If I Only Had a Brain …

Often, I feel like the Scarecrow from the Wizard of Oz when he said several times “if I only had a brain” particularly concerning the shape and nature of the P&C insurance industry in the next five or 10 years. There seems to be no end to the many prognostications that incumbent carriers are in trouble because of a perfect storm of heightened customer expectations, investments in technology-dependent startup insurance brokers and carriers, and continual advances in technologies and their concomitant applications.

I can’t board the ‘carriers are in trouble’ train. I don’t see the incumbent carriers being in trouble of losing market share. Rather, I see the startups:

  • disappearing into the insurance history books
  • continuing to operate without generating profitable premium until an insurance regulator removes them from the insurance marketplace
  • getting swallowed by incumbent insurers if the incumbents prefer to acquire the new(er) technology instead of building the capabilities themselves.

Concomitantly, I also see customers continuing to be disappointed in some, but not all, of their insurance commerce interactions with carriers (and agencies and brokers) in the next 10 years.

I agree that there are several forces reshaping the insurance industry that carriers must be prepared to accomodate sooner than later assuming, of course, they have the budget, human resources with the requisite skills and experience, flexible architecture and IT/Telco infrastructure including value chain and shared systems, and an ability to overcome existing company inertia.

Here are four of those forces:

  1. Market metabolism is accelerating driven by customer-tailer service expectations (including claim service) and products to be consumed quickly and easily
  2. Overall marketplace is becoming more and more digitized regardless of industry
  3. Expanding spread of IoT will continue to offer customers and corporations a two-edged sword: providing more mobile (and voice-activated) ‘at-your-service’ devices (and software) while simultaneously generating a tsunami of cyber risk throughout society
  4. Global pandemics, like COVID-19, amplifying the risks of conducting commerce with customers – and brokers – caught on the wrong side of the Digital Divide

Incumbents vs startups

To make my point more explicitly, I don’t see any contest here. There are thousands of incumbent P&C carriers and tens of thousands of insurance brokers / independent agencies. Together, they acquire and service tens of millions of customers.

The reality is that many of the customers, whether personal or commercial lines customers, prefer conducting business with their current broker (or independent agent) and/or don’t want to interact using the latest technology application.

There is a ‘long tail’ of customer expectations and requirements interacting with carriers: the ‘latest’ isn’t always the ‘greatest’ to many customers sitting on carriers’ books regardless of the amount of press and investments the ‘latest’ generates.

Beyond that, there are eight reasons I don’t see a contest between incumbents and startups:

Obviously, I could be wrong because I am cursed with having together over 40 years of experience working in the insurance industry, being a management consultant to the industry, and since 1997 being a technology-focused insurance industry analyst. I am thankful that I am allergic to whatever kool-aid VCs are drinking and erroneously believing that are going to put a noticeable (read profitable according to the metrics of the P&C insurance industry and NEVER the metrics of the technology industries) dent or ding in the insurance industry.

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