Insurance Industry Disruption, Challenges and Opportunities.

Introduction

As the world modernizes and the pace of change continues to accelerate, so do the business models that make it turn, and the lives of every consumer living within it.

Almost every industry in the world is experiencing immense disruption, Automotive, Financial Services, Telco, CPG, Transportation, Shipping, Logistics, Social, Education, Sports, Media, Manufacturing….the list goes on. Some are experiencing change faster than others, HBR recently published an article on it

The change we have seen in the last 5 years is going to be eclipsed by what we’re going to see in the next 5. That’s not a prediction, it’s a fact that what has recently been viewed as exploratory will become mainstream, look at Voice for example. Consequently, the insurance industry will see an immense need to evolve just to keep up with the needs of their customers and the lives they lead and need to underwrite.

The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today, according to Professor Richard Foster from Yale University.

Simply put, the reason for this rapid decline is not because companies didn’t keep up with the increasing pace of change. If you peel back the onion a layer, you’ll discover that it’s because these organizations didn’t position themselves to be able to do so. With fragile, ‘legacy’ spaghetti tech stacks and systems/layers so tightly coupled together it’s almost impossible evolve products as fast as the market demands let alone scale, by the time they saw it coming it was too late, like a beached whale once the king of the sea, being picked apart by the ecosystem it once dominated. Change and disruption is nothing new, what’s changed is the frequency of change. In the past we’ve witnessed only one or perhaps two forms of major change in a lifetime – now it’s multiple, during a working career, let alone a lifetime.

The current reality; the need to adapt, just because insurance is mandatory - you’re not!

By its very nature, the insurance industry sits at the very heart of all change as it has tentacles that extend into every industry, type of business, and profile or person. Insurance has one special attribute; everybody needs insurance, but no-body wants insurance, as a result, consumers will look for any opportunity to jump ship and get a better offering from a competitor or get rid of all together if they possibly can. You have to continually be improving your customer journey to maintain the stickiness.

It’s because of this it’s of paramount importance that the industry and companies keeps up pace, becomes more transparent, modernizes (internally and externally) and offers more a diverse, value driven range of offerings to its customer base, even at this incredibly diverse and complex moment in time. If you don’t, they will leave. Remember that darwinian quote or misquote? It’s not the strongest species that survives, it’s the one that’s most able to adapt? Well there’s a whole bunch of truth in that, no matter what anyone says.

You may take some comfort that at this current point in time it’s probably the most complicated it going to be out there, in the world, digitally.

Never has the diversity range of users and subsequent needs (business or personal) been so great. You still have folks in later life (70+) with wealth and no digital footprint. This is an economic and digital minefield. You have the generation below that which is resistant, either in retirement or moving there with minimal footprint (GenX). Then beneath this bracket the digital maturity level leapfrogs until you get to the millennials and after. These people are not only digital natives, but digital fluents - who now are officially in 2017, the biggest spending population bracket in all respects across the globe.

To pile fuel on the fire, there has never also been so many forms of emerging technology, that the evangelists say will be the next big thing; blockchain, digital currencies, digital wallets, artificial intelligence, big data, machine learning, autonomous vehicles, electric vehicles, voice platforms, the sharing economy, IoT, bots, wearables, AR, VR - you can’t possibly be experts in all of them. Nor should you be.

The solution?

What you do need is the ability to investigate and estimate the potential they hold for change/value to the industry as a whole or your specific sector and take action.

As the older generations speed towards irrelevance the millennials influence continues to grow as they accrue wealth from the older generation and begin to actually run the major corporations that influence innovation, economies, governance and progression in the world.

We’re at the tipping point; the time for putting off change is over; getting a major consultancy to take a year to produce a $5mm report to say you need to digitally transform is now more than ever redundant. And let’s be honest, when folks say ‘Digital Transformation’ what they really mean, whether they know it or not, is bring innovation to the market before others do, service your changing customer base better. Those investments into (to the major consultancies) need to be spent on R&D, new partnerships, modernizing tech stacks, taking risks, changing culture, attracting new talent etc..

Aging pro sports players, Ivory Towers and Dependency.

