In claims, and across the entire insurance enterprise, the pace of technology-driven change is accelerating —
By Stephen Applebaum, Insurance Solutions Group —
The phrase “gradually, then suddenly,” is spoken in Ernest Hemingway’s 1926 novel The Sun Also Rises, by character Mike Campbell when asked how he went bankrupt. “Two ways,” he answers. “Gradually, then suddenly.” These simple but profound words also apply to changes the insurance claims IT industry over the last few decades, and how today’s insurance industry leaders need to be thinking and acting to avoid the “suddenly” outcome.
The insurance claims process has changed enormously since 1980’s. Back then, it was stubbornly long and involved many phone calls and messages, dozens of hours of effort, numerous different insurance staff including call center representatives, field appraisers, desk adjusters and managers, hundreds of local claims offices, rooms full of mail, mountains of paper, cavernous file storage facilities and a great deal of time and frustration for everyone involved. Today, most auto claims are being resolved “touchlessly” in hours or days through near real time digital exchanges between policyholders, insurers, repairers and claims service providers.
When one analyzes how we got from “there” to “here,” it’s clear that it did not happen suddenly but in fact very gradually. The first “laptop” was introduced in 1980. The Internet and email started to appear within the insurance claims process around 1985, and shortly thereafter automated collision estimating software became available. The direct repair program (DRP) concept was introduced in the U.S. in 1990, the same year that the World Wide Web (today’s Internet) became generally available, enabling communications and commercial relationships between auto insurers and repairers and allowing insurance claims staff and collision repair shops to communicate with one another electronically for vehicle repairs. While DRPs grew to ultimately absorb well over 50 percent of all insurance repairs, not much else changed dramatically until 2007 when the first iPhone became available. But it was not until the early 2010’s that smartphone adoption exploded and insurers raced to adopt digital business platforms across the enterprise. Within less than 10 years, the auto claims process transitioned to digital via smartphones and evolved into today’s nearly touchless process.
Moore’s Law and ‘Suddenly’
Therefore, “suddenly” actually occurred over more than 35 years. The slowness of these changes could easily lull one into a fall sense of complacency about innovation and disruption. But that would be a big mistake, and here’s why: Moore’s Law will quickly turn “gradually” into “suddenly.”
Moore’s Law, as many readers will know, observes that computing will dramatically increase in power and decrease in relative cost at an exponential pace. Today, this is known as exponential doubling, by which the pace of computing-based innovation driven by ever cheaper technology will continue to double in ever shorter periods of time. This will actually make “gradually, and then suddenly” redundant.
In terms of the “gradually” signals to which insurers must pay very close attention, the slow and steady entry by OEMs into the auto insurance and accident management process through connected car technologies requires strategic planning and responses sooner than later. In fact, all of the connected technologies—home, wearables, production facilities, buildings and smart cities—represent threats to insurers who do not understand, leverage and manage them before others do.
So, it’s not your imagination that the world around you, including the insurance industry in which we work, is changing at an ever-increasing pace. It is, and to compete effectively and survive, we will have to adapt our thinking and actions to exponential doubling.
About the Author
Stephen E. Applebaum, Managing Partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem focused on insurance information technology, claims, innovation, disruption, supply chain, vendor and performance management. Mr. Applebaum is also a Senior Advisor to Waller Helms Advisors. WHA is the premier investment banking boutique focused on the crossroads of the Insurance, Healthcare and Investment Services sectors.
Stephen is a frequent chairman, guest speaker and panelist at insurance industry conferences and contributor to major insurance industry publications and has a passion for coaching, mentoring, business process innovation and constructive transformation, applying disruptive technology, and managing organizational change in the North American property/casualty insurance industry and trading partner communities. He can be reached at [email protected].