Tag Archives: startups

How Startups Will Save Insurance

Digital disruption used to be seen by insurance industry watchers as an existential threat to the sector. That argument no longer applies. Today, there’s no argument that the insurance needs digitalization to secure its future. 

Across the financial services sector, companies are being re-defined by their clients’ needs.

It’s what happened with banks. They were driven to embrace fintech because of the speed of innovation required, and what their customers were experiencing elsewhere, particularly in the retail sphere. In the same way, insurers (and brokers) are looking to insurtech for answers.

Actually, the insurance industry doesn’t have a choice, with insurance spending as a percentage of GDP declining over the course of the last two decades. The industry’s share of GDP has declined from a high of 7.5% in 2002 to 6.1% in 2017 (source: Swiss Re Sigma Explorer Dataset 2019).

This is happening in part due to an increase in the world’s population and disproportional prosperity growth in emerging markets, creating more consumers who need to protect their property and families. Meanwhile, value is changing in the corporate rankings, where businesses with high-value intangible assets, like Google, Alibaba or Apple, have overtaken companies trading in more tangible products.

It all points to a need for risk management and for the insurance industry to drive innovation and its relevance – especially during a period of great change. Arguably, the incumbent market simply should be innovating at a quicker pace to meet the evolving needs of its client base and its stakeholders.

Many clients today have unmet risk transfer needs, related to intellectual property, the gig worker economy, cyber threats, pandemic or climate, for example. We as an industry need to acknowledge these differences across traditional and emerging markets, tangible and intangible assets, and deliver a differentiated approach in our increasingly connected world.

Meanwhile, the entire sector – brokers and insurers – has been making healthy profits. This combination of an inverted innovation curve and profit pool has proved to be irresistible to entrepreneurs.

See also: Will COVID-19 Disrupt Insurtech?  

Incumbents’ fears around digital disruption are misplaced, however. After all, when the fintech wave hit the banking sector, it didn’t knock out the big players like JPMorgan Chase, Bank of America and Citi. They retained their positions because they took the best of innovation and applied it.

In a similar way, the insurance industry can and will adapt to the direction of change in the use of technology-enabled platforms.

The insurance industry has to incorporate digital distribution and automation in underwriting, the intersection of data science and actuarial science, to design modern underwriting models and create larger pools of insurable risk in ways that insurers remain profitable covering them.

Common ground with clients

Our clients themselves are looking for innovative solutions, so we have common ground. For example, new technology in trucks now allows for user-based analysis of driving behavior. Aon Affinity partnered with CarrierHQ to roll out a new motor insurance program that applies third-party data, real-time driving analytics and a proprietary rating algorithm to score each driver in a fleet of 20 or fewer trucks. Premiums are adjusted monthly for each truck based on the driver scores. To power this behind the scenes, Aon partnered with Instec to enhance the customer experience for small fleet trucking while improving underwriting results for the insurers.

By using our data analytics and insight, we can design technology-enabled platforms for all kinds of business, big and small. It’s why Aon acquired Coverwallet, the leading digital insurance platform for small and medium-sized businesses. 

The evolution is unstoppable because innovation benefits both the insurance markets and the underlying consumer. 

Even pacesetters like Amazon and Uber continue to be defined by their clients and appreciation of the transparency and convenience these platforms afford them.

See also: Time to Retire the Term ‘Insurtech’?  

To meet the needs of a changing consumer, incumbent businesses – including insurers – need to be client-driven and data-centric to embrace innovation and better network among themselves.

But crucially, everyone needs to stay safe in a dynamic environment heightened by cyber risk, global pandemics and climate change, a problem that insurtech is helping resolve to the benefit of both insurers and insureds.

How Startups Disrupt Health Insurance

It’s no secret that the healthcare system is a mess. When was the last time you went to the doctor and knew how much you would pay for your treatment? Probably never.

It isn’t just a mess for patients. Employers, hospitals and brokers are all suffering from the same dilemma. So should we just keep accepting it?