In my opinion, large organizations / big business and in particular the Insurance Industry is at risk of being victims of their own success. They have accrued such immense wealth over the past 50-100 years, with little outside threat, that whenever a need has arisen they’ve been able to outsource a problem, usually in the form of a technological advancement, to a third party supplier which has been sufficient, such as the first few generations of mobile applications. What has resulted, is their inability to learn and adapt to changing market and consumer needs, and getting rather comfortable in their ivory tower. Now all of the small start-up companies that weren’t much of a threat, are snowballing to a point where if they continue on the current trajectory there will be no stopping them. Companies like League in the benefits space, Oscar in health, Lemonade in Home, Metromile in Auto have all had huge 7 figure investments and are really beginning to scale.

Like an aging pro-sports player who grows up in a bubble, never learning life skills to support one’s self once the inevitable happens. Large traditional business, of which insurance is a prime candidate, are now dependant on those third parties who provide service to them, instead of being able to take care of themselves and diversify. The end result takes a long time but is totally destructive and ends in bankruptcy.

The longer an organization offshore's and outsources what should be a core competency (digital), the more they’re effectively holding themselves to ransom and hindering their own progress - let alone bringing new innovation to a market.

The solution

You need a partner the will enable you, not mother you. You need a partner like TribalScale that will roll their sleeves up and not only bring you up to where you need to be now, but also help you make sense of future tech and give you the ability to be self sufficient. Here’s a simple list of opportunities and risks as I see them.

Opportunities

Data / Data Science: Enterprises, particularly Insurance, are sitting on a wealth of information that can be leveraged to competitive advantage through improved and more diversified service offerings and risk analysis

Self Service: Give the people what they want, nobody wants to sit on the phone to an indian call centre. It will reduce cost for you and satisfy the customer.

Honesty & Transparency - let’s face it, the insurance industry has a bad rep - you can use technology to change that but offering simple, easy to understand, lower margin insurance that satisfies.

Client Base: Enterprises have the reach and trust new entrants don’t have Changing &

New Markets; Cyrpto-Currency, eGaming, Cannabis, Automation, Robotics, Sharing Economy..

Artificial Intelligence / Machine & Deep Learning: can service customers better and uncover opportunity

R&D - Investment in R&D is invaluable - here at TribalScale we dedicate approximately 20% of our resources to R&D, learning, trying new things. There is ROI to be measured here.

Agile Software Development - delivering value to your users regularly and adapting the changing current tech + Agile Architecture - you need this to unleash effective software development and enable technology adoption

Taking mitigated, data driven risks - The only man who never makes a mistake is the man who never does anything. (1900: Theodore Roosevelt)

Talent - Attracting and keeping new talent will inject new life into anything - but you have to give them the tools to succeed

Diversity - Diversity spawns innovation and by its very nature a difference in perspective.

All this leads to innovation in:

• New products
• New features
• Streamlined, simplified offerings

ON

• New platforms

FUELLING

• New revenue streams
• Market (and diversified market) relevance
• Attracting new, digital talent

Risks

The biggest risk by far is not doing anything, I cannot emphasize this enough - this will only lead to you being a beached whale. I repeat; The only man who never makes a mistake is the man who never does anything. And then in this case becomes irrelevant.

Beware of false prophets; don’t build a glass box and write ‘Innovation’ on the side and pretend you’re innovative. Seek professional help, roll up your sleeves and try new things - don’t be afraid to admit what you’re not good at or don’t understand.

Hiring ‘YESMEN’ - A partner ask how high when you say jump is more destructive than constructive. You need a partner that will challenge you and call you out at every turn (within reason of course)

Legacy Tech Stack - you MUST modernize. Bit by Bit, but there must be a plan in place - even if ‘it ain’t broke’. At some point the risk of protecting and managing a legacy tech stack becomes more risky the moving to a new one. Don’t let yourself get to that point. To quote an industry colleague “Which leads us to the enterprise IT paradox: go faster and innovate. But always stay secure.”

Talent / Not evolving culture - A a younger workforce with difference value continue to dominate the workforce you MUST evolve with them and be able to attract them

Resistance - Stop resisting technology threats (disruption) and start embracing/investigating them early. This is usually a hallmark of middle management.

Diversity - Diversity on all levels spawns innovation and attracts talent.

YOU CAN’T STOP THE WAVES BUT YOU CAN LEARN TO SURF!