwriting discounts, rewards, claims monitoring and new services using real-time data. The new services can include advice on healthy living, real-time healthcare and prevention, real-time monitoring and assistance in treatment or recovery plans and determining return to work timeframes for injuries or other health-related incidents. These all contribute to enhanced customer experiences, longer customer lives and improved insurer investment options.

There’s No Limit to Sensor Growth

This rapid experimentation and use of IoT isn’t just limited to wearables, telematics and smoke detectors. Sensors of all kinds are being born into healthcare environments, construction sites, commercial buildings, roads and bridges, homes and cars.

  • By 2025, the Internet of Things will be worth trillions annually.
  • Connected homes will grow rapidly by 30% per year in the U.S. alone, where 22% of households now have at least one connected device.
  • The wearable device market is expected to more than double over the next five years.

Sensors Should Reduce Claims

With the proliferation of companies innovating and taking new offerings to market using IoT, we are seeing the beginning of a huge boom in insurers using IoT to drive an engaging customer experience through personalized insurance offerings, reduced costs and new value-added services. The Boston Consulting Group estimated that U.S. insurers could reduce annual claims by 40% to 60% with real-time IoT. The key is that insurers will be able to move from paying claims to mitigating or eliminating risk by engaging with customers via IoT devices while also enhancing the customer experience.

What’s Next for the IoT? Better bugs?

Though so much remains uncertain and untested, we should expect to see a rapid evolution of technologies to sort out which sensors are most valuable in which locations and just how IoT can bring cost-effective monitoring to market.

For example, P&C insurers were quick to pick up on OBD technology, with installed devices in vehicles. In many cases, mobile phone monitoring soon became a more cost-effective solution. Most smart phones have GPS capability and an accelerometer. And now automotive manufacturers are embedding sensors and telematics in vehicles to enhance safety and position themselves toward autonomous driving vehicles – just like Bond.

As some wearable technologies are dropping out of the running, life and health insurers will soon be taking advantage of advancements in smart watch design. The first wave of wearables looked like digital tech devices with touchscreens and LED displays. The next wave is the introduction of smart tech into “normal”-looking watches from standard manufacturers like Movado, Tag Heuer, Fossil and Tommy Hilfiger. Android Wear technology will be feeding the data. These would be much more like Q would have designed, and they will undoubtedly be worn by many who wouldn’t normally use an Apple Watch or a FitBit.

A similar technology wave is beginning to hit homes. Currently, sensors are in use in some thermostats, appliances, lighting systems, security systems, computer and gaming devices. But one of the drawbacks to having so many sensors is that most companies haven’t networked all of them to a single IoT data framework. This hinders the ability to aggregate the data across sensors, limiting the potential value. Every new data point requires a new type of sensor. As with OBD devices, attaching a sensor to everything may even become non-essential, in favor of one centrally located device with multiple sensors.

PhD students at Carnegie Mellon University have been developing a plug-in sensor package they call a “Synthetic Sensor.” Plug it into an outlet, and that room is immediately a smart room. Instead of a smart sensor on every item in the room, multiple sensors in the device track many items, people and safety concerns at once. The device can detect if anything seems to be “wrong” when appliances are in use by analyzing machine vibrations. And, of course, it can track usage patterns. The sensor can even track things insurers may not need to know, like how many paper towels are still left on a roll.

See also: How the ‘Internet of Things’ Affects Strategic Planning  

So, would P&C insurers like to be connected to the water heater thermometer, or have access to a device that can hear pops and leaks? Would L&A insurers like to know the lifestyle and behaviors of their customers to encourage healthy living?  Much of this will be sorted out in the coming years.

What doesn’t need to be sorted out is that insurers will want access to device data – and they will pay for it. They will need to be running systems that will readily hold the data, analyze it and use it effectively. Cloud storage of device data and even cloud analytics will play a tremendous role in giving value to IoT data streams.

IoT advancements are exciting! They hold promise for insurers, and they certainly will make many of our environments safer and smarter.

A Simple Model to Assess Insurtechs

“The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative.”

― Peter Thiel, Zero to One

Whether we’re talking about telematics, artificial intelligence (AI), digital distribution or peer-to-peer, investing in insurance-related technology (commonly termed “insuretech” or “insurtech”) is no longer considered boring. In fact, insurtech is one of the hottest investable segments in the market. As a 20-plus-year veteran in insurance, I find it surreal that insurance has become this hip. Twenty years ago, I gulped as I sent an email to the CFO of my company, where I proposed that there was a unique opportunity in renters insurance. That particular email was ignored. Today, that idea is worth millions of dollars.

