A Quick (No Really, Super Quick) Insuretech Primer
I wonder if anyone has ever done this.
You’re involved in a conversation with a group of peers or boss people (or other people that you’re trying to impress) and they start talking about a topic that you don’t know anything about. You let the conversation roll on, smiling and nodding, but having no idea what they’re talking about. You really hope that one of two options become available. You get enough hints so that if you have to comment, you can say something reasonably intelligent or someone helps get you out of the conversation. You really don’t want to admit that you’re clueless, but there you are.
I think that happens a lot more than we like to admit, so I’m going to come out and say it. It’s taken some time, but I finally think I have a reasonable grasp on this topic of insuretech. Sure, I’ve written a few things on the subject, but I know that I’m not an expert. In fact, I have been guilty of knowing enough about part of the topic and applying my opinions broadly (OK, too broadly). I’m almost positive that I’m not alone. I’m not looking to embarrass anyone (except maybe myself), but I think it’s time for a quick primer on the insuretech space for those of us who are late to the party and want to get caught up. There’s no need to thank me.
What is Insuretech anyway?
That’s a really good question. So let’s break it down as simply as I know how. Insuretech is a blanket term that refers to certain technological advances, and the start up companies that are creating them, that are meant to create efficiencies in the insurance industry. These efficiencies are said to be disrupting the insurance industry in every aspect.
There are insuretech companies whose focus is on the distribution channel. They are looking to create efficiencies in the ways that people purchase their insurance. You’re heard some of their names, and quite likely, this may be most of what you think about when you think about insuretech. These are companies like MetroMile, Lemonade, and Policygenius. They are looking to remove as many obstacles to insurance purchasing as they can. Some of these companies ask only one or two questions prior to offering a quote, while others are hoping to provide a customer with multiple quotes to choose from.
There are other insuretech companies that are working to make risk selection and rating a simpler and shorter process from the company side. These are names that you may not have heard of, but they include software companies like Guidewire, which provides policy administration for insurance companies. Their software can currently help a company reduce their administrative burden by auto-underwriting certain risks that meet the criteria set in the software.
Other insuretech companies are helping claims professionals to accomplish their work faster and more efficiently. One of these companies is Snapsheet, which has created several applications that allow insurance customers to take pictures of their damaged property and upload them directly to their insurance company. This allows for faster claims adjusting, which means that the insured gets paid quicker.
These are just a few examples on how insuretech companies are entering the traditional insurance space to bring us (kicking and screaming mind you) into the 21st century.
Are these companies really as disruptive as they say? What does that really mean anyway?
In short, yes, I think that overall, the insuretech space is going to be as disruptive as they think they will, but no, I don’t think that the disruption will look the way that most of them think it will. I predict that the disruption will come as insurance companies learn what their customers want and begin to absorb some of these startups. That will free up the folks that started the startups to find the next thing that we need to change and start a new startup to disrupt that part of our life. It’s the tech circle of life.
Unfortunately, they probably aren’t as disruptive as they want to be and as disruptive as their press releases tell us that they are. Are they making a difference? Yes, they are. They’ve gotten everyone’s attention. They’ve changed the market dynamics in our industry. If they continue to adapt, grow, and innovate, they have a chance to truly disrupt insurance and grow the market space that they are already occupying.
There are several different schools of thought about what it really means to be disruptive, especially in what is known as disruptive innovation. Some believe that it means that the disruption is in the creating of a new market segment that is not being properly served by the traditional market players. Some look at it from a technological standpoint where the technology changes occur so rapidly that the old market players can’t keep up because they’re too busy trying to compete in their current ways. That leaves space for new market disruptors to come in and strip market share from the old players. Eventually, the old market players are forced to get in line with the technological changes simply to survive.
There may be some truth to all of that. Here’s how I see it. Disruptive innovation appears to be a process where industry outsiders create new tools and processes (many of which the insiders refuse to believe will work) that eventually require the attention and implementation of an industry. This eventually causes a shift where the disruptor can become the establishment.
Why do you care?
If you’re in insurance, you should care. If you don’t care, it’s possible that the industry will have passed you by before you realize it. We cannot ignore the truth that our newest customers want to be served differently than their parents did. The next generation of customers will want something even more different. I don’t even want to think about the needs of my grandchildren’s generation. I’m not quite ready for that conversation.
Every technological change comes with those that think that it’ll pass and it’s just a fad. After a little while, those voices quiet down because the fad turns out to be a trend and trends can become a norm. Some change is just a fad, or an intermediate step between yesterday and tomorrow, a stop-gap innovation, if you will (I’m looking at you laserdiscs). Other changes come and stay for a long time (long in technology terms means 5-10 years).
As professionals in an industry that traces its lineage back thousands of years, we should jump on any chance to move forward and do what we do better for our customers and we shouldn’t be afraid of today or tomorrow. Besides, the good old days aren’t nearly as good as we remember them.
PS – My notes about different insuretech companies are not meant to be endorsements for their products, services, or company. I’m just giving some examples of different insuretech companies.