The Elephant is Insurance

(This is a reprise of an article posted in May, 2018)

The blind men have been polled and it’s agreed- the elephant is insurance.

It may have a frayed tail, treelike legs, a snaky trunk, but those are only features that comprise the beast- collectively.

???????????????The market discusses innovation, InsurTech, digitalization, artificial intelligence, algorithms, CX, UX, and all sorts of chatbots, RPAs, SaaS and other tech acronyms.?Those are not insurance- those are features, functions, tweaks and adaptations of methods by which the market interacts with insurance.?

???????????????We remain like the blind men if our approach to insurance is colored by a narrow perspective followed because that’s our business model, our shiny object, the thing we have worked on so long and hard that we have lost the easy ability to remember that the beast is insurance.

???????????????Insurance remains a risk sharing agreement, truly a contract between the insured and the carrier.?An insuring agreement, policy provisions, conditions, and prescribed remedies in case of contractual default- that is insurance.?It could be in a form that is hosted online, on app, agency driven, MGA, reinsurance backed, and so on, but it remains the agreement.?In exchange for the policy premium we agree to provide coverage for the property noted on the declaration page. Insurance remains something people and businesses need but would rather not want.

???????????????Stakeholders to the agreements have varying needs, foci, desires, directions, tech advances, service approaches, financial stakes, exposures, risks and business forms.?After all is said and done the unique nature of insurance function, finance, accounting, information management and service needs of the customers democratizes all the ‘stuff’- the playing field will tend to level.?If all players will be InsurTech, then all players will also encounter the same lag in accounting that written premiums, earned premiums, loss adjustment expense, reserving, incurred but not reported and expenses bring.?It’s not sales minus cost of goods sold equals gross margin, it’s customer acquisition costs, loss cost management, retention rate, customer experience and well-trained personnel.

???????????????At every turn the elephant remains the beast, but its accompanying features differ depending on what part of the insurance ecosystem the blind man’s perspective is.?It’s almost an infinite number of blind men who must remember that insurance is the entire system, and that each narrow perspective affects and is affected by others.?It’s even contrarians who refuse to accept the elephant has features.?

???????????????Actuaries know this theme the best- they consider all features of the risk to better understand the beast, even to the point where a parallel group of data scientists is growing in popularity of use in capturing the many data points related to its function.?And let’s not yet focus on sorting the elephant’s features and refiguring them through application of AI- the elephant has not yet fit comfortably confirmed where it fits in that venue.?But the elephant will find applications leveraging AI, and we’ll have to have another session debating what the beast is.?But for now- it is insurance.?The rest of the discussion is for the blind men to hash out.