- Where Insurance & Technology Meet

Looking Down The Road

There is an old adage – Parkinson’s law – which says: “Work expands to meet the time and resources that are made available.” When I read a few postings around the Platform Economy, I realized that this was not going to make the cut, specifically with all the bazillionaires you’ve ever met.

Why was I looking at this?

I picked up an article from McKinsey: “Insurance Beyond Digital: The Rise of Ecosystems and Platforms.My primary interest from McKinsey’s large, quality information set was that insurance was the primary focus throughout. (Take that, you second-class FinTechs!)

A secondary interest came from the authors Tanguy Catlin, Johannes-Tobias Lorenz, Jahnavi Nandan, Shirish Sharma, and Andreas Waschto and contained a compelling follow-up (emphasis added):

By 2025, as this revolution gains speed, McKinsey expects 12 distinctive and massive ecosystems to emerge around fundamental human and organizational needs (Exhibit 1). These 12 ecosystems will account for $60 trillion in revenues by 2025, or roughly 30 percent of all global revenues.

Not even the current POTUS would be able to respond without stammering, methinks.

The start up team …

Since 1992, when the opening of the third generation of the previously unthinkable (read: Internet denizens), digital has taken control of many items and have been careful to connect carefully.  That said, it is going well beyond using the fourth generation.  The leaders are teaching themselves and extending technologies to surround users and their tools (smartphones) to satisfy their needs-for-the-day.  

The current core systems players Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent now operate in more than 630 cities across 80 countries. McKinsey notes that the systems and companies are “betting big on opportunities that have the potential to realign global markets.” The ultimate objective is to usher an era of “sectors without borders.”

And this is the rub. McKinsey research shows that: 

“while digital technology propels some companies to become clear market winners, it depletes corporate earnings and overall value for many others.”

The Insurers will change …

McKinsey notes that “insurers act primarily as risk aggregators”.   This has risk itself, noting that the customers are not tightly engaged, which leads to “disintermediation, disaggregation, commoditization, and invisibility.”   

McKinsey says:

Adopting an ecosystem perspective—reevaluating the traditional business model and considering partnerships with players both within and outside the industry—could reinvigorate insurers’ digital strategies.

… but they might not know until it’s done

McKinsey notes that risks are changing but “uncertainty will be reduced as tracking and predictive technology improves.”

Also, McKinsey says that “substantial changes in risk distribution and actuarial models (for example, due to an increasing number of long-tail risks) are further aggravating this trend.”

I agree – for a little bit.  But not for the big bit.  

I get the impression that there will be relatively simple changes in vehicle usage and driver usage.  That may not be as easy as it is to say.

As we speak, we have ‘driverless’ vehicles, automated (but not driverless) vehicles, and standard ‘keep your eyes on the road’ vehicles.  Outside of closed testing tracks, most of the vehicles and drivers will be on the same road.  Also, a few insurers (Travelers for one) are raising a flag to get aligned insurance.  (See the blog post Travelers’ Autonomous Vehicles in a Mixed Environment).

That being said…

Right or wrong, the organizations are recognizing major changes to vehicle transports.  If you have some thoughts, I’m all ears … we need more like this.  And if you get bored, start counting the revenue for the 12 ecosystems.