What is the Key to Insurance Innovation? (Hint: It's not Tech)

The service of risk management within insurance companies needs to innovate.

Today, a small fraction of commercial customers take advantage of risk management services provided by insurance agencies.  And insurance companies are fine with this as they have limited supply -- or people -- that can provide risk management services. 

But what if the same high level of risk management services could be offered to all customers of an insurance company?  

How would an insurance company go about offering widespread, and high quality, risk management services? 

The Solution to Better Risk Management is Your People 

Insurance agencies currently engaged in risk management services have a distinct advantage:  the accumulated knowledge of its people that provide contract reviews for customers.  

I had this epiphany as I was reading through a slidedeck entitled "Innovation is almost impossible for older companies," which states: 

"People have acquired skills that, at moments, have given significant advantages to companies in order to prosper."  

Insurance agencies now must figure out how to harness the risk management skills of its people in new ways.  The alternative is scary for my insurance professional friends, because someone else -- someone with new technology and a new supply of risk management knowledge -- will figure it out instead.  Insurance companies could quickly be out innovated, as occurred to the taxi industry.  

For some time, the taxi industry had skills that allowed it to prosper.  Taxi companies used technology and money to setup phone numbers that could be called to request a ride; these companies also stockpiled just enough cars and drivers to meet the minimum level of demand.  But then Uber came along and created a better technology that connected riders to a different (and bigger) pool of drivers.  The taxi industry got out innovated.  

Insurance agencies are comprised of people that have acquired risk management skills.  My friends in the industry can review contracts with the best of them.  But each of them has a limited capacity to complete contract reviews based on hours in the day.  And so not all customers get risk management services (either because they don't know about it or don't want to pay for it).

A technology will come along that will expand the supply of risk management services.  One insurance consultant thinks that technology will be a computer avatar that analyzes and predicts risks independently.

I think the idea of an independently functioning risk management avatar is misguided.  I am reminded of a quote from Zero to One, written by the founder of Paypal, Peter Thiel:  

"Better technology in law, medicine, and education won't replace professionals; it will allow them to do even more."  

Better Technology Will Allow Insurance Professionals To Do More

I continue to be drawn to the word "collaboration" as I envision the future of insurance technology.  This last week I spent time evaluating software solutions in the insurance industry.  All of the solutions I reviewed are focused on step one, what I call "Make it Digital."  Only within the last five to ten years have insurance carriers and agencies gone paperless and the insurance software companies are filling this need.  

Digital is not enough.  Paperless is not enough.  Insurance technology must connect people and the knowledge that they create.  Don't think about just connecting to your customers.  Think about connecting your team. 

Imagine if your entire risk management team could work as living, breathing entity to assess and evaluate risk.  When Agent Jim in Kansas City has a question about liquidated damages in Texas, he should be able to quickly identify work completed by Agent Bob in Dallas dealing with this exact issue.  He can then evaluate the work and bring Bob in on any follow up questions. 

I have yet to find an insurance carrier or agency that has figured this out.  

This is where the opportunity lies in insurance technology.  Collaboration. 

Chris Cheatham is the CEO of Risk Genius, a collaborative contract review software application for the insurance industry.  Learn more at https://www.riskgenius.com/.