Modern Insurance: To Infinity and Beyond?
At the Insurtech Hartford Symposium last November, we facilitated a workshop that challenged insurance leaders to explore the industry’s inability to move beyond its core offerings as the world around it changes.
In their own words: the insurance industry needs help. It’s not as nimble as other industries in creating new streams of revenue, deepening and extending customer relationships, and evolving with the times.
Many major carriers are well behind the technology and user experience curve. They’re failing to find new growth paths beyond what has been tried and true for years; many insurance products provide a sub-par customer experience when measured against consumer expectations set by the Big Four tech companies and other digital innovators.
If our workshop is any indication, no one knows this better than the people who work for the carriers. And they’re eager to be a part of the solution.
Opening Talk: Extending Offerings and Growth Paths
Matt Josefowicz, President of the research consultancy Novarica, gave a kick-off talk where he discussed ways that carriers might extend their offerings and growth paths beyond their traditional insurance offerings, in order to create new streams of revenue, deepen and extend customer relationships and more effectively manage risk.
He touched upon adjacent and related industries such as smart homes, smart buildings, home security, wealth and asset management, financial planning, home maintenance services and health and wellness that are natural extensions or complements to traditional insurance.
He discussed how carriers might invest in technologies such as AI, IoT and predictive modeling to help mitigate losses or stop them from happening in the first place. Taking the technology opportunity further, carriers could develop their own platforms and ecosystems. Not just for their own benefit, but for use by the wider industry and other industries as well.
Workshopping the Way to the Future
Participants were then split into three groups, each independently tasked with articulating the biggest challenges for the industry. There was a strong consensus among participants that culture and legacy thinking are the main obstacles holding the industry back. In fact, two of the three groups cited culture as the main sources of difficulty.
Culture is a challenge for insurers for the following reasons:
Institutional inertia and satisfaction with the status quo keep insurers in their comfort zones.
A reluctance to take chances—fear of failure obscures the potential for opportunity.
Customers aren’t the focus—products and services aren’t necessarily empathetic to or understanding of the customer.
The industry is currently successful (“we’re fat and happy”). See point #1.
Bonus structures and compensation hold back innovative thinking. See point #1 again.
But culture isn’t the only challenge. Much inertia occurs due to a legacy orientation.
Overcoming legacy everything is a major challenge along a number of fronts:
Technology—the literal legacy systems upon which much code has been built—are old, outdated and costly to replace, but not doing so prevents the industry from providing experiences that customers have come to expect in other aspects of their lives.
Thinking lags behind. Not because there aren’t a lot of smart people in the field—it’s because there is little corporate investment in new ways of doing things, like moving from a waterfall development process to a more Agile-focused process.
Business models aren't necessarily what consumers have come to expect from exposure to other industries and marketplaces.
Customer perception problems persist. There is the age-old problem that customers don’t trust insurers. But more than that, customers are reticent to buy insurance because:
Insurance is perceived as “a necessary evil.”
It’s one of the only products in a consumer’s world where there is no tangible product unless something goes wrong. Thus the customer experience becomes everything, and customers aren’t perceiving value other than through the claims process.
Current insurance products don’t live up to the excellent digital experiences customers have become used to in their lives and on their smartphones, like Uber, Spotify, and AirBnB.
The workshop wasn’t tasked with solving for these issues—but it’s possible to take some good guesses at what might help. The insurance industry might move toward the future by looking at cultural change from within, redirecting their focus to a more customer-centered mindset, as well as looking to other innovations in technology for inspiration.
"Carriers, your employees are eager to be the change they want to see in the insurance world."
Talk to them, talk to your customers, and talk to your boards. Find a way to integrate modern innovation techniques into your organization to move not just forward, but beyond insurance.