Unfortunately, there isn’t just one problem to fix. Even just identifying the underlying issues can be challenging, and this allows the chaos to continue.

The Falling Benefits and Rising Costs Challenge

While HR departments everywhere try to tackle the problem, it continues to reign. Here are some stats:

  • A 7% annual increase means costs double every 10 years.
  • A 15% annual increase means costs quadruple every 10 years.

This isn’t sustainable for any business. Employers are already contributing a huge percentage of spending on healthcare, and most won’t be able to sustain themselves with rapidly increasing costs.

See also: Insurance: On the Cusp of Disruption  

Fortunately, this is where startups are stepping in to help fix healthcare. Here’s how they are doing it.

Providing More Transparency

This is a top priority among many startups. Imagine if you could walk into your next doctor’s appointment already knowing what the price is going to be.

What? That’s crazy!

Well, there is actually a startup that does allow you to walk into your appointment knowing what the cost will be.

How does this affect you? Now patients are able to better budget for their healthcare expenses. You no longer will be wondering what kinds of bills will come in the mail six months from now.

This startup would also affect hospitals. When patients are able to accurately budget for medical costs, hospitals will have fewer accounts receivable. When a larger percentage of patients can pay their medical bills, this can result in lower prices and better care because there is a larger percentage of the population paying for their treatments.

Fewer Interactions Between Provider and Payer

One of the reasons transparency is very difficult to attain is the numerous third-party interactions that provide little to no value.

Health insurance isn’t a typical transaction. In most other service industries, the payer selects a product or service and then pays a price directly to the provider that has been agreed on by the two parties.

In health insurance, a web of people lie between the patient and provider who each get a cut. This increases costs dramatically and is responsible for a number of transparency issues.

What many health insurance startups are doing is creating a transaction closer to what we experience with any other product or service. While there are times when a third is party necessary, communicating directly with the payer and provider drastically decreases costs.

More Efficient Processes

Another massive problem with the standard health insurance process is slow and inefficient processes.

Fortunately, most startups are investing in modern technologies, like cloud computing and data sharing, that allow easier access to documents and drastically shorter processing times. Processes that used to take weeks can now be done in hours.

This also helps employers because the onboarding process with most health insurance startups is drastically (sometimes up to 75%!) shorter. This allows for companies to move faster and implement savings faster.

See also: Who Will Win: Startups or Carriers?  

The fewer hours that HR has to spend on implementation, the more hours they can win back so they can do more important work for the company.

The Future of Healthcare

While we still have a long way to go, startups are finally beginning to unravel the mess of health insurance complexity.

We see a future of healthcare where the patients and providers are back in control and better communication and transparency are a norm.

How Incumbents Can Smother Startups

One of the most fun and inspiring endeavors I’ve undertaken in my post-corporate life has been to advise select early-stage companies, portfolio managers and accelerators.

Startups need lots of marketing advice, especially early on when there may not be a CMO on board. As a result, my work often involves defining audience targeting strategy and the value proposition (from the buyer’s perspective), building the messaging framework and then spending lots of time advising on how to navigate the corporate gauntlet.

The problem is, even with a well-defined marketing, communications and sales strategy, a startup at the pre-seed, seed or even A-round stages may not have the endurance to make it through the corporate gauntlet.  The effort is just too complex and time-consuming given the demands and limitations on a young company’s talent and the sensitivity to monthly cash burn.

You may say, well, the startup world is a bit Darwinian.  Only the fittest survive, and that is to be expected.

My bet is that while most everyone at work in the corporate world acknowledges their own bureaucracies, too few act on the recognition that their people, policies, and processes can absolutely affect startups’ survival, which, in turn, hurts enterprise efforts to transform and innovate. Those in the corporate world pay a price for killing or weakening these innovators, who are a source of new capabilities that established companies are unlikely to create on their own.

Corporate leaders can do something about it – if they can summon the leadership, courage and tenacity to do so.

What exactly is happening?

