All of us – people and businesses – leverage, in some degree, the reality that the marketplace is rapidly becoming an interconnected mobile, digital network. IP-enabled smartphones and tablets (and watches), owned and used by millions of people across the planet, enable a never-ending flow of data, knowledge, and business transactions throughout this network.
One of the challenges for the insurance industry is to determine how to increase insurance commerce using this ethereal, ubiquitous agora. One manner of resolving the challenge to the benefit of customers, producers, and (re)insurers is to create, maintain, and/or participate in insurance commerce platforms (platforms) for sales, claims, product development, and customer service.
The purpose of this post is to consider the use of platforms for insurance sales in this modern day agora.
A customer – insurer sales interaction
First, consider the basic customer – insurance sales interaction. (See visual below.)
A customer has a set of risks which requires insurance to mitigate his or her potential losses if one or more of the risks occurs. To resolve the situation, the customer contacts an insurance company (either directly or reaching out to an insurance agent or broker).
The insurance company is never going to disappear
I realize that there are (many?) people who would like the insurance company (and/or the agent or broker) to be completely removed to satisfy their need to obtain insurance coverage (i.e. policy) to manage whatever risks they face. In today’s society, that is a fantasy that is not going to happen. Nor should it ever happen.
Society doesn’t put insurance companies and agents/brokers between the customer and the requisite insurance policy to enrich insurers and/or their management and/or agents/brokers or to put roadblocks in the way of acquiring insurance to frustrate customers. Legislators and insurance regulators enable the creation and continual operations of insurance companies because the plethora of ever-changing risks threaten customers’ lives, health, property, income, actions, and behaviors. Insurers have existed for millennia precisely because through their legally regulated construct they offer risk mitigation / management solutions which enable society (customers, businesses, education, healthcare, entertainment, and other societal artifacts) to persist.
Insurers will continue to exist through the millennia ahead. It doesn’t matter if an insurance company uses mobility, web portals, basic or advanced analytics, cloud deployments, virtual reality, augmented reality, IoT, robots, drones, or the focus of this post: platforms. None of these or other technologies (or their applications) will ever nullify the existence of an insurance company. An insurance company, defined by laws governing its ability to operate and in compliance with regulations ensuring adherence to those laws, will always exist as the ‘ultimate’ intermediary to sell and service insurance.
Delving deeper into the customer-insurer sales interaction
Delving a little deeper into the customer – insurer sales interaction brings up a more realistic picture of the actors involved in the insurance sales process, albeit still at a high level..
There are more actors involved with the insurance purchase than the customer and the insurance company. Most of these other actors involved in the purchase of insurance could also have a role to play in an insurance commerce sales platform. We discuss some of their potential involvement in the next section of this post.
Customers purchasing insurance don’t always recognize the existence of the various actors involved with the transaction. Nor do customers have to know about all of them. However, there are too many customers who believe their “insurance company” is the insurance agent or broker they purchase insurance from. Other customers erroneously believe that there is no agent involved if they reach out directly to the insurance company or if the insurance coverage is embedded in their vehicle purchase.
Actors and factors involved with purchasing insurance
Customers have no need to know about reinsurance companies but the ceding (or assuming) of reinsurance is an important factor to (re)insurance companies. Similarly, it is critically important that (re)insurance companies keep up with existing and planned insurance regulations in each of the jurisdictions they conduct business.
Moreover, insurance companies have to be continually aware of their (current and changing) financial and claims paying ratings from the insurance rating agencies. Finally, but as important as the other actors and factors, the investment environment is important for insurance companies to monitor to better shape their product development, pricing, and reserving practices.
With these actors and factors as context, let’s consider the use of platforms for insurance sales.
Platform possibilities for insurance sales
First, we need to establish what we mean by ‘platform.’
Per platform expert Sangeet Paul Choudary, “a platform is a plug-and-play business model that allows multiple participants – producers and consumers – to connect to it, interact with each other, and create and exchange value.” Mr. Choudary is using the terms “producers” and “consumers” generically, rather than the way we use them in the insurance industry.
Keep in mind that “consumers” and “producers” could be the same people or companies creating platform value, but it is the “consumers” who purchase value from the platform. (See visual below of the major players and components of a platform.)
Platforms are interaction engines
More elegantly, Mr. Choudary states that “platforms are interaction engines that scale when they optimize the interaction flow.” The platform itself:
- could be a proprietary platform (i.e. a platform owned by one insurance company) or an industry-wide platform (i.e. a platform owned by an insurance industry standards – creation organization)
- could be deployed in a public or private cloud
- should be accessible using mobile devices, whether smartphones or tablets
- can be connected to other businesses that build products and services on top of it, and by so doing, co-create value for all the stakeholders using the platform.
My description of a platform
In summary, I use the following description of a platform – all the attributes are required (seamless interconnection, collaboration, creation, improvement, and exchange) preferably in real-time:
A platform (whether a general societal commerce platform or an insurance commerce platform) in the interconnected digital, mobile era enables a multitude of people and/or companies to seamlessly interconnect, collaborate, create, improve, and exchange various types of value in real time.
Platform possibilities for insurance sales
As I mentioned above there are several opportunities for insurers to use platforms throughout the insurance value web. In this section, I want to consider three platform possibilities for insurance sales.
To simplify my discussion, I am writing about three specific pairs where the first actor of the pair is the ‘platform consumer’ and the second actor of the pair is the ‘platform producer’: customer – agent/broker, agent/broker – insurance company, and customer – fluid cover.
Note that by the phrase ‘fluid cover’, I mean insurance coverage that changes dynamically to meet real-time or near-real time changes in the risks that any one customer is facing.
Continuing in my quest for simplicity, I show illustrative potential platform values only for the ‘platform consumer.’ Obviously, a deeper conversation is required to ‘fit’ the complete platform framework for each pair and/or for any insurance lines of business.
There is obviously significantly more to discuss about insurance platforms including:
- security (of data, of platform value, of procedures, … of whatever the insurer believes helps the platform provide a competitive edge)
- privacy (see above)
- user authorization regardless of whether the user is a Platform Consumer, Platform Producer, or Platform Owner
- the variety of value that could be created for Platform Consumers
- the stability or transience of users accessing the platform to consume or create value to maintain / enhance the platform
- linkages to other platforms the insurer is using within its company value webs (i.e. product development, claims, customer service)
- linkages to the variety of ecosystems the insurer participates in or wants to participate in
- types of technologies available to ensure the platform operates effectively and efficiently
- skills that the insurance professionals need to easily use the array of functionality enabled by the platform
I want to end on the issue of regulation
To those who advocate for regulating an insurance platform: I remain unsure what regulation of an insurance platform would consist of because the insurance industry, including all the actors within the industry, are heavily regulated in the US, Canada, the EU, and other countries around the world.
I question the efficacy of regulating an insurance platform on top of existing insurance industry regulation – it seems to me like over-kill. I could be wrong. I was wrong before – I think it was on a Tuesday a few months ago.