What changed?

Insurance seems to be the latest in a string of industries caught in the crosshairs on venture capital. With the success of Uber and AirBnB, VCs are now looking for the next stale industry to disrupt, and the insurance industry carries the reputation of being about as stale as they come. The VCs view the needless paperwork, cumbersome purchasing processes, dramatic claims settlement and overall old-school look and feel of the industry and think they can siphon those trillions of dollars of premium over to Silicon Valley. It seems like a reasonable thesis.

The problem is, it’s not going to happen that way. Insurance will NOT be disrupted. While insurance looks old and antiquated on the exterior, it is actually quite modern and vibrant on the interior. The insurance industry is actually the Uncle Drew of businesses; it’s just getting warmed up!

The Model

Much of the reason I think VCs are unaware of their doomed quest for insurance disruption is that they are looking at the market from a premium standpoint and envisioning being able to capture large chunks of it. $5 trillion is a lot of money. Without an appropriate model, an outsider coming into insurance can naively think they can capture even a fraction of this. But premium is strongly tied to losses. Those premium dollars are accounted for in future claims.

I once had a VC ask me what the fastest way to $100 million in revenue was. The answer is easy, “slash the premium.” I had to quickly follow up with, “and be prepared to be go insolvent, as there is no digging yourself out of that hole.” He didn’t quite get it, until I walked him through what happens to a dollar of premium as it enters the system. And it was this that became the basis of the model I use to assess new product formation and insurtech startups.

There are four basic components to my model. Regardless of new entrants, new products or new sources of capital, these four components remain everpresent in any insurance business model. Even if a disruptive force was able to penetrate the industry veil, that force would still need to reflect its value proposition within my four components.

Component 1 – EXPOSURE

This is the component that deals with insurance claims: past, present and future. Companies or products looking to capture value here must be able to reduce, prevent, quantify or economically transfer current or new risks or losses. Subcomponents in this category include expenses arising from fraud and the adjustment of claims, both of which can add substantially to overall losses.

See also: Insurance Coverage Porn  

Startups such as Nest are building products that increase home security by decreasing the likelihood of burglary (or increasing the likelihood of capturing the criminals on video) and thus reduce claims associated with burglary or theft. Part of assessing the value proposition of Nest is to first understand the magnitude of the claims associated with burglary and theft and then quantify what relief this product could provide (along with how that relief should be shared among stakeholders).

Another company that is doing some interesting things in this model component is Livegenic (disclaimer: I have become friends with the team). Livegenic allows insurers to adjust claims and capture video and imagery using the mobile phone of the insured. This reduces the expenses associated with having to send an adjuster out to each and every claim. Loss adjustment expenses can be in excess of 10% of all claims, so technology that reduces that by a few basis points can be quite valuable to an insurer’s bottom line and ultimately its prices and competitiveness.

Component 2 – DISTRIBUTION

This component focuses on the expenses associated with getting insurance product into the hands of a customer. Insurtech companies in this space are typically focused on driving down commissions. This can be done by eliminating brokers and going directly to customers. Savings can also be achieved by creating efficient marketplace portals that allow customers to easily buy coverage.

Embroker is one of many companies trying to do just that in the small commercial space by creating a fully digital business insurance experience. Companies such as Denim Labs are providing social and mobile marketing services to companies in insurance. And then there is Lemonade, which is developing AI technology that it hopes will reduce the friction of digitally purchasing (its) insurance and making the buying process “delightful.”  Peer-to-peer (P2P) insurance is a fairly new insurtech distribution model that attempts to use the strength of close ties via social methods for friends and close associates to come together to make their own insurance pools.

Distribution expenses in insurance are some of the highest in any industry. As with the risk component, reducing expenses in this component by even a few basis points is incredibly valuable.

Component 3 – CAPITAL

This component focuses on the expenses associated with providing capital or the reinsurance backstop to a risk or portfolio. For many insurers, reinsurance is the largest expense component in the P&L. Capital is such an important component to the business model that the ramifications of it almost always leak into the other components. This was one of my criticisms of  Lemonade recently. Lemonade will have a lot of difficulty executing some of the aspects of its business model simply because it cedes 100% of its business to reinsurers. So, when it comes to pricing or its general underwriting guidelines, its reinsurance expenses will overwhelm other initiatives. Lemonade can’t be the low-cost provider AND a peer-to-peer distributor because its reinsurance expenses will force it to choose one or the other. This is a nuance that many VCs will miss in their evaluation of insurtechs!

