We’ve all heard about the tremendous amount of venture capital that has been invested in hopes of disrupting various parts of the insurance value-chain. When I heard about InsureTech Connect 2016, the conference that brings together the tech firms with the insurance industry, the opportunity to attend the conference billing itself as, “The Biggest Thing to Happen to Insurance Since the Policy”, was too alluring to pass up. Only once I got to the conference did I learn that “insuretech” is a word that describes the modern coupling of insurance and technology. It has become a buzz word of sorts in the venture capital, tech start-up world. It probably comes as no surprise to those in the insurance industry, but insurance is seen as having been very slow in adopting new technology. Combine that with the fact that it is an industry with annual global revenues of over $4 trillion, and it is easy to see why so many tech firms are wanting to see if through technological innovation, if they can capture a piece of that market.
The land of jeans…..with sports coats.
Throughout my career, I’ve attended dozens of insurance conferences (maybe even a hundred or more!), but I had never before attended a “Tech Conference.” The attendees at InsureTech were roughly 2/3 from the technology industry and maybe 1/3 from the insurance industry. One of the first observations was that the “dress code” among the two groups was noticeably different. In a very stereotypical way, many of the tech guys wore jeans with tee-shirts, sports coats and tennis shoes. Not a typical look among insurance executives. There were several recurring themes throughout the conference.
Improving the customer experience:
Many of the tech firms discussed the importance of meeting (or exceeding) the expectations of today’s consumers. The world has changed, and the organizations that we all do business with in today’s world have completely changed what consumers expect when dealing with every organization. Simple, fast, intuitive, 24/7, competitively priced, transparent, customer-centric, and contributing to a social good were all mentioned as being elements that help define the customer experiences. Think about buying an item from Amazon. At any time, the purchaser can go to the website, and check the status of the order. Is it in fulfillment? Is it being shipped? If so, where is the package right now, and when is delivery expected? Some of these InsureTech firms are building those types of systems, so that an applicant can see exactly where there application is in the underwriting process, or exactly where their claim is in the process, and when they can expect to receive a check.
The CEO of Trov spoke about how the company’s primary goal is, “to create a delightful customer experience.” The concept of Trov is rather novel, and it has the “slick as a button”, consumer interface that you would expect from a tech company. Consumers can simply use their smart phone to purchase, single-item, micro-duration, on-demand insurance. And of course, all of this is done in a “disintermediated” fashion, meaning no agents or brokers. To describe the business model in more traditional insurance industry terms, the consumer can purchase an in-land marine floater for one item that they own, activate and deactivate that coverage from their phone as often as they would like. Taking your bike to the park? Use your phone to activate coverage on your bike. Make it home with your bike in one piece? Simply use your phone and swipe your insurance coverage to the “off” position. There’s so much about this that makes us traditional insurance guys scratch our heads, but from the consumer perspective, perhaps this is how insurance should work. Insure what I want, when I want to . Remember, many of these companies are trying to rebuild product distribution in a way that the insurance buying experience is “delightful”, and is more like buying other products in today’s economy.
Throughout the conference, there were many references to how dissatisfied consumers are with how insurance works. How many people rank insurance agents lower than used car salesmen. How many people view insurance as a “necessary evil”. How many people see it as perfectly acceptable to overstate a loss (commit insurance fraud!) when turning in a claim. How many people feel like they get jerked around at the time of a claim. How many people feel like there were treated unfairly at their policy renewal after having turned in a claim. And on, and on, and on.
So the perspective of the venture capitalist is that the insurance industry is a huge part of the global economy, has been slow to embrace in new technology to improve the customer experience, and as a result, has a very high percentage of dissatisfied customers. Where else would you possibly want to invest in disruptive technologies?
Future of agents and of distribution:
One interesting component of the conference was also the fact that some of the tech start-ups in attendance are wanting to partner with existing insurance agencies. How can agents use technology to improve efficiency and deliver a better consumer experience. This initiative was largely referred to as “Building Agent 2.0”. These companies recognize a very important factor about insurance, which is that the agents (and companies) are the ones that actually have customers, and to disrupt that relationship could potentially be very expensive from a customer acquisition standpoint. Some of these initiatives are very close aligned with IIANC’s 24/7 Agency Solutions program. Use technology to enhance customer satisfaction.
Another couple of observations in this area: 1) Some of these companies want to provide technology solutions to both companies that are trying to disrupt the market, as well as the incumbents that are trying to hold onto the market. As one said, during the gold rush, the guy selling shovels didn’t care who found the gold, as long as everyone bought shovels from him. And in most instances, the guy selling shovels made more money than the guys looking for gold! 2) Some of the start-ups are suspicious that if any of the disruptors start causing too much of a headache for the big players (consensus agreement is that GEICO and State Farm have the most to lose), that they might just “disappear”. You know, kind of like the cars that ran on air or water seemed to do in the 1970s when the oil companies purchased them. 🙂 It was pointed out that GEICO typically spends more in advertising in a week than most of these start-ups have raised in venture capital. What’s to keep the start-ups from being acquired at a nice multiple for an amount that one of the big carriers wouldn’t blink at. A company that has a balance sheet with billions of dollars has always enjoyed protection from disruption, as it can certainly chose to buy (or duplicate the efforts) any competitor that it feels threatened by.
By in large, most of the speakers at the conference are convinced that agents play a valuable role in many areas of insurance. Nearly everyone agreed on that point. However, they also nearly all agreed that many areas of insurance are ripe for disruption, most notably, personal lines. One tech start-up CEO (Snejina Zacharia, Founder/CEO Insurify), made the two following statements: “There is nothing in personal lines insurance that cannot be automated.” and “I see insurance agents going the way of travel agents 15 years ago.” There was good, spirited debate over this point, and the general consensus was that agents will continue to exist in areas where they add value. One panelist made the point that the internet didn’t put travel agents out of business, but that it put bad travel agents out of business. He went on to give the example of where travel agents still add value. “No one needs a travel agent to book a flight from San Francisco to Chicago. It is impossible for a travel agent to add value there. However, if someone is planning a 3 week trip to Tuscany, they would be crazy NOT to use a travel agent. You would use a travel agent that travels to Tuscany once or twice a year, and knows the local tour guides, restaurants and villas. An agent that could not only book your flight, but handle your ground transportation and the works!
While I don’t think this is a perfect analogy, I do think that it certainly helps to frame up a valuable question for agency owners to consider: is our agency selling the insurance equivalent to flights from San Fran to Chicago, or are we selling three-week trips to Tuscany?