How insurers can hold off insurtechs
Cloud computing, mobile technology, artificial intelligence and the Internet of Things are no longer "emerging," they have arrived and insurers feeling threatened by insurtechs should turn to these digital tools to fend them off.
That’s according to author and innovation advisor Chunka Mui, who delivered a keynote on day two of the IASA Educational Conference and Business show in Orlando. Mui believes that there are several core principles separating innovation winners from losers, based on his research and published works dating back to the late 1990s.
In order to innovate, carriers must embrace the gap between how quickly technology moves and how slowly incumbents tend to change across all industries. Often times the conversion is incremental, not exponential, Mui says.
“Organizations do not want to change too fast because they rely heavily on current channels and expertise,” he added, referring to companies like Blockbuster and Kodak as businesses that burst onto the scene, but didn’t adapt. Today it is Google, Facebook and Netflix that are considered innovators.
The idea is to think big, but start small, Mui says. Insurers are better served focusing on