For those seeking disruption in insurance, we have historical precedent of what that might look like based on the last 20 years of alternative capital flooding into the insurance space. I will devote space to this in future articles, but, in brief, this alternative capital has made reinsurance so inexpensive that smaller reinsurers are facing an existential crisis.

Companies such as Nephila Capital and Fermat Capital are the Ubers of insurance. Their ability to connect investors closer to the insurance customer along with their ability to package and securitize tranches of risk have shrunk capital expenses tremendously. Profit margins for reinsurers are collapsing, and new business models are shrinking the insurance stack. It is even possible today to bypass BOTH veritable insurers and reinsurers and put the capital markets in closer contact with customers. (If you are a fan of Michael Lewis and insurance, you will enjoy this article, which ties nicely into this section of the article).

In the insurtech space, VCs are actually behind the game. Alternative capital has already disrupted the space, and many of the investments that VCs are making are in the other components I have highlighted. Because of the size of this component, VCs may have already missed most of the huge returns.

Component 4 – OPERATIONS

The final component is often the one overlooked. Operations includes all of the other expenses not associated with the actual risk, backing the risk or transferring the risk from customer to capital. This component includes regulatory compliance, overhead, IT operations, real estate, product development and staff, just to name a few.

It is often overlooked because it is the least connected to actually insuring a risk, but it is vitally important to the health and viability of an insurer. Mistakes here can have major ramifications. Errors in compliance can lead to regulatory problems; errors in IT infrastructure can lead to legacy issues that become very expensive to resolve. I don’t know a single mainstream insurer that does not have a legacy infrastructure that is impinging on its ability to execute its business plan. Companies such as Majesco are building cloud-based insurance platforms seeking to solve that problem.

See also: Why AI Will Transform Insurance  

It is this component of the business model that allows an insurer to be nimble, to get products to market faster, to outpace its competitors. It’s not a component that necessarily drives financial statements in the short term, but in the long run it can be the friction that grinds everything down to a halt or not.

SUMMARY

I have presented a simple model that I use when I assess not just new insurtech companies but also new insurance products coming into the market. By breaking the insurance chain into these immutable components, I can estimate what impact the solution proposed will provide. In general, the bigger the impact and the more components a solution touches the more valuable it will be.

In future articles, I will use this model to assess the insurtech landscape. I will also use this model to assess how VCs are investing their capital and whether they are scrutinizing the opportunities as well as they should, or just falling prey to the fear of missing out.

Originally published at www.insnerds.com,

Keen Insights on Customer Experience

The need to improve customers’ experiences in interacting with insurers strikes me as so acute that I’m going to take a shot at the issue here, even though we’ve been hitting it hard in a series of articles from Capgemini and Salesforce over the past month. (The articles are here, here, here and here, and a related white paper is here.)

I want to share what I found to be some keen insights from a webinar I hosted last week with executives from the two companies and with Donna Peeples, a member of our advisory board who was the chief customer experience officer at AIG and who is currently the chief engagement officer at Motivated, a consultancy she founded to help improve experiences.

The basis argument goes like this: Customer ratings of their dealings with insurers are bad and getting worse, putting hundreds of billions of dollars of premiums at risk. Insurers need to solve the problems and even find ways to start delighting customers. Technology must play a huge role.

But a lot lies behind that straightforward argument, and a lot of art, as well as science, needs to be applied to the problem. Thus the insights from the webinar, whose panelists, in addition to Peeples, were Nigel Walsh, vice president, insurance, at CapGemini, and Jeffery To, senior director, insurance, at Salesforce.

The insights are too long to fit on bumper stickers but are still plenty pithy and deserve careful thought.

The Problem

Peeples:

“Let’s face facts. Who really gets excited about buying insurance? It’s just not that much fun.”

“We think of claims as our product, when in actuality peace of mind is really our product.”

To: 

“There’s $400 billion in premiums across P&C and life that is at stake. That’s because 70% of policyholders are making renewal decisions in the next 12 months.”

“You lose, not just the customer for that one policy, but you lose the lifetime value of that customer.… The second thing that insurers will suffer from when a customer leaves is brand erosion, because in this day and age, with social media and mobile and so forth, bad news travels fast.”

Walsh:

“Insurers get compared to every other retail product or retail approach that consumers make. More often than not, of course, those are retail purchases that you make. They’re joyful, they’re delightful, they’re exciting.”

