I recently wrote an article for Carrier Management offering some thoughts about the possibility that an InsurTech would develop a killer app. A killer app, as its name suggests, slays the competition. I used Amazon Prime to describe the perfect assassin. Once an Amazon customer agrees to pay the annual fee for Prime membership, he or she becomes eligible for “free” shipping on many purchases. After having paid the fee, that customer needs a pretty compelling reason to order merchandise from another online vendor.
As I see it, InsurTech exists today mainly because of its ability to deliver insurance to customers through well-crafted, intuitive online portals. InsurTechs are also pairing data analytics with intelligent risk management and insurance solutions. While there are certainly other benefits and features, these two have attracted the great many venture capital dollars being poured into startups.
I consider online portals and data analytics to be powerful applications. As both economic and social transactions are increasingly managed online, InsurTech portals and the data powering them are clearly on trend. Yet, it is also clear InsurTech has not yet found its killer app. Not only are the walls of legacy carriers still standing, I don’t even see cracks.
At least, I don’t see any cracks yet. What are the chances InsurTech will find its killer app? If it does, how should legacy carriers and brokers react?
Regarding the first question, let’s pause for a moment to consider Elon Musk. Of course, these days it is hard to avoid him. While it is true he has recently made a public spectacle of himself, he has also singlehandedly put electric automobiles on the industrial map. While the electric automobile industry would exist without him, he has been largely responsible for elevating it from a sideshow to a main event.
Ted Turner served a similar function for cable television. Before he assumed leadership of TBS, cable television was a nonevent for both viewers and advertisers. Almost all channels were tuned to PBS or one of the three major networks. By the time he retired to his ranch in Montana, he had violently disrupted the broadcast television industry.
Steve Jobs, in only a few years, disrupted several industries. These include recorded music, telecommunications, radios, television, mainframe computers, minicomputers and many more.
While automobiles would have eventually clogged highways without the participation of Henry Ford, bicycle, buggy whip and carriage manufacturers would have enjoyed several more years of success had he been born with less grit and determination or chosen other industries to disrupt.
Does there exist a similar man or woman rising through the ranks of an InsurTech startup? Maybe this future disrupter is restlessly completing college course work while workshopping a killer app.
Shortly after Apple introduced the iPod, I was on a beach on Block Island, Rhode Island, with my wife and two daughters. When a young woman entered the water with her iPod encased in a waterproof container, I was struck by how this one product had created an opportunity for another manufacturer. Of course, the number of products today supporting Apple products is legion. This includes speakers, earbuds, carrying cases, screen cleaning solutions, phone chargers and so many more.
While Apple disrupted many industries, it also created opportunity for others who saw opportunity in the disruption. One particularly compelling example is Beats audio products, which was founded in 2004 by two music entrepreneurs. Ten years later, they sold the company to Apple for $3.2 billion.
What does this mean for the insurance industry?
Even should the chosen one eventually arise from within the ranks of InsurTech companies or college campuses to power this new industry to a leading position, there are many things legacy carriers and brokers will continue to do better.
Claims management, plain and simple, is not easy. It takes time and careful attention. It also requires a reassuring advocate the insured can trust. When disaster strikes, a skilled agent will still be in the best position to help an insured see his or her way to a brighter day.
Legacy carriers have also proven themselves as being highly effective at raising money in the public markets.
It is easy to say competition is healthy. It is also a bit facile. If I owned 500 shares of Prudential or AIG, then to cheer as an InsurTech startup breaks down the walls of the carrier community would be foolishness at best. If I had worked tirelessly to build up my brokerage business, rejoicing as my insureds migrate to an InsurTech platform would be a bitter exercise.
Yet, the wheels of history relentlessly turn. When they turn, people can get hurt. In a risk management business, it only makes sense to account for the presence of risk. Should InsurTech begin to establish a significant marketplace presence, legacy carriers and brokers should have already determined in advance where to identify their own advantages.
Claims management is one beachhead. Capital raise is another. The thousands of installed agents form an army. Brand identity is more than a beachhead; it is an entire continent.
The future belongs to those who prepare for it.