Tag Archives: utility

Can Insurance Become Utility, Like Electricity?

Imagine a time when oil lamps dimly lit streets. They were difficult to service — someone had to light them and put them out every day, and they required regular maintenance. Moreover, oil had a nasty tendency to catch fire during transport.

As it became possible to improve the lamps, it was difficult for oil lamp manufacturers to comprehend that what society needed was light, not a better lamp. Light with all the fundamentally wonderful things that it enabled: joy, safety and productivity.

It wasn’t lamp manufactures that brought about the revolution in electricity and electrical lighting that most of us take for granted now.

Insurech as a Catalyst for Change

What if I told you that the story of insurance resembles that of oil lamps? We are now in the age of oil lamps of insurance while electricity is being invented in our backyards. Investment into insurtech has grown exponentially since 2012, and 2016 is the year it entered the mainstream. Entrepreneurial talent powered by investment is rapidly experimenting across the whole insurance value stack and is starting to chip away at the first set of key insurance industry problems.

Power of a Utility

Over the years, insurance has evolved into the equivalent of a super complex oil lamp contraption that resorts to all kinds of complexities and tricks to address inherent structural limitations of the current insurance model. The more time I spend with insurtech startups, customers and insurers across Asia, the more I become convinced that the only way forward for insurance is for it to become a utility, akin to electricity. In fact, as a consumer you want insurance for precisely the same reasons you want electricity, as an enabler for joy, safety and productivity.

See also: InsurTech Need Not Be a Zero-Sum Game  

Furthermore, just as electricity expanded from the original purpose of lighting to power everything from our homes to internet and transportation, once basic insurance becomes a utility there’s a world of opportunities for it to improve society on a much broader scale. Think of these opportunities as apps that plug into the insurance platform, just as fridges, air-conditioning, computers, Teslas, etc. are all ultimately powered by electricity. Electricity is a super enabler, and insurance should be, too!

Insurance Journey Toward Becoming a Utility

If we take an analogy of insurance = oil lamps, we can extrapolate it to help us start imagining what the world of insurance would be if it became the equivalent of electrical lighting. It’s a journey that will take us less time than you might imagine because of the non-linear nature of progress.

Furthermore, I’ll venture to say that we’ll experience a tremendous consolidation across the insurance industry and will end up with three major utility providers per market instead of the current, fragmented landscape.

First Wave of Insurtech

The first wave of insurtech startups is already out there in the market experimenting with new tech/propositions and testing insurers’ appetite for collaboration. Broadly, there are three camps of startups:

  1. Partner with insurers to accelerate their journey toward becoming a utility (eliminating frictions and building insurance grid infrastructure);
  2. Develop applications that plug into the insurance utility grid to provide custom products both in insurance and risk prevention;
  3. Aim to outrace insurers and become utilities themselves.

I’m a big believer in the power of collaboration between startups and incumbents. Hence, I feel that the first two insurtech camps have a better shot at creating a broader impact.

At this point, most of the startups are focused on one particular technology or proposition. For insurance to become a utility and a true enabler of joy, safety and productivity it will take a few of these enablers to join up in clusters and connect to the right insurers. The heat map from Munich Re is a useful reference.

“Insurance as a utility” is the mental model that nicely summarizes all the various things happening in the nsurtech ecosystem and at a same time can act as a beacon for ecosystem players.

The Shift to Frictionless Insurance

Loic Le Meur, who many will know from Le Web Conference and his new startup, Leade.rs,, had a great interview with Alex Dayon, the president and chief product officer at salesforce.com, about how owning a car is almost obsolete. It got me thinking about our shift to utility-based living and what it means for insurance.

In a land where an Englishman’s home is his castle, the car is often seen as the next most expensive asset a person will purchase, so the move away from ownership is great.  And the car is just the start. Now, start to add bundles such as insurance, maintenance and fuel. These sorts of schemes give the best of both worlds because you get to choose what model you try. Do you want a weekend utility, something bigger for holidays away or something smaller for whizzing around town? These new levels of flexibility will absolutely become the norm.

See also: Connected Vehicles Can Improve Claims  

Many of us are used to utility today — prestige car hire, AirBnB, vacation rentals, handbagspets and so much more! The sharing economy is continuously expanding. The key changes here for me are the added convenience because of technology (think about calling a taxi 10 years ago vs. calling one today with an app) and then business models that have changed to deliver micro experiences.

Cuvva is doing the same in insurance with policies available by the hour. While that’s a brilliant idea, I’d almost argue we can get too granular sometimes. We need to be clear on what the pivot point is — it’s just different for different people in different circumstances. If you have ever been to IKEA or something like it, you often find vans in the parking lot that you can rent for an hour because you have bought more than your car can hold.

See also: Beat Brain Drain: Boost Your Talent Pool  

These sorts of schemes change the entire competitive landscape. The winners here will be those companies that provide frictionless experiences that are both relevant and convenient.

Of course, frictionless won’t be for everyone. Your choice will depend greatly on where you live (inner city, suburbs or rural areas). Some look at moving away from ownership as another bastion of losing control. That said, think about how many more hours a day you’d get back to do enjoyable or more meaningful stuff. Time is the most precious entity — period. This is the new generation; experiences far outweigh things, which, coincidentally, makes us all happier, too!

As the old saying from John Paul Getty goes, “If it appreciates, own it. If it depreciates, rent it!”

As we move further and further in this newly accepted world, insurance will form part of the experience bundle, whether you knew it was there or not. The important thing is being reassured you have it and that you have it at the right level.

As I picked up a rental car in Dublin Airport, I got a hard sell about reducing the €1,500 standard excess with better insurance for just €20 per day. While I understand why companies do this, it kind of makes me sad and gives insurance a bad name. How many take out this extra cover? Now is the time for carriers to focus on the partnership opportunities that come with renting and to come up with better approaches.

No matter what, I’m looking forward to trying lots of different cars without the hassle of owning any through new apps and business models that allow me to try things I would never be able to own.