What Customers Want

Walsh:

“GAFA — or Google, Amazon, Facebook, Apple: If I could describe the ideal experience every one of us wants, we almost want data like Google have it, supply chain like Amazon have it, a community like Facebook have and a brand like Apple….This whole concept of GAFA to me gives you the ideal framework for what a great experience would look like.”

The Key Words to Focus On 

Walsh:

Convenience: “Let me pick on Amazon and Amazon Prime, specifically. I’m still in awe that someone turns up on Sunday morning, first thing, with my package I ordered the day before, and it’s just there…. The speed at which they operate and are able to fulfill those things, we need to apply that to a claims scenario or a mid-term adjustment.”

Relevance: “We need to be relevant to customers time and time again, as opposed to approaches that we do once a year or at certain points in the year….Day in, day out. ADT and Nest is an example about how you become relevant to your customer by doing more than just insurance.”

To:

Seamlessness: “Customers are expecting the Apple-like experience….You want to provide that effortless experience to policyholders across all phases in their journey.”

Stickiness: “If you can provide agents and brokers with the latest product updates, support and expertise with the same ease as in a community like Facebook, you’re creating loyalty and stickiness.”

Integrated: “Insurers have grown through acquisitions….I’ve worked with insurers who’ve got hundreds of different legacy systems, back-office claims, policy billing systems that they have to deal with, and you can’t achieve a true single view of a customer without integrating all of these various pieces.”

The Solution 

Peeples:  

“Always start with the people. We have to stop thinking about sorting data, and we have to start thinking about beating hearts.”

“We all talk about busting silos, but silos are like cockroaches. They’re going to outlive us all.”

“How do you think about those verticals where we all take such good care of the customer and say we own them, when in fact we’re all just caregivers for a certain amount of time along that customer’s journey? The elegance, or lack thereof, of those hand-offs is where I would also focus.”

To:

“If I’m a service agent or a sales agent, regardless of what device I’m using, whether it’s a desktop or a mobile device, I want a single view of that policyholder that pulls together things like claims history, policy changes, interaction history, and add all of that in addition to policyholder profile information…. If I’m a life provider, it’s important for me to know who the spouse and the children are because they could be potential dependents or beneficiaries. Tying all these pieces together requires more than just a unified front-end user experience. You need to actually unify the underlying pieces.”

Walsh:

“[The three most important areas for focus are] connecting elegantly, engaging regularly and seeing completely.”

“Engaging regularly is actually a tough challenge for insurance organizations because ultimately, why would I want to talk to my insurance provider unless it’s a time of crisis? …There are some great examples, from the connected car, the connected home, the connected self, where we can actually regularly engage with each of our individuals that we want to market to and talk to. That’s really, really key.”

“Millennials want to connect the way that says, “We actually have no clue what we’ve bought. We’re worried about what we’ve bought. Therefore, can we speak to someone that’s going to give me the assurance and confidence and walk me through the process?”

Peeples:

“The call center folks generally, not always, are some of the lowest-compensated. Maybe some of the least-trained. But they still represent the brand every single day as surely as the senior executives when they’re speaking on analyst calls or to Wall Street. Those people are really where the rubber hits the road. If you haven’t gone out and stood in the retail locations and seen the interactions, if you haven’t sat at the caller processing centers… these are the warriors of your brand and of your company.”

“There was a study that was conducted around call centers that found that, in 2013, the average number of screens that a CSR would have to pull up to get to what you and I as a customer would think is a relatively simple answer, was five. That number jumped in 2014 to seven…. I would encourage just a very thoughtful process around connecting those systems.”

“We have to recognize that we no longer have the benefit and control of a monologue at the customers or stakeholders. It’s no longer ‘word of mouth’; it’s a ‘world of mouth’ out there.”

“We talk a lot about the customer’s journey, but there’s also equally as important an employee journey that creates this double helix that is the corporate DNA.”

Walsh:

“You can actually break the problem down into some quick hits. We’ve got some clients that launch products in 30 to 40 days. I say that to most people, and they almost fall of their chair because the usual time for these things is six, 12, 18 months….You need to tweak it, or it’s going to fail. But with modern technology at least you can try and prove it and move it into a full rollout or move on to a different thing.”

Peeples:

“We need to listen to our customers, get out of our focus group of one, out of our own head.”

To:

“It simply will not work to turn to the predefined business process maps that you’ve done in the past. Don’t turn to those. Think first about the customer and agent experience, what their goals are, and design the customer experience around those goals. Don’t pave the cow path.”

“Rationalize. Make those tough decisions about what systems that you have in your spaghetti factory of legacy systems, which ones of them are strategic and which ones are you going to sunset.”

