A recent social media debate on insurance innovation was sparked by a State Farm TV ad in which the insurance giant celebrates the superiority of its thousands of human insurance agents compared to the AI-based chatbots.

Executive Summary

Two industry consultants explain why they like the message of a State Farm television commercial celebrating humanity in the insurance process and encourage other carriers to start telling their stories in support of insurance agents.

A longer version of this article appears on the LinkedIn page of one of the authors, Matteo Carbone.

Lemonade, a smart U.S. InsurTech startup, has credited itself as the target of this ad, because their marketing story is that a chatbot is just as good—if not better—than any human insurance agent. It does appear their platform needs to learn a bit more about how insurance works as AIs have regularly paid out more in claims than they’ve collected in premiums.

Many comments on various social platforms have called the commercial “the worst commercial I’ve seen,” creepy, freaky and hilarious. Many blame the insurance giant for releasing this “attack ad.” Even futurist and innovation adviser Chunka Mui has written a well-articulated censure to this ad (for Forbes, “State Farm Mocks Lemonade’s Use Of AI, Doubles Down On Human Agents—Not A Great Idea,” Oct. 24, 2018).

However, we love this ad. We hope this discussion will encourage two calls to action for insurance companies:

  1. Be proud of the way you do business.
  2. Master the art of communication.

Be Proud of Your Business Model

Let us start with the first aspect. In the past years, technology arrogance and a sort of “politically correct tech” speak have forced the storytelling of the largest insurers around the world to shyly hide that real people generate the vast majority of their business. On the other hand, these insurers celebrate any InsurTech proof of concept as evidence of their innovation, even when it has an immaterial impact on the business profit.

It seems insurance companies have felt embarrassed by their agents, brokers and other distribution partners. Most of their innovation efforts have been on solutions that in some way challenge their greatest asset: the human agent and broker.

“The last agent is already born” is a slide title we have seen at industry conferences for the last 10 years, but as of today all around the globe, the sale of P/C insurance continues to be dominated by agents and brokers (excluding a few exceptions like the retail auto business in the U.K.).

It is great news to finally see a large insurer that is very proud of its agents. We love this communication because it is not hypocritical and gives a clear message both to customers and to agents: This is the way (through agents) we do business, and this is the reason why we do it this way.

We are not celebrating or encouraging “old school” thinking. We are firm believers in insurance innovation and agree with Mui that chatbot, machine learning and AI use cases are among the technologies that will have the greatest impact on the future of the insurance sector.

However, we are also pragmatic. We want to provide a view about InsurTech that is different from the superficial mainstream. We think it is a pity to let the innovation cheerleaders—people raising their pom-poms at any PR released news but who are not able to distinguish a loss ratio from a combined ratio—guide the debate about the future of the insurance sector.

The mantra of our activities in the insurance sector around the world is “all the players in the insurance arena will be InsurTech,” meaning organizations where technology will prevail as the critical enabler for the achievement of their strategic goals. So, we believe InsurTech is much more than digital distribution.

Our view is that InsurTech is a superpower for insurers. It is a terrific enabler for performing the job of insurance in a better way—to assess, to manage and to transfer risks.

The world is full of opportunities for reinventing each step of the insurance value chain through technology and data usage. Moreover, an insurance company has a key opportunity to share these superpowers with its agents, brokers and distribution partners.

Many insurers already understand that not involving their distribution system in corporate innovation is a wasted opportunity, so these carriers have introduced technologies that can enhance the capabilities of their human intermediaries. Meanwhile, we have seen only a few players communicating effectively and consistently to support their agents and brokers. Because of this, carrier innovations are frequently perceived as threats by agents and brokers.

Insurance companies don’t need to create this kind of barrier. Maintaining this conflict only pleases the innovation cheerleaders who do not like and want to get rid of intermediaries.

Master the Art of Communication

Let’s move to the second call to action. The insurance sector has always experienced bad press and has never excelled in effective storytelling. The new generation of InsurTech startups is demonstrating the power of a consistent and modern communication strategy. The startup that started the discussion about this ad—Lemonade—is the best example of this communication ability. From our perspective, its two years of case history must be studied in marketing courses at any university. There is a lot for the current industry to learn.

They have pretended to be the good guys who will be the remedy for a broken business. This home insurance startup has positioned itself as a champion of trust. But those who dig deeper can find flaws in the logic behind the benevolent promises—like a potential charity giveback of 40 percent of premiums. (Editor’s Note: A longer version of this article available on the LinkedIn page of one of the authors of this article, Matteo Carbone, provides more detail about the authors’ perception of a discrepancy between the giveback promise and the reality. Carbone also provided a detailed analysis of the giveback in a separate article he wrote with another InsurTech analyst, Adrian Jones, “Bigger and Redder: A Look at Q1 ’18 for Lemonade, Other InsurTech Carriers,” published by Carrier Management in June 2018. A social media debate between Carbone and Lemonade CEO Daniel Schreiber is described in a June 2018 article authored by Carrier Management, “Hands Still Tied at Lemonade, CEO Says.”)

It seems clear to us that the insurance incumbents have more arguments for claiming they are the good guys, but they have to develop consistent and modern approaches to storytelling.

Following are some suggestions on next steps insurance companies can take:

  • Be proud of and support your agents, brokers and distribution partners.
  • Encourage them to be part of your innovation initiatives.
  • Develop a frictionless process to help the people who distribute your products better engage with policyholders.
  • Learn how to tell a better story—about your company and your agents, brokers and distribution partners.

What ideas do you have for helping the industry help agents and brokers better protect their clients?