Insurance is changing, whether practitioners accept this or not. It is simply the reality of an industry where many new participants are arriving, rising fast and bringing a big wake of change along with them. Those companies that cannot swim with this tide will, as Bob Dylan famously sang, sink like a stone.
The most telling sign of the trend is not hidden in a report or a conference speech. It’s called Policy 2.0, a daring pronouncement made by insurtech startup darling Lemonade last year. In a controversial blog post, Lemonade attacked traditional insurance policies and argued for a new approach. The problems it identified should be familiar to many industry professionals.
Too much paper in the process, too many people involved, no clarity on where premiums go, slow speed of claims payment and too much legalese in contracts were some consumer-facing issues. Then some hurt the industry itself: also among the items listed are high customer acquisition costs, flexibility in policy contracts after issuance and being able to sell policies anywhere.
None of these problems are controversial, but many took umbrage with Lemonade’s plans to address these. Yet no matter where you stand in the debate, the message is clear: insurance’s stable days are over, at least for now, as new companies with new technologies can radically challenge the status quo.
“Companies that I speak to often look at technology to improve their operations, but they still believe they will remain in control no matter what happens,” says Riaan Bekker, Force Solutions Manager at thryve. “But the fact that a startup such as Lemonade can cause such a furore over policy direction should be an eye-opener. There are clearly new players at the table, they are building a lot of clout, and it’s technology that helps put them there.”
In the US market, technology adoption is already a given. According to Deloitte, 7 out of 10 carriers there use cloud-based systems to power their businesses. This is not merely to gain some new advantages, but is also motivated by hunts for efficiencies that can be fed back into competitive adjustments as well as reducing customer churn. At the head of the pack are insurers eager to start harnessing blockchain and other emerging technologies.
But clearly, there is no time to languish. Yet technology is just a means to an end. Insurers do need the best the market can offer, such as Salesforce’s integrated insurance CRM platform, but these are tools from which to deliver the real changes needed.
“What are the ingredients a successful future underwriter or broker needs?” asks Neer Rama, Force Solutions Product Manager at thryve Canada. “They must shift from a product focus to a customer focus, creating experiences and ecosystems that keep customers informed and engaged. Even a basic self-service portal can win loyalty from customers. Insurers can also better manage their data intelligence and analytics, and they can move away from being insular. Partnerships are very powerful in today’s economies, so insurers must leverage those.”
Consider that we live in a time where even banks can not only sell insurance but often have the technology to propel their services well ahead of the incumbents – and the challenge becomes clear. The insurance industry needs to start swimming as the challengers do.
This doesn’t mean they should just ape those companies. But they cannot languish, thinking the transformation is optional or inconsequential. It is very real. Lemonade was already pondering a new type of policy approach in 2016 but held back until it had the clout to make its ideas public. If a startup can go from a benign participant to a rule-changer in a mere two years, what will the next five bring? When these changes emerge, will you be prepared? Are you preparing now? The insurance challengers are already here and they are already changing everything.