There’s a lot of outside-industry attention being given to insurance right now. Why? It’s apparently ripe for disruption (I don’t like that word so much). In lay terms, that means the tech community haven’t raided the larder yet.
With a few opportunities of innovation out there, it’s point of choice that matters the most, argues Worry+Peace founder, James York.
To those in the know, there is already an insurance tech stack. I’ve talked about it before – and tried to pad it out – the front, the middle and the base. Since my first effort, I’ve actually begun to refine my thinking by looking at the process in terms of product flow.
Now, the back/base of the stack is the insurers, the middle is wholesalers and the front, distributors. The whole stack is supported by a side structure, like a splint. That’s the current technology, enterprise and proprietary tools the various parts of the stack are using. It works better this way.
Good so-called disruptors or innovators, will sit somewhere in that stack, maybe across a couple parts of it, with a smaller, lighter, or seemingly invisible “splint”. From base up, though – there are simple questions to consider.
If you were to create a new insurer, you’d need to consider – from your spot at the base of the stack – where am I going to distribute? Likewise, the wholesaler must consider – who and where am I going to distribute?
Finally, and most flexibly perhaps – when it comes to disruption – is the distributor and they consider; who, where and how am I going to distribute? (I like that triple opportunity, because it can dictate the way you innovate. It’s where I sit.)
Remember the questions each part of the stack must answer – it might help you figure which type of disruptor is a safer bet.
Three clear paths to innovation
On the front end, there are three clear paths to innovation being pursued:
– Point of Choice
– Point of Problem
– Point of Social
Easy. Choice was the first to move, with aggregators and comparisons sites (PCWs). You can help consumers look at a range of options and make better purchase decisions. Given this is now a fairly mature area, it’s likely there are some definite opportunities to make a better model – which is what Worry+Peace is exploring (although you’re only seeing “own branded” products right now…)
‘Problem’ was next. Those brokers and intermediaries not decimated by the move to direct and digital focused on niche schemes. They focused on providing better servicing – in terms of access to information, not necessarily advice. That’s now being disrupted by players coming in and doing niche better. I am sure you can think of some niche areas! I own a brand that sells only Engagement Ring Insurance, for example. Neat.
Then there’s point of Social – a most recent frontier! That’s where entrepreneurs are really charging forward right now. The likes of Friendsurance and Hey Guevara are using pools and escrowed cash to manage those little claims and unite people in a way that mimics and mirrors the things they’re use to in their social networks. It’s a nice concept because insurance was THE first functional social network – sadly, its just not gotten the cachet of Facebook, has it? (Of course it hasn’t.)
There you have the three points of disruption. Social sounds the best, but don’t be seduced! Equally – the Problem seems like a white space, with less competition! Again, don’t be too seduced.
Point of Social and Problem
Both are fantastic opportunities for innovation. Alone, they are vulnerable. Firstly, point of Problem has few barriers to entry, most brokers could figure out a way to make a basic group or forum – and if they have insurer relationships, a bundle of problems can be matched to a willing underwriter.
Social is a bit trickier. Because it’s not actually “one” insurance policy – it’s a cash pool plus an excess of loss policy – it brings problems. It doesn’t offer true capital adequacy security if the XL insurance isn’t captive.
Secondly it complicates the claims and complaints processes. What happens in the pool when a claim is paid by the primary, but drags in the excess section? What happens when other members of the cash pool get disgruntled with poorer drivers draining the pool but not being penalised with higher prices? There are more issues, but I don’t want to give too much away.
Clearer products, easier to compare
Choice then. Let’s consider it. It’s proven to be popular. It’s good for the insurers to acknowledge that, even if an insurer claims to be direct only, the consumer is savvy enough to “compare” the direct players over time – by their own personal metrics. Some won’t, but most people are inherently risk averse and care where their money goes – regardless of what they tell pollsters or focus groups.
In terms of regulation, the FCA also wants clearer products that are easier to compare. That isn’t going to flip to a monopoly-rich appetite any time soon.
Now imagine these opportunities are three circles. Overlap them and you start to see the interesting players. Bought By Many bridge Social and Problem. Simply Business have successfully bridged Problem and Choice for commercial customers.
Me? I am focusing purely on choice right now. But I will very shortly break ground on a suite of apps for our site that hit the sweet spot – the prime overlap. Where point of choice meets problem and social. That’s a platform for both of the key stakeholders combined: Insurers and Consumers.
Choice will out
I don’t think Worry+Peace will be alone, either. There have already been several successful aggregators – competition makes you better!
It’s from choice, though, that the other two points of innovation can be better sustained. Going from the other two circles of innovation exposes a startup/project. There are far lower barriers to entry – especially for someone with decent tech resources and capable product makers. Plus, you’re chasing the same market as the large-budget direct players, and I’d argue your model just isn’t disruptive enough to wow.
If you’re looking to start an insurance company – you’ll need to hit all three spots of the stack. A wholesale hedge is likely to appeal – just in case platforms do well! That’s why many a “We aren’t on Comparison Sites” insurer usually has a brand Trojan horse in that channel. (They just don’t tell you a lot!).
Choice will out. You’ve been told. Maybe this helps you invest your time, interest and capital in the right place…