Here’s a sampling of what I see founders run into, once the introduction is made and there is an expression of interest to learn more.

First, a couple of months pass to get a meeting on the calendar, and to take place with at least some of the right people in attendance.

See also: How Startups Win Customers’​ Hearts  
The conversation after the presentation and demo moves to: “We love this tech, and it would do a lot for our organization…”

Yet, within a couple of follow-up meetings, phone-calls and other internal introductions, the conversation switches over to one of many variations on the big “but” …

  • But we have too many priorities.”
  • But we have to pick our battles with [fill in the blank – procurement, compliance, information security, et al.]
  • But we have so many open roles that there is no one here to lead the pilot.”
  • But we cannot get the support in ‘the business’; they are just focused on this quarter’s sales.”
  • But it turns out we already do this or can do it ourselves.” [This is often untrue.]

These are real quotes from real conversations with well-paid, smart and accomplished corporate managers who get the reality of declining customer franchises, diminished brand commitment, new and unbounded competitors, legacy distribution, etc. Some of them are actually – yes – digital natives, and all are at least digitally enlightened.

I wonder, are they simply beaten down? Are they afraid? Do they define their roles as being great at repeating how things have always been done, and not deviating too much? Or are they trapped inside a legacy mindset, an outmoded idea of the value of speed (no, you cannot expect the world to wait for your annual planning cycle), and higher internal hurdles for getting approval to do new stuff than to maintain the status quo?

There are common characteristics inside large enterprises where the future is being advanced with meaningful adoption of some of the imaginative business models, offerings and technologies developed by startups:

  • Leaders are allowing the processes, policies and procedures that are fit for the purpose of innovating to co-exist alongside those that are essential to sustaining earnings predictability.
  • Leaders are willing to try new things and know that failure is a natural and expected part of experimentation.
  • Leaders are speaking up and advocating for policy and process change and holding themselves and their people accountable for delivering the short term while also taking steps to the future.
  • Leaders are developing their people, ensuring collaboration and diversity through action not just talk and having their people’s backs when they take risks.

See also: Who Will Win: Startups or Carriers?  

Startups are discouraged by enterprise relationship opportunities where the pace and bureaucracy are simply too slow and complex to be practical when they have to demonstrate milestones every month to their investors.

Is your company or another one you know of missing out as a result? Do you believe something can be done to change?

Marrying Incumbents and Startups (Part 1)

This article is based on a keynote speech, “Disruptive Leadership,” at the World Forum Disrupt, Strategy & Innovation Conference in New York City.

The pace of change we are experiencing today is as slow as it is going to get for the rest of our lives. Everyone talks about disruption: digitalization, automation, virtual reality, artificial intelligence, big data.

The corporate world is polarized at the moment. Companies today sometimes feel that they must choose between flexibility, on the one hand, and the stability, on the other.

There is a lot of talk about agility as a way to bridge the gap between the startups and the industry incumbents. According to McKinsey, “Truly agile organizations learn to be both stable (resilient, reliable and efficient) and dynamic (fast, nimble and adaptive).”

Disruptive leaders are the ones who can stand in the middle – the ones able to speak both the language of the legacy world and the language of the startup world. They stand in the sweet spot between rapid change and rigid stability. In fact, disruptive leadership is the single most important ingredient of agile organizations.

Disruptive leadership is not reserved for tech and innovation departments only. It is about changing the organization’s DNA, instead.

Through my work over the past decade, I have been observing highly effective leaders, and, as a result, I came up with five main pillars of disruptive leadership. I will cover three here and follow up a second article that has the final two, plus a conclusion.

1. Past — Future

Startup leaders ask: How could we do it tomorrow? Legacy leaders ask: How have we done it so far?

Disruptive leaders ask: How might we do it today so that we bridge the gap between yesterday and tomorrow?

