Jack Welch, the former CEO of GE, once said: “If the rate of change on the outside exceeds the rate of change inside the end is near.”
Advances in technology, the ensuing shifts in consumer behaviour and the arrival of new competitors in the form of tech start-ups have already caused waves of change as well as corporate casualties in industries ranging from telco through media to travel. Many are suggesting that financial services, and in particular insurance, might be the next industry to be hit.
One of the advantages the new entrants have in their favour is their lean operating model afforded by digital technology.
Social With respect to specific trends within the insurance industry, two areas are particularly interesting. The first is around P2P or social insurance, and the second that of insurance aggregators.
Guevara is a UK-based business offering car insurance that allows customers to pool their premiums, share their risk and in the words of CEO Kim Miller cut out the middleman helping significantly reduce premiums. What impact might this have on brokers?
Friendsurance in Germany is another example of a start-up with a similar model. They enable customers to connect and commit to supporting each other in the event of the claim. Their model helps to reduce their operating costs by reducing sales costs, reducing the need to claim for small claims and reducing the likelihood of fraud.
The other area of interest is what might be a second generation of insurance aggregator, with Swiss start-up Knip being a good example.
Aggregators made comparison for consumers far easier aiding with transparency but in doing so make it far harder for the insurers to differentiate on anything other than price. Businesses like Knip will take this a step further by automatically monitoring and switching customers between policies as well as assisting with claims and in doing so massively reducing the engagement an insurer might have with their customer.
Aggregators have already impacted significantly on broking - what might these second generation services do?
Change These are just two developments that can impact the insurance market. Many in the industry might comment that regulation makes it hard for new companies to enter or that the brand capital and financial position of existing players makes it too challenging to compete but being complacent about change is risky.
The incumbents have to act now to be able to keep pace with the change. Like incumbents in other sectors these businesses are fully aware of the trends and new entrants but the question is how they respond.
While it’s difficult to accurately predict the future, what you can predict with great certainty is that the change will occur and the pace will only increase so businesses need to design themselves to be more responsive to it.
James Haycock is managing director of the digital innovation agency Adaptive Lab which partners with companies experiencing disruption.