Amazons and Apples and Googles. Oh my…
What do these companies have in common? Devout brand loyalty from the modern consumer coupled with world-leading technology. This poses a massive threat to insurance companies that value ownership of the customer above all else and are seriously lagging on tech. In a post-financial crisis world where financial brands are reflexively distrusted by modern consumers that have incredibly high digital UX standards, technology brands and emerging insurtech startups have a considerable advantage in winning future insurance business.
Amazon, Apple, Google and other tech giants don’t do anything small. It would be foolish for insurers to think that these disruptors will enter the industry to play nice and simply serve as their brokers or lead generators. They have capital in spades, massive captive audiences, piles of valuable data and are perfectly comfortable navigating complicated regulatory landscapes. Insurers like to hide behind this regulatory complexity as a reason to dismiss new market entrants, but this is simply a speed bump for those who want to make insurance a point of focus – not an insurmountable barrier to entry.
The Google Experience
Google dipped its toe in the industry in 2015 with Google Compare and then quickly withdrew in 2016. Insurers like to point to this as the shining example of how technology companies “don’t understand insurance” or how they “underestimate the complexity of the industry.” What they forget (or simply don’t mention) is Google’s core business model – advertising. What is the sixth most expensive word on Google AdWords? Insurance ($48.41 per CLICK!). Who buys that word and drives significant revenue to Google? Insurers. Google's exit was not the result of execution failure or naivete; it was a consequence of rocking the boat with some of their highest-value advertising customers. The rest of the companies listed above, among countless other tech giants and well-funded startups, do not have that same conflict. Insurers are not immune to disruption from them.
Shifting Consumer Behavior
The modern consumer is a digital native and does not want to speak to people on the phone or fill out piles of paperwork. Consumers want to be offered insurance when it’s top of mind – how they want it, when they want it, from brands they trust, instantly.
One of the biggest problems we see with tech-insurance partnerships is insurers’ insistence on controlling the underwriting and sales process, which creates massive friction with technology companies that offer far superior digital experiences. Consumers don’t want to leave Amazon to start a separate purchasing process on an insurer’s website, and Amazon doesn’t want them to leave its site, either. This is something that is easily solved through API-driven technology systems and programmatic underwriting – words that often give insurers heart palpitations.
See also: What if Amazon Entered Insurance?
Consumers don’t want to shop around for insurance on quote comparison sites. They don’t want to engage with insurance companies more than necessary or share troves of personal data through an insurance app. They want to purchase insurance when they need it, pay for what they use and never think about it again. Insurance incumbents have responded by building their own apps, offering discounts for more shared data and doubling down on advertisement spending.
Insurance in the Background
Insurance is an important feature, but not always the star product. It’s sold well to the modern consumer either purely digitally or as part of a broader offering – typically at the point of purchase for a non-insurance product or service. That’s an unpleasant thought for insurers that take a tremendous amount of pride in their history, processes and brands. However, letting pride and status quo dictate your business strategy is a good way to get your business killed.
Why not offer homeowners insurance in 15 seconds (not minutes) through fully digital workflow like Kin does? Why not combine cyber protection software and cyber insurance like Paladin Cyber does, so risk is reduced even further in the event of a cyber incident? Why not offer white-labeled SMB insurance to the millions of third-party retailers currently selling on Amazon? Or episodic renter’s coverage directly through Airbnb at the point of booking?
Here are a few reasons why insurers aren't being more innovative:
- insurers’ technology simply can’t support seamless distribution through digital platforms
- insurers/agents/brokers insist on owning the customer
- insurers don’t want to alienate their traditional distribution network of brokers and agents
- insurers want full underwriting control through traditional, and often analog, methods
- insurers don’t want to share data with tech companies but expect tech companies to open their proprietary analytics models to insurers.
