Beyond product delivery – FinTech and InsurTech solutions are a means to an end

I got invited to a meeting with insurance companies from around the world, spending the day discussing technology and latest innovations in the insurance space. I came away inspired, with one precious nugget: Know thy customer.

In fact, it’s a theme that I hear from entrepreneurs across different industries: insurance, healthcare, and financial services alike. Whenever I ask entrepreneurs about the most precious lesson learned, the overwhelming response always is: you need to know the customer well.

Digitization is a must

Of course, knowing your customer is only half the battle. Regardless of demographics, consumers’ technology expectations are ever increasing. Consumers nowadays are used to being able to consume a service when they want it, where they want it, and how they want it. Going digital is no longer a nice-to-have but a must. Unfortunately, the insurance industry for the most part has not evolved much with the digital age. To purchase life insurance for example, consumers still need to have in-person meetings and fill out pages of paper work.

But that is about to change. Ladder is one of the latest US-based insurance tech startups looking to disrupt the cumbersome on-boarding experience. Not only are consumers able to get a quote via mobile, they receive coverage within minutes rather than weeks. Another interesting startup to watch is Fabric, which allows a consumer to sign up for life insurance in two minutes.

Unsurprisingly, these startups are actively targeting new parents who are typically short of time but anxious to secure insurance for their families.

Who are you competing with?

If you think your competitor is another provider in the field, think again. A recent study by Accenture revealed trends towards non-traditional distribution channels: 60% of consumers would consider buying an insurance product from a bank; 29% would consider buying from an online service provider such as Google or Amazon. Financial services firms are no longer competing with other incumbents, but rather, technology brands that provide the trust and experience consumers have come to love.

To differentiate themselves, providers must focus beyond offering just an insurance product; they need to build trust and loyalty by providing exceptional customer experience and value added services. Vitality from South Africa is a great example. They are the first insurance company to reward people for healthy living. By leveraging behavioral economics and empowering people to take a more active role in managing their own wellness, they are able to create health insurance that people actually like. Harvard Business School recently did a business case on Vitality; the podcast can be assessed here.

How do you win?

Similar to the FinTech startups in the banking industry, insurance tech startups are trying to disrupt the insurance industry by focusing on improving specific areas of the customer journey. Rather than “us versus them”, great opportunities exist for startups and incumbents to partner and provide better service for the consumers.

According to CB Insights, insurance tech startup investment hit a new high in 2016, raising $1.7 billion across 173 deals. On a year-over-year basis, private tech investments involving (re)insurer participation rose 49% in 2016 and 257% from 2014′s tally. Key focus areas include digital distribution, connected devices, cyber security, and property/rental management.

Moving beyond a slogan

Whether it is innovating in-house or collaborating with external startups, it is important to remember that innovation needs to go beyond a departmental “function”, a slogan, or a cool office space. To have a chance to succeed, innovation must become part of the overall enterprise strategy and the team must be allowed to fail in order to learn. Alex Jimenez has an excellent post on how to run an Innovation Lab.

At the end of the day, as my good friend Spiros Margais said: “FinTech or InsurTech solutions are only a means to an end.” Indeed, incumbents and startups alike, no matter which vertical they belong to, need to think beyond creating a product; they must challenge the status quo and deliver value-add to the customers.

“Design Thinking is a method of meeting humans’ needs and desires in a technologically feasible and strategically viable way.“ Tim Brown, CEO and President of IDEO

Putting the human instead of tech in the middle is essential as we focus on improving the lives of the customers. It is through collaboration and thoughtfulness that we can innovate for the consumers of the future.

Ready or not, change is happening in our industries. You can either ride the wave or risk getting left behind.