Why InsurTech Should Be Like Football

A podcast I enjoy listening to is “Revisionist History” by Malcolm Gladwell, the author of five New York Times bestsellers, including “The Tipping Point” and “Outliers” (http://revisionisthistory.com/). Episode 6 discussed educational philanthropy and the $100 million gift by American Hank Rowan in the early 1990s to an almost bankrupt school in South Jersey, which at the time had an endowment of only $787,000. Gladwell discusses why no one followed Rowan's lead. The vast majority of the 87 gifts of $100 million-plus since then went to elite schools like Harvard and Yale, which, arguably, do not need it. What has this got to do with InsurTech? Please indulge me. Gladwell gives some insights from the book “The Numbers Game” by Chris Anderson and David Sally. The book argues that football is a weak link game—success depends not on how good your best player is but how good your worst player is. This is because, in an 11-player game, the result often depends on mistakes. It is, therefore, better to use your resources to upgrade your worst players rather than spend everything on a superstar player. Superstars like Lionel Messi finish off the efforts of teammates, but people forget about the 10 passes before the great through ball that Messi tucks away—still, those mundane passes are absolutely necessary. Basketball is the exact opposite of football—it is a strong link game. What matters in basketball is how good your best player is. To deal with Michael Jordan, you might need three players, leaving yourself wide open to movement by his teammates. See also: Matching Game for InsurTech, Insurers   The strong link/weak link framework is very useful in thinking about certain types of problems. Efficiency of air travel is dependent on how good the poorest airports, not the best ones, are, as delays in the former have a knock-on effect and can disrupt even the most efficient. Air travel is a weak-link problem. There are parallels in this framework to the accelerating amount of investment into InsurTech. Most business models I see are looking at addressing strong-link problems—i.e. taking existing products and making incremental improvements, most likely through taking out cost across what is currently a heavily intermediated insurance value chain. In contrast, business models that look at weak-link problems are focused on where that incremental dollar of investment could raise the bar, improve the average and make a real difference to society. These companies are seeking to address the unacceptable protection gap that exists today, using technology to make yesterday's uninsurable risk insurable and providing solutions to vulnerable communities to help them become more resilient to catastrophes. More football, please!