When it comes to industry disruption, there’s no question that entertainment and transportation are prime examples. Amazon, Netflix and Uber have become integrated into the fabric of society so much so that consumers hardly think of them as disruptions anymore. They’ve become the industry standard.
The same type of technological disruption is taking place within the insurance industry, albeit it much more slowly and quietly. This slow surge known as Insurtech has, in recent years, gained quite a bit of momentum creating disruption in the insurance industry. According to CB Insights, funding for insurance technology companies rose from $740 million in 2014 to $2.7 billion a year later. And by the end of 2016, funding will have hit a total of nearly $17 billion to date, according to Venture Scanner. That’s a meteoric rise when you consider the complex and regulated nature of insurance.
These Insurtech start-ups began popping up because consumers wanted a better and more customized experience. And with customers clamoring for convenience in every other sector, insurers have no choice but to follow suit by investing in technology, either in-house or in an Insurtech company, as many have done this year. Insurance disruptors are focusing, for the most part, on how to revolutionize distribution, i.e., utilizing new technology to reach consumers usually in the form of an app.
UK-based Cuvva, for example, takes an on-demand approach to car insurance. Rather than providing the standard annual coverage, they offer customers the flexibility to insure themselves for as little as an hour at a time via an app. Say someone wants to be insured on a friend’s vehicle for a day or drives his or her own vehicle infrequently and doesn’t need a year-long contract. That’s now possible.
Start-ups like this offer attractive consumer solutions, made possible by the immediacy of technology. Where they fall short – and why this disruption hasn’t been as speedy as others – is product. Insurance is inherently complex and exists in a highly regulated environment, so most of these nascent companies can’t function without at least one partnership with an existing insurer. An October 2016 article from Financial Times says the same thing: “The links between traditional insurers and new players are critical for both.”
The “new players” need established insurers to create the products – they have product teams and legal experts adept at navigating the complicated landscape of FINRA. On the flip side, traditional insurers need these new companies to provide innovative solutions – and thereby access to new markets — that they don’t have the bandwidth to develop and execute. The drawback to this dynamic is that insurers are relegated to the role of product manufacturer and lose the customer-interaction component, the exact opposite of the current industry trend of getting closer to the customer.
This is why LegacyShield is such a unique Insurtech solution for digitalization in life insurance. We have the mindset that the customer should have access to the insurer – we don’t attempt to own relationships. In fact, the more people dedicated to helping the consumer, the better. LegacyShield is one of the few technological solutions that invites engagement from all parties.
Using Uber and Amazon for inspiration and insight, we’ve created a simple platform for users to drive their own experiences. They choose how and when to interact with us, distributors and carriers.
The thriving insurance companies of the future will embrace technology to create (or invest in) superior client-centric platforms. So you have to ask yourself one question: Do you want to have an active role in the disruption or sit back and wait to be disrupted?