“Unify. Before you can even take the first few steps toward actually deploying or designing, you need to get basic blocking and tackling stuff done, like governance. Like having a common data model in place so that everyone agrees on what the data is, how it’s defined and where it’s going to come from. Unify the visions across the various levels in the organization.”

“You want to be able to measure your results. At the end of the development and after we’ve let it run for a little while, have we met our objectives?”

“Before problems even arise, you want to be so in tune with where that policyholder is in their interactions with you or in their life events that you are able to actually provide value-adding services and information before it even has to be requested.”

Walsh:

“Think big, start small, act quickly.”

“The cross sale, up sale is a constant, constant challenge. Most companies that I work with right now have an average of 1 to 1.1 products per customer. Best in class will tell you that it’s probably 3 products per customer. What’s the route for 1 or 1.1 to 3?”

Final Words

Walsh:

“Believe me, it’s absolutely possible to do some crazy things out there.”

Peeples:

“Let’s be honest here, we talk about hearts and minds, but it’s really about hearts, minds and wallets.”

“By the numbers, 55% of our customers tell us that they would pay more for guaranteed better service, and 82% of our customers would buy more from us if we just made it easier for them. 89% of our customers said that they would quit doing business with us after a bad experience.”

“Stop thinking about transactions and start thinking about relationships. Whether they’re customers or they’re employees or they’re part of the bigger universe of stakeholders including the intermediaries and the legislators and the regulators, it’s about the people.”

“Always keep the people in mind. Be data-informed and technology-enabled, but always think about the people.”

To hear the full webinar, click here. To see the slides, click here. If you want the full transcript, email me at paul@insurancethoughtleadership.com.

How Google, Amazon May Lead Disruption

In response to a great piece here by Barry Rabkin, I have a strong opinion. That doesn’t mean to say I’m right here, but I’m reflecting all the customers and partners I have spoken to at length on this topic over the last many months.

Barry, really interesting piece. I hear this question nearly every day, about whether Google, Amazon and other tech giants will enter the insurance business. I have heard this nearly every day for the last 24 months now, maybe longer. This question won’t go away and will continue to spark ideas and pique the interest of individuals and boardrooms up and down the country, fearful for the large, digital, (perceived) nimble enterprises that could engulf them in a swift clean swipe.

I think if you break the question down further — to personal and commercial lines — the story may evolve even further. Take the small and medium-sized enterprise (SME) side, particularity the S part of this. These organizations (and I include our traditional carriers here) have an ideal opportunity to further leverage what they do so well today, but, as you point out, it’s well known what they do and how to imitate or improve on that.

While I agree with you that Google, Amazon, et al. are highly unlikely to become direct insurers themselves, they are already heavily involved in the insurance value chain as creators and orchestrators of data. These organizations are data companies, and we are an industry of risk-based data. We have some good examples already of Google in the U.S. providing advanced weather data and subsequently crop insurance. In the UK, Google has an insurance price comparison site, albeit loss-making at present – however, don’t let this fool us.

These are the guys who help create the data, the Internet of things (IoT), Internet of customers or Internet of everything (whatever today’s buzz word is) — from your mobile location (Nexus, Android), your home (Nest, Google TV), your location (driverless cars, maps, Android), your health (wearables) and so much more! This volume of data on us as individuals has immense value and power in the right hands to reduce the inconvenience in our everyday lives.

However, what if Google and Amazon were to partner in the same way they do with hardware providers for mobiles and other devices with a re-insurer, not having to worry about the things you clearly highlight and instead focus on the one thing they do well – the customer (Google), the supply chain (Amazon), the experience (Apple) and the community (Facebook)? You would have a very powerful story! (Queue scary music!)

What if this community were to all club together with the digital networks and relationships that exist today? It could use the platforms these giants have created to break down the sequence and focus on the parts they truly dominate in, disrupting the very tenants that have formed the backbone of this industry for decades. The worrying situation here, therefore, would mean the traditional product manufacturer is further removed again from creating and maintaining customer and brand loyalty. We simply disappear into a land of brand unknowns.

The only thing I would add to your list would be there are two customers here – our customers and our shareholders — and we have a clear obligation to both.

I think they could be here anytime they want; however, like you, I don’t believe it will be anytime soon. In my view, they will only enter when our margins are good enough or theirs are bad enough.

Just don’t rule out the partnerships or consortiums on the personal lines side. It will be a harder debate in the complex commercial world.

Disruption is coming!