August 20, 2018
The Case for a Hybrid Business Model
The firm of the future needs to combine the innovative thinking of an insurtech with the experience and knowledge of a traditional insurer.
Change is a funny thing. The people who say they embrace it sound smart, for sure. But saying you embrace something and actually embracing it can be different things. The fact is, for many insurance agents and companies, the old model works. They benefit from customers’ fears and lack of knowledge. In a perverse way, if a customer is fearful or lacks sufficient knowledge, the customer becomes dependent on someone else. That dependency is satisfied by someone from the traditional insurance industry. So if you’re a traditional insurance agent or company, why change?
Name another industry where the courage to not change outpaces the courage to change. There’s probably one out there, but I can’t think of it. Fortunately for the customer, things are starting to change.
Making Customer the King
The traditional insurance model was built in a time when today’s technology didn’t exist. That’s to be expected, but the insurance industry fell further behind by failing to make the first technological leaps that most forward-thinking companies, including other financial services companies, made in response to our digital age that began years ago. I won’t talk about all those leaps, because they’re well-documented. Let’s just skip ahead to the part where the customer expects to be fully in charge.
As insurance companies updated their technology, they bolted new technology on top of their old systems, failing to meet customer expectations. In the process, companies focused inward, instead of focusing on the user interface and customer experience.
Some startups, with awesome technology acumen but little to no insurance background, have appeared over the last few years, accelerating change in the industry. Shiny new websites are beginning to make it easy for customers to get coverage in seconds, lending the same familiar and seamless online experience to insurance that customers experience when they purchase other products from their desktop, laptop or mobile device.
That’s a great step for the industry. Unfortunately, it’s not quite enough.
Something Old and Something New
While building an online experience where the customer gains knowledge and confidence to adopt a new insurance purchase experience is great, customers are also going to need confidence that, if something goes wrong, the coverage they bought will really protect them. That takes more than a user-friendly website. It takes real insurance knowledge and experience. Most, if not all, new technology providers that have built a great user interface must pass the customer on to a traditional insurance company once it’s time to provide real customer service or pay a claim. That type of handoff interrupts the customer experience and simply won’t work.
See also: The Industry Needs an Intervention
The companies that will succeed at bringing real change to the insurance industry will need a blend of sophisticated technology and insurance expertise.
Combining the innovative thinking of an insurtech with the experience and knowledge of the traditional insurance industry under one roof is rare today. But it’s this type of unique hybrid model that will become the new standard for companies that will lead the insurance industry for years to come.