It is 1921 and the insurance industry looks quite different than it will in a century.

Automobile policies are bound annually, and insurance risk is often spread across entire states as opposed to specific ZIP codes or census tracks. This model leaves many customers very dissatisfied, especially farmers, whose businesses—and risk profiles—are highly seasonal. These customers express, broadly, that the industry is no longer working for them.

Hearing their concerns, an entrepreneurial insurance salesman named G. J. Mecherle launches a small insurance company called State Farm in 1922 with a simple but powerful innovation: He will price and underwrite policies every six months, thereby providing coverage that adapts to the needs of the largest consumer constituency in America—farmers.

In the span of a mere 20 years, State Farm skyrockets to be the largest auto insurer in America, where it remains to this day.

Fast forward 100 years, and Americans are again expressing, broadly, that the insurance industry is no longer working for them. Every bit of research I’ve seen indicates that consumer dissatisfaction with insurance (all of it—from auto insurance to homeowners insurance to health insurance and everything in between) is high and continuing to rise.

It is easy to see why. Consumers look around to other industries and see elegantly designed products that practically read their minds. Across tech, e-commerce, media, automotive, mobile and numerous other industries, products are getting smarter, more elegant, more predictive, more personalized, more adaptive and more intuitive. But insurance seems to have not evolved at all since the inception of the Internet era, at least not in the minds of customers. They see other industries accelerating past the insurance industry and wonder, “What gives?!?!?” And they are not happy at all.

In this environment, as insurers continue to hike rates year over year, consumers are increasingly wondering what, exactly, they are getting for their money. And a “promise of protection” isn’t cutting it anymore, especially given how outdated the claims experience has become.

The industry is in dire need of innovation and evolution (if not revolution), but for some reason the disruption event that has impacted nearly every other industry has yet to impact the insurance industry. The critical question is “Why?”

In this multi-part series, we will explore the factors (cultural, technical, structural, etc.) that hold back the insurance industry from evolving and advancing like other categories have since the digital era. As someone who has worked across multiple categories (like mobile telecom, tech and insurance) as well as multiple insurance carriers, there are operating models, best practices, technical capabilities, cultural considerations and numerous other drivers that define the way other industries operate that have still not made their way to the insurance industry.

The capabilities of telecom and other industries are lacking across a critical mass of insurance carriers. The result is almost a “reverse flywheel,” creating drag and inertia that holds the whole industry back from leaping forward into a more innovative and customer-centric future.

These best practices have been proven to deliver significant top- and bottom-line value across all industries in which they’ve been adopted. They are, in short, proven methodologies. Yet many insurance companies lag behind in their adoption, and that gap is hurting profits and costing policyholders money.

To be clear, it isn’t as if, say, the mobile telecom industry has all of these capabilities in spades. But these assets are lacking in sufficient numbers across a critical mass of insurance carriers that the result amounts to an almost “reverse flywheel,” creating drag and inertia that holds the whole industry back from leaping forward into a more innovative and customer-centric future.

The industry-critical question is whether there is something intrinsic to insurance that makes these methods unworkable, or whether it is simply that insurance (as a notoriously slow-moving and backward-looking category) is just late to the game.

The even more critical question pertains to what carriers can do to catch up and realize the benefits of these “world beating” operating models so they, too, can become the winners in the digital age.

To be clear, the challenges here are numerous, and my list is not exhaustive. However, in my experience these opportunities boil down to several key areas of focus we hope to cover throughout this series:

On Culture and the Concept of “Risk.” If I had a nickel for every time an insurance professional told me, “We work in insurance…we don’t like risk,” I’d be retired on a beach somewhere. It is an ironic statement, given the fact that the whole business of insuranceis risk—assessing it, quantifying it, pricing it, underwriting it and (ultimately) accepting it.

If we, as insurance professionals, didn’t like risk, we wouldn’t have a business model.

When professionals in insurance make this statement, what they really mean is that they don’t like risks they don’t understand. But all innovation has risks that aren’t understood. That’s why it is innovation.

Getting over this mental virus is the first step.

On Customers, Customer Experience and User-Centered Design. Linked to the cultural issue is a very similar issue of customer centricity. I have had numerous senior insurance leaders tell me with straight faces that they do not believe consumer research or user design research. “Customers don’t know what they want or need,” they say.

