New Leaders in Race for the Killer App

Last week, we looked at how insurers have missed opportunities, multiple times, to become real innovators and follow through on developing the new killer apps. We took as our inspiration, the book, The New Killer Apps: How Large Companies Can Out-Innovate Start-ups, by Chunka Mui and Paul B. Carroll. This week, we’re looking forward. Is the insurance industry thinking big enough? Is it starting small? Is it learning fast by experimenting, testing and learning from failures? If the industry isn’t currently innovating, new competitors entering the market are! There are dozens of examples. Consider Climate Corp. and its re-imagination of crop insurance using mobile, cloud and emergent knowledge. There is Google with its aggregator site, Google Compare, allowing drivers to search for the best car insurance deal, creating an interesting and formidable channel. Then there is Peers, a nonprofit developing products for those participating in the sharing economy. These aren’t just new ways to sell. In many cases, they are groundbreaking models of protection to respond to new models of life. The rapid experimentation and expansion of social media or peer-to-peer-based insurance companies, introduced by Friendsurance in Germany, now includes new companies like InsPeer in France and Guevara in the UK. Guevara pools customers’ premiums online to save money, and any money left in the pool at the end of the year stays with the group and lowers everyone’s price the next year. Will automotive companies be next with the emergence of connected and autonomous cars? Where are the 21st century affinity models going to lead us? So how do established insurers out-innovate, let alone compete? How do they become this generation’s emerging insurance leaders? They must look beyond long-held traditional views and become accustomed to major business shifts. Instead of transforming the business using age-old assumptions and traditional business models, insurers must look to reinvent the business model, not unlike how Uber reinvented the taxi model or how the new entrants are reinventing insurance. Starting at the Core: What Is Insurance? Todays’ insurers may be tempted to look at surface issues, just like they did in 1998. How do we sell differently? How do we empower our agents? How do we touch consumers? But to understand the real reinvention of insurance, consider how confusing the concept of insurance has become to the consumer. The insurance industry sells a product that may be legally required, such as auto insurance. The product may not really be deemed to be a necessity, such as life insurance. To the consumer, premiums seem to simply evaporate down a hole, instead of accruing like mutual funds. And many consumers would suggest insurance isn’t even a “product” at all! If an insurer has to spend too much time educating and selling AND it lags behind in digital technology and excellent customer experience, how long do you think it will last when a new competitor comes along and offers a new model of engagement that is simple and easy to understand (and uses the latest technology)? Insurers need to erase the white board and begin with a redefinition of insurance. How do we protect people in all of the new ways that they live while using digital technology to actually make the experience of buying, owning and using the product we sell more appealing? There are start-ups and venture capital looking to “uberize” insurance to be that new competitor and disrupt insurance. But traditional insurers still have an edge. Start-ups and "unicorns" (those challenging industry disrupters with billion-dollar pre-IPO values) don’t have the knowledge of pricing, profitability and regulatory requirements or a base of customers. This is where insurance as an established industry can compete and out-innovate. To do so, we must embrace the digital revolution. We must turn long-held business assumptions upside down. We must reinvent the business model. We should embrace trends and experiment. And we must effectively answer the consumer’s question, “What is insurance, and why is it important to me?” Instead of implementing modern core insurance systems on-premise and converting your existing business, look to cloud options where you can experiment and build innovative products, new channels and reach new market segments fast and less expensively. Look to your partners to provide an ecosystem of options and capabilities that will help you meet existing customer needs and reach new customers. Look to your peers to see if you can partner or collaborate, leveraging the assets of both organizations in new ways. By doing so, you can find innovative ways to create a business model outside the traditional business, seek new market segments and new regions through insurance as a service model and reach more customers with alternative channels. Insurance business models, assumptions and practices of the past decades and centuries are less durable in today’s game-changing marketplace. Competitive dominance is no longer achieved by operational efficiency, lower prices, massive advertising, large internal systems or channel loyalty. It is achieved by anticipating trends and pivoting quickly to create and capture the economic and competitive opportunity. To win on the final lap (the one that counts), insurers need to make moves today that will position them as emerging leaders. In this race, there is no one path that moves you across the finish line. There is no singular destination. There is only a world of possibilities. So think big! Start small. Act fast. Unicorns beware. We’re coming for you in this final lap!