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Will InsurTech Break Two Solitudes of Insurance?

An increasing number of  insurance practitioners are looking seriously at using InsurTech solutions for competitive advantage.

At the same time, InsurTech suppliers are looking at our industry and developing solutions and constructs with little or no understanding of modern insurance.

My spider sense tells me the ‘two solitudes’ approach – which has never worked particularly well – will continue to perpetuate misunderstanding. The following contains a few examples that might prove informative to both sides.

Insurance is really simple … until it isn’t

When I first became involved in the industry (as a second career), a mentor of mine said, “The principles of insurance are dead simple. But trained professionals have worked for more than 300 years to make them complex.”

It’s a bit cynical, but it tracks close to the reality.  For the most part, complexities in insurance  are driven by external requirements. Many of these are governmental regulations, which means the terms can vary from one jurisdiction to another.

The complexity frustrates practitioners and customers alike.  While InsurTech can help with presenting information on-line and facilitating communications with service personnel and bots, the issue goes deeper.

Distribution is changing — dramatically

For the better part of the 20th century, insurers retained responsibility for developing products, controlling claims, and managing finances.  They ‘outsourced’ policy sales and service functions  to brokers and agents.

That has been changing dramatically, and could offer the best opportunities for  both InsurTech suppliers and insurers/brokers.

The only caveat is that many insurers have yet to articulate their distribution strategy for the future. Some insurers are going full-out with a “mixed distribution” plan, utilizing direct channels, agents, and brokers. Other insurers may be holding off until they understand their end customers better and see how their competitors fare. And some may not have even embarked on a discussion.

All of this just means that the InsurTech supplier will be facing a panoply of requirements – and they will continue to evolve. I would suggest that the insurers take the responsibility for providing at least the current thinking, and what could change, before the InsurTech suppliers go too far with a product.

Engagement is hard, except …

Try as insurers might, the vast majority of customers just don’t get excited about insurance generally.  The complexity is one reason, but many customers see insurance as ‘money for nothing’; as in ‘the customer gives the insurer money and gets nothing in return.

The exception, of course, is the claim.  When there is an accident, or theft, or fire, or any other insured loss,  customers tend to become very engaged.  And they typically want someone to reassure them, to expedite the claims process, and to get the best possible settlement.

There are InsurTech services that are digitally enabling steps in this process.  But many insurers want to keep tight controls because this is ‘the moment of truth’ which will impact their top line as well as the the bottom line.

So what can insurers and InsurTech suppliers do to improve the insurance product and its distribution? And, perhaps, increase the customers’ engagement and satisfaction levels.

I think each side needs to focus on its respective expertise and be candid with each other about concerns before taking  stance that would have to move.

Can we bring this all together? 

We have all heard about becoming agile, and nimble; establishing innovation teams and experimenting with new approaches, etc. (One source, in case you missed it at our Technology Conference last month, is the ‘Nimble Hippo blog‘, authored by Craig Haney, from Communitech.)  Insurers should prepare to invest significantly in these projects from a monetary and a management standpoint, understand what the InsurTech suppliers need to start producing product, and how this will be coordinated.

InsurTech suppliers need to move away from other solutions they have developed and look at the value points of insurance from the underwriting, claims, and marketing/distribution angles.  In other words, be humble in front of the practitioners.

What do you think?

Can either InsurTech or our industry drive this to success? If not, can we be genuinely candid and recognize that humility has power?

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