Insurance Myths Part IV: Fast, Cheap or GoodInsurance Explained
For the final segment in my series on insurance myths, I want to examine a statement most people believe to be true in just about every industry: “Fast, cheap or good. Pick two out of three.” Many in the insurance industry cling to this adage, believing that any deviation from the old, established way of doing business will somehow result in a lower quality, higher cost, or just worse product or experience. Unfortunately for those who hold dear to the status quo, however, this happens not to be true- at least not for software products.
Reality #1: Technology makes things faster, and improves quality.
Any given product can serve as an example for this point. Think about how long it took to create it and whether its current version is superior to one that existed fifty years ago. It’s hard to think of any industry in the world that hasn’t improved tremendously in both speed and quality because of advances in technology. From transportation (both air and ground), to manufacturing, to finance, to construction, all industries have been forced by competitive pressures to, at least on some level, embrace the use of technology to improve both product quality and speed of production.
The current wave of disruption that Silicon Valley crows about is, in most cases, not true disruption at all but just natural evolution as newcomers are better able to utilize modern technology. For example, Uber didn’t disrupt ground transportation; instead, the company just used technology to improve the speed and quality of getting from one place to another vs. a taxi.
Reality #2: Improving a product that is sold at the same price makes it cheaper (to the customer, at least).
This last point is easiest to demonstrate using specific examples, so I’ll start with a very intuitive one. If a restaurant improved the quality of its fare from a greasy diner to a Michelin starred experience, but kept its per-meal price at $8, its customer base would feel that it had become much, much cheaper. In this case, unless the restaurant had invented a new way of cooking, sourcing food, and serving its customers (altering the entire value-chain process), it would probably be losing significant amounts of money, which is why it would feel so inexpensive to its customers.
But industries that don’t produce physical products, such as our industry, insurance brokerage, are subject to different rules. And it is in these industries that the maxim ‘fast, cheap, or good’ is most flawed, as advances in technology make it possible to have all three, at least over a longer period of time.
For example, at Embroker we’re often asked, if we’re providing the customer with the same level of customer service as other brokers but also investing significantly in technology, won’t that make us a lower margin business?
In the short run, it absolutely will. One of the main reasons that venture capital is such a force for change is that it makes it possible to operate a business with negative margins for an extended period of time. The single best justification for negative margins is a large investment in technology, because over the long run the equation changes: once it’s built, software is not only more efficient than people at things like transmitting information or performing predictive analysis, it’s also infinitely scalable. Therefore, a company that uses software to accomplish certain things that would otherwise be done by people can do those things faster, better, and cheaper than its competitors.
Obviously software can’t do everything better than people, so if this company reallocates its people from tasks that can be automated with software (like data entry) to tasks that can’t be automated (like helping customers navigate a complicated decision with no clear answer), it can effectively produce a vastly superior product. This is what Turbotax has done for tax preparation, Salesforce has accomplished for managing customer information, and Square has started to achieve with credit card processing. The beauty of these products is that they can be sold to customers at the same price, or even less than, their competitors and still improve both quality and speed.
This explains the increasing role software plays in all aspects of our economy, and it is similarly what we hope to accomplish at Embroker for commercial insurance brokerage: rethink processes, build software to improve them, and use people to educate and solve problems for customers. It’s a powerful formula for change, and one for which we think the industry is finally ready.
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.