Dec 16, 2015
Insurance Myths: On Technology and Existential Dread
Every industry has certain bits of mythology carved out around it. Whether they’re centered around people or personalities – think Steve Jobs or Jack Welch – or around an industry’s perceived strength, like Silicon Valley’s vaunted but perhaps illusory meritocracy, every industry has guiding principles that, while rooted in substance, become exaggerated and end up taking on a life of their own. These myths also oftentimes cement themselves in the conventional wisdom of an industry and become one of its operating principles.
The insurance industry is no different, and over the next few weeks, we’re going to take a look at four common myths that have long been held as truths by insurance brokers, carriers and buyers. Just because something is repeated often, doesn’t mean it’s true, and I think examining these myths is actually very constructive and tells us a lot about our industry and where it’s going to head in the next decade or so.
Technology will eat us
The first myth I often encounter is an existential worry about how the rise of technology will affect the insurance industry and the people who work in it. This is most commonly articulated as “Insurance is on the verge of being massively disrupted by new technology and software.” It’s a reasonable belief, and one that could be defended by what’s happened to any number of industries in the 10-15 years. How Napster, and later Spotify, blew up the music industry; what Uber did to the cab industry. It’s very relatable to insurance: a firmly entrenched industry, blindsided by some unforeseen, alien force. A few weeks ago, I even presented at a conference called “Insurance Disrupted” that was entirely dedicated to this topic.
I’ll be the first to agree that there’s plenty of room for improvement in the insurance industry, but the fact is, insurance isn’t ripe for that kind of massive disruption. What’s the common thread in the two examples above? Massive customer displeasure, and a new way to address it. People were sick of paying $15 to $20 for a CD and with the advent of MP3s, no longer felt like they should be held captive to the format and medium the industry preferred. Technology filled that void and the record companies’ financial models melted. Same with taxis. Ask anyone who lived in San Francisco or Boston prior to 2010 what it was like hailing a cab on a rainy Friday night. Uber capitalized on new technology to fix a massive pain point for customers.
Insurance doesn’t have that single, massive pain point. Buying and dealing with insurance isn’t a magical experience for most customers, but there’s also no huge inherent flaw in it either. It’s very simple for the most part: a customer picks up a phone, calls their broker, fills out a few (or a few hundred) pages of paper and the broker uses that information to buy insurance. The work for the broker is mostly customer acquisition in the first place, then figuring out with which carrier to place any given insurance policy. Because of this, and also the challenges of it being a complicated, regulated industry, with a real need for an intermediary, there’s no obvious point for technology to insert itself and create a wedge between customers and brokers.
Technology will fix us?
As I said there is tremendous room for improvement, however, and technology will undoubtedly have a role in these fixes. The area I see where technology can most obviously exert its influence is in a customer’s digital experience. It’s worth highlighting that – especially in commercial insurance – this is a hard area to disrupt, because it’s never really existed in the first place. There is demand for it, though. An Accenture survey earlier this year found that 53 percent of property and casualty insurance buyers would like more access to online channels at all stages of the cycle. Only 15 percent of P&C buyers are currently satisfied with their provider’s online experience. If 15 percent doesn’t strike you as an awful number, consider that Congress’ approval rating sits at 14 percent.
There seems to be a tremendous amount of misinformation and confusion about digital engagement and what customers want. I’ve done a lot of customer research on this, both when I was involved with Hub International, and also for Embroker. In my experience, customers don’t care about your website, they don’t really care about your social media profiles either. Even online quoting, which is considered the vanguard of digital engagement in the insurance industry, actually isn’t the most important thing for most customers either. Insurance is a financial service – a fairly complicated one – and we don’t need to try and make it like buying shoes on Amazon.
Technology has the potential to improve every aspect of the insurance ecosystem, just as online banking radically improved the process of managing your own money.
The digital engagement that customers are asking for is the kind that uses technology to make processes easier and more transparent. Technology has the potential to improve every aspect of the insurance ecosystem, just as online banking radically improved the process of managing your own money. Things like being able to see claims history across different policies and carriers without having to call a broker, getting specific product and coverage recommendations based on available company or personal data, or even just having a central digital repository for your entire insurance program.
These types of improvements are necessary and are where the “disruption” will happen. There’s no easy “Uber fox” fix in our industry, nor is there huge demand for one. There is demand – and I’d say an obligation on the industry’s part – for a significantly better digital experience and that’s where the bulk of the innovation in the insurance industry will happen in over the next few years. The only question left is who will figure it out and who will be left behind.
If you’re interested in learning how Embroker can help you mitigate risk and intelligently insure your business, you can reach out to our team of expert brokers. Or, if you prefer to get started on intelligent quotes, create your Embroker account today.