How traditional insurance carriers can play along with InsurTech while being true to themselves.
Imagine that the insurance industry is really the world in Disney Pixar’s Toy Story. You are Woody Insurance. As a traditional carrier, you have ruled the roosts for decades. You have had your customers’ backs through thick and thin. You are their absolute favorite insurer. They would never choose someone else, no matter how shiny and new, over you.
Until there’s a new kid on the block: Buzz LightSure. He is the young, attractive startup that has heads turning. He is uninformed with all the bells and whistles. He allows groups of insurers to pool deductibles and risks. He comes with an artificial insurance agent that can find the best deals for customers based on their license plates. He even offers customers a pay-as-they-go program.
And before you know it, even your most loyal customer is jumping on Buzz LightSure’s ship.
This scenario isn’t just something out of a cartoon movie. At Centric Consulting, our full-service business consulting and technology solutions firm, we see it all the time: insurers accustomed to a 150-year-old business model are struggling to overcome a significant technological shift that is forcing them to rethink traditional paradigms. Last year alone, over $2 billion was invested in InsurTech startups. Our business and technology consultants are now tasked with helping carriers to keep up and stand out in a world that is going increasingly digital.
When it comes to incorporating InsurTech into your traditional business model, it may seem like you are reaching to “infinity and beyond.” But we can help. Our Insurance Industry Lead in Boston, Sean Sweeney, has answers to the most common questions we receive from insurers as they begin a digital journey.
What is the one thing carriers should pay attention to when it comes to InsurTech?
Carriers need to keep current not only on new technology but new business models as well. Technological changes such as Internet of Things (IoT) have proven to have game-changing impacts on carriers. A few years ago, drones were viewed as neat toys. Now they are becoming the norm for roof inspections. Similarly, startups are introducing new — and cheaper — business models that can optimize the processes that were previously thought of as: “that’s how it’s done and there is not a lot of opportunity to improve.” Carriers need to pay attention to these InsurTech innovations, and also challenge themselves to re-invent and re-look at the mundane for improvements and opportunities.
What is the biggest change InsurTech is making on the industry?
InsurTech is challenging a great industry with traditional views to innovate and try new things. The entrepreneurial spirit is infiltrating the small and large carriers that know they must innovate to improve and survive. Still, some carriers are working to identify how they can play in this space, and some are taking a more defensive approach to making sure that they are not left behind, even if they are not leading the innovation charge.
What is one change that carriers can make to keep up with the rise of InsurTech?
A change that carriers can make is to evolve company culture to be more open to new processes and innovation. Younger employees are helping to invigorate carriers by challenging the norms of today’s workplace. They will not accept what many of their parents also saw as inefficiencies. Many carriers have responded to these challenges and have set up specific departments and groups to look at InsurTech capabilities. Some have even created innovation labs. Being open to exploring the new will only lead to improvements. Even if some specific InsurTech trials don’t pan out, the process will lead to a more innovative culture.
How can insurers make this change without completely redefining their business model?
Insurers need to determine for themselves the appropriate level of change to ensure they are delivering on their core capabilities. Proof of Concepts is a good way for carriers to dip their toe in the water. Creating new entities to pursue changes to their business model can allow room to experiment while maintaining the status quo. Identifying InsurTech opportunities that are complementary to the carrier’s core competencies is also a good approach. We often work with carriers to help them manage and change their ability to innovate. Constant improvement on what they are already good at can create continued differentiation for an insurer.
InsurTech is certainly a major disruption, but it can also be a welcomed one. Just like in Toy Story, the traditional and the new can come together to overcome business challenges.
Traditional insurers can learn a lot from the modern, customer-focused approaches these startups are taking to the insurance business. At the same time, Insurtech startups can adopt the strategies that have made carriers successful for centuries. One thing that carriers do understand is risk. Striking the right balance between innovation and is critical. It is time for them all to play together.
But we know change can be daunting. Our 800 consultants at Centric, especially those in Boston, are always helping clients navigate change. In fact, Boston has been identified as the city best prepared to take advantage of the Digital Economy by the US Chamber of Commerce.
Our Centric Boston team brings that same enthusiasm for innovation while positively influencing the people around us. Whether you are at the beginning of your transformation, need help navigating cultural change within your business model, or simply want to know more about InsurTech, you’ve got a friend in us.
We can assist with enabling that innovation change, developing a digital presence, modernizing your systems, building analytical data models, developing marketing automation capabilities, or responding to digital threats. Maybe you’re a Woody. Maybe you’re a Buzz. Either way, we can help turn your ideas into reality.