I’ve seen insurance professionals shun the methodologies used by multitrillion-dollar companies like Apple, Google or Meta to design world-busting products because they don’t have the sample sizes of actuarial tables or because customers “don’t understand insurance.”

Learning how to properly conduct quality consumer and user research, and then properly apply those insights, is the second step in building a culture of innovation.

On Product and “Product.” Every insurer with which I’ve worked (and many with which I’ve spoken) have aspired to build a “Bay Area-Style Product Mindset,” and with good reason. The product development and management methodologies pioneered by the big tech companies are best-in-class methods for building and scaling beautiful digital products.

Those carriers then invariably place those teams within the actuarial product governance model, which crushes the agility and speed that defines the product method.

It isn’t entirely irrational or unexpected. In actuarial product management, a small error in such a highly regulated and competitive environment can literally ruin the business.

The insurer of the future would be well served by aligning a two-track method where fast-twitch teams manage digital products within the “Product Method” and slow-twitch teams operate at the speed of the regulatory environment.

Getting these teams organized appropriately is the third step in building a technologically driven insurer that can innovate with speed and precision.

On Data and AI. “Big Data,” “AI,” “Gen AI,” etc. are all buzzwords of the last decade. Insurance, as a category, has been a data-driven industry since before “Big Tech” was born. We were “big data” before “Big Data” was even a thing, much less cool.

But the insurance industry has fallen behind. The amount of data available on a consumer now vs. the data that was available 20 years ago is an order of magnitude broader and deeper. The way a Big Tech company thinks about data is very different from an insurance carrier. They get the data first, then consider how to leverage it later. By comparison, insurance carriers shun the acquisition of data that they are not currently allowed to use, legally, to price and underwrite right now.

This is unique to insurance even within the financial services category. In banking, as an example, lending companies leverage data from all around the Internet to underwrite in new and innovative ways.

How is an insurance carrier to find additional ways to better leverage data to price and underwrite risk if they don’t have the data in the first place? In the modern world, it is the equivalent of driving with both eyes closed.

Evolving the approach to data (both from a platform and access perspective) is the fourth step in the evolution of the modern carrier.

I can hear my actuarial and underwriting peers now, “Haden, the regulators won’t let us use this data, so what is the purpose?!?!?”

I have answers to this question, and innovation visions for several other topics to share, such as the nature of core technologies and systems; opportunities for insurers to go beyond insurance; the nature of climate change and the moral hazard for insurers, etc.

As we engage in the topics above, we will highlight where some of these farther-reaching opportunities impact the near term, and may even publish additional articles following this series, if you—the reader—are interested.

Lastly, and perhaps most pressingly, none of this is possible without having the right people in your organization to lead and drive it. The insurance industry has a well-known and well-documented retirement cliff coming, especially at leadership levels. And on the surface, the younger generation of upcoming professionals would seem like a natural fit for the industry. These bright-eyed young business people crave companies that help people, stand for something and do good in the world—just the kind of qualities that would seemingly resonate with the ultimate mandate of the insurance industry. However, these professionals also demand transparent and empowering work environments; they want to work on projects that change their industries (and the world) for the better; and they want to work at places they can tell their friends about and feel proud.

For all the reasons we outlined above, the current state of the insurance industry does not offer an environment conducive to the wants and needs of the professionals of the future, and if insurers do not quickly work to adapt their culture and operating model, they might soon find the halls of their offices with a dearth of qualified professionals to lead the change that is necessary in this industry.

As we unpack these subjects and others, we invite industry professionals from around the category (both in legacy carriers and in insurgent upstarts) to collaborate on any of these subjects that speak to their passions, their business models, their approach to innovation and disruption, or a combination thereof. If one of these subjects is the focus of your business or is a passion project for you, please reach out to Carrier Management or me directly and we can collaborate on the follow-up as we double click on solutions and approaches to solving these critical innovation challenges in our industry.

If the last 20 years of business has taught us anything it is that innovation, even revolutionary innovation, is possible—even in insurance. It requires a little bit of (well managed) risk, a little bit of focus, a solid understanding of your customer and your business, and a willingness to accept trying something new to benefit all involved.

The future of the insurance industry is right in front of us, and carriers big and small have the right to win that future. Those carriers who do not evolve might find themselves (like Union Automotive, the former employer of G. J. Mecherle) extinct in 100 years.

This series will help show you the way. Will you be one of the few who creates the future, or be disrupted by it?