Disruptive leaders are able to keep one eye on the present and the other on the future. They know that, to successfully lead a disruption, they need to keep the significant part of their existing operations stable. They also understand, however, that experimentation is crucial to be future-ready. Balancing these two conflicting goals is not easy. There are not a lot of leaders who can do this. It’s a missing skill in the market.

See also: InsurTech Forces Industry to Rethink  

Some traditional companies try to bridge the skills gap by hiring leaders from the startup world, which often fails. Why? Because they often don’t pay the necessary respect to the existing culture and the existing business model. They are great at innovation, but they are often not adequately skilled to balance stability with change.

Reflect: How much time are you carving out in your day to think about where the future is headed?

2. Limited — Unlimited

Limited vs. Unlimited thinking is closely related to the previous point. Our past and our present are mere indications of what is possible. Truly unlimited potential lies in the future.

Disruptive leaders create an appealing vision by thinking in an unlimited manner and are then able to tie it back to reality and find ways to make it happen.

Startup leaders focus on closing the so-called opportunity gap – the gap between the way things are and the way they could be. Legacy leaders focus on closing the performance gap – the gap between the way things are and the way they should be. Disruptive leaders focus on both. They aim to make improvements to the existing product or service (performance gap), while at the same time challenging whether that product or service is relevant any more (opportunity gap).

Reflect: What can you do to move from limited thinking to unlimited thinking both in relation to your company and for your career in general?

3.  Internal — External

Legacy leaders have an internal focus: How have we done it so far, and what is it that we are strong at, that we want to offer to our clients in the future? Startup leaders are extremely client-focused, on the other hand; they are great at listening and designing a business that meets their clients’ needs. As usual, a disruptive leader is the one who can do both – honor the legacy and the strengths of the company, while keeping another eye on the external world: clients, competitors, new entrants, emerging risks.

See also: Industry Demands an Open Ecosystem  

Disruptive leaders keep a close eye on all the players up and down the value chain because they understand that clients of today may be competitors of tomorrow, and vice versa.

Value chain disruption is becoming more prominent, so keeping an eye out on the external developments is critical.

Reflect: How much of your time are you carving out to observe the market and understand the developments up and down your value chain?

How Startups Win Customers’​ Hearts

Customer service is undoubtedly important to the modern, connected consumer. The chief differentiator between legacy carriers and the new breed of agile, digital-native insurtechs lies in the superior, efficient and omnichannel customer experience the latter are able to provide. The rapid rise of companies like Lemonade has shown the benefits that personalized offerings can produce.

While 2018 saw many legacy carriers conduct a host of pilot initiatives aimed at improving the customer experience, there is an imperative on the rest to act now in delivering interactive and personalized products, communications and experiences.

Based on a 2019 Insurance Nexus survey, insurance executives firmly believe that customer experience will see the biggest impact from the implementation of AI. While there are many barriers for carriers to effectively leverage AI (data organization, lack of technical expertise and ever-increasing regulation, to name but a few), its potential for winning and retaining customers in the future is now beyond doubt.

The survey found, among other things, that:

–85% of the executives expect to increase their investment in artificial intelligence this year.

–30% see the biggest impact on customer service, while 26% expect the biggest changes in claims.

–76% expect their personal roles to be transformed by AI.

–52% see AI as integral to one of their company’s top three strategies.

Three carriers who are making great strides in the successful deployment of AI-driven personalized services will join Insurance Nexus for a webinar, “Create Customer Value with AI + Innovation: Personalize Insurance to Win Customers Hearts,” on Jan. 30. You can register here to attend live or to have the recording sent to you afterward. Moderator Stephen Applebaum, managing partner, Insurance Solutions Group, will be joined by: Thomas Sheffield, QBE senior vice president and head of specialty claims; Nicolette de Guia, Allstate head of consumer innovation and design, Allstate Digital Ventures; and Bilal Parviz, Arch Mortgage Insurance vice president of product development. They will explore the approaches carriers are successfully deploying to create valuable customer experiences driven by AI, including: how to move from low-touch to automated underwriting; how to let customers own their claims journey; and how to completely understand your customer.