Tag Archives: taxi

Digital Is Not Enough; Nor Is Paperless

The service of risk management within insurance companies needs to innovate. Today, a small fraction of commercial customers take advantage of risk management services provided by insurance agencies. And insurance companies are fine with this, as they have limited supply — or people — that can provide risk management services.

But what if the same high level of risk management services could be offered to all customers of an insurance company?

How would an insurance company go about offering widespread, and high-quality, risk management services?

The Solution to Better Risk Management Is Your People (Plus Technology)

Insurance agencies currently engaged in risk management services have a distinct advantage: the accumulated knowledge of its people that provide contract reviews for customers.

I had this epiphany as I was reading through a slidedeck titled “Innovation is almost impossible for older companies,” which states:

“People have acquired skills that, at moments, have given significant advantages to companies in order to prosper.”

Insurance agencies now must figure out how to harness the risk management skills of its people in new ways. The alternative is scary for my insurance professional friends, because someone else — someone with new technology and a new supply of risk management knowledge — will figure it out instead. Insurance companies could quickly be out-innovated, as occurred to the taxi industry.

For some time, the taxi industry had skills that allowed it to prosper. Taxi companies used technology and money to set up phone numbers that could be called to request a ride; these companies also stockpiled just enough cars and drivers to meet the minimum level of demand. But then Uber came along and created a better technology that connected riders to a different (and bigger) pool of drivers. The taxi industry got out-innovated.

Insurance agencies are composed of people who have acquired risk management skills. My friends in the industry can review contracts with the best of them. But each of them has a limited capacity to complete contract reviews based on hours in the day. So not all customers get risk management services (either because they don’t know about them or don’t want to pay for them).

A technology will come along that will expand the supply of risk management services. One insurance consultant thinks that technology will be a computer avatar that analyzes and predicts risks independently.

I think the idea of an independently functioning risk management avatar is misguided. I am reminded of a quote from Zero to One, written by the founder of Paypal, Peter Thiel:

“Better technology in law, medicine and education won’t replace professionals; it will allow them to do even more.”

Better Technology Will Allow Insurance Professionals to Do More

I continue to be drawn to the word “collaboration” as I envision the future of insurance technology. Recently, I spent time evaluating software solutions in the insurance industry. All of the solutions I reviewed are focused on step one, what I call “Make it Digital.” Only within the last five to 10 years have insurance carriers and agencies gone paperless, and the insurance software companies are filling this need.

Digital is not enough. Paperless is not enough. Insurance technology must connect people and the knowledge that they create. Don’t think about just connecting to your customers. Think about connecting your team.

Imagine if your entire risk management team could work as a living, breathing entity to assess and evaluate risk. When Agent Jim in Kansas City has a question about liquidated damages in Texas, he should be able to quickly identify work completed by Agent Bob in Dallas dealing with this exact issue. He can then evaluate the work and bring Bob in on any follow-up questions.

I have yet to find an insurance carrier or agency that has figured this out.

This is where the opportunity lies in insurance technology: collaboration.

Is Uber Already in the Crosshairs?

The CEO of a large insurance company once confided to me that the toughest innovation challenge he faced was that, “Every time we try to innovate, the agents turn around and kick us in the nuts.”

The dance between Uber and Google around drone taxis reminds me of that conversation. Google invested in Uber in 2013 but has recently distanced itself from Uber amid indications that it is considering offering its own ride-hailing service using driverless cars. While such a service might make sense for Google and might be the way of the future, imagine how Uber’s drivers will react if Uber attempts the transition to driverless cars.

Both the insurance CEO and his agents knew that the most innovative thing his company could do was to eliminate the agents as middlemen between him and his customers. This insurer was paying about 15% of its premiums to agents in commissions and bonuses. Eliminating agents would have translated into lower expenses for the insurer and lower premiums for customers. GEICO, for example, pays no agent commissions. It takes advantage of its structural cost advantage to out-market and out-price its agent-based competitors.

The problem was that this insurer depended on its agents. Going from agent-mediated sales to no agents was fraught with danger.

Sometime in the future, whether five, 10 or 15 years from now, Uber will confront a similar predicament as it confronts the adoption of drone taxis.

Fully autonomous cars will enable Uber-quality service at much lower prices — and at a fraction of the cost of car ownership. The only difference is that there will be no human drivers.

Drone taxis are an opportunity that Uber has long foreseen. It was likely a part of the calculation for accepting Google’s $258 million investment in 2013Travis Kalanick, Uber’s CEO, was clear about the opportunity when he told a technology conference in 2014 that:
“The Uber experience is expensive because it’s not just the car but the other dude in the car. When there’s no other dude in the car, the cost [of taking an Uber] gets cheaper than owning a vehicle.”

And, as I discussed I a recent column, Uber just put a lot of money behind that vision. So, by the time driverless cars become viable, Uber will have had a hand in its development for a long time.

But here’s the rub. By that time, Uber will no longer be a feisty startup with nothing to protect. It will most likely be a highly profitable and richly valued public company. It will be servicing millions of customers in thousands of cities across hundreds of countries all around the world. And its success will depend on the allegiance of hundreds of thousands of independent human drivers.

As with insurance agents’ power over the aforementioned CEO, drivers will have tremendous leverage over Uber. Will Uber drivers accept a drone option on the Uber app? No.

It is easy to imagine work stoppages and mass defections to competitors that promise not to offer drones. It is also easy to imagine intense campaigns by drivers and third parties to save drivers’ jobs and livelihoods. Uber will find itself at the very uncomfortable heart of the technology vs. jobs debate.

Will Uber management have the audacity to risk changing Uber’s business model? Could Uber weather the bad publicity and potential disruption to its revenue and profits? Would its board and investors allow management to put the company at risk?

Uber will be in much the same position that Kodak found itself with digital photography. Kodak had the foresight to invest in research that yielded many of the core inventions enabling digital photography. Yet it struggled for decades to capitalize on those inventions — even as digital photography inexorably replaced film-based photography.

Kodak failed even though it had immense resources, technical expertise and management talent. It failed because it could never negotiate the business model transition to digital photography. If you had a very profitable and dominant film, chemical and paper business, when would you choose to accelerate its demise? Kodak management stuck with film until the company’s early advantages in digital photography no longer mattered.

The iconic “Kodak moment” used to conjure up images of heart-warming pictures. It now symbolizes companies grappling with complete and utter technology disruption.

Uber will no doubt have all the prerequisite resources, technical expertise and management talent to fully comprehend the strategic implications of driverless cars. Like Kodak, it will have a very long time to prepare.

Do you think it will survive its Kodak moment?