9 Realities About Insurance and Technology

1. Insurance commerce can only be legally conducted between customers (personal, corporate) and insurance firms (whether reinsurance firm, insurance firm, agency, broker, MGA, MGU).
2. It is illegal to conduct insurance commerce with a technology firm.
3. No technology can ever transform an insurance firm into a technology firm.
4. Technology – whether past, current, or emerging – is critically important to the operation of any insurance firm (carrier, agency, broker, MGA, MGU, reinsurance firm)
5. Any person that invests in or manages an insurance firm as if it was a technology firm deserves all the financial failure that the firm generates.
6. Any investor or executive of an insurance firm – whether new or an incumbent) that states it is some kind of “tech” firm or believes and behaves as if it was a technology firm is lying: lying to themselves, lying to their employees, and lying to their customers and prospects.
7. When an insurance firm sells an insurance policy it is simultaneously purchasing a potential future loss – the insurance firm requires insurance experience and know-how to mitigate the impact of that loss on the firm’s bottomline.
8. The use of technology is important to profitably getting-and-keeping customers but not nearly as important as the insurance experience required to use the technology to profitably get-and-keep customers.
9. The insurance industry is a world-class industry: there is no need to tell people that you work for any kind of technology firm when you work for an insurance firm. Employees of startup and incumbent insurance firms (carriers, reinsurers, agencies, brokers, MGAs, and MGUs) should feel great pride that they work in an industry that exists to manage and/or mitigate risk to keep society running … and has done so throughout hundreds and hundreds of years.

For all those reasons and others, they are why I believe that the term “InsurTech” is an arrogant, vile, and cancerous concept. It is an acid that eats through and damages the insurance industry. Worse, it puts insurance clients assets, lives, and health at serious risk which are the very reasons the insurance industry exists in the first place – all so VCs and other investors can say that they are ‘disrupting or transforming the industry’ while they are actually financially plundering the industry for their own benefit. Or so they can attempt to prove that using the metrics of a technology firm (e.g. hockey-stick growth can be applied to a startup insurance firm) without realizing the foolhardy dangers of using those metrics in the insurance industry while they put their clients’ insurance requirements at horrendous risk.

Technology is fun to research, analyze, write about and discuss its impact and implications on the insurance industry (which I have been doing since 1997). However, the onus, the spotlight, and celebration must be focused on continually achieving the insurance business objectives that need to be accomplished enabled by insurance experience and know-how to use technology (customer service, product development, claims adjudication, target marketing, sales and distribution, alliances and partnerships).

If we, as an industry, continue to listen to the VCs and other investors in new startup insurance firms about ‘disruption’ or ‘transformation’ we will be proving P.T. Barnum’s philosophy correct: “There is a sucker born every minute.” Unfortunately, it will be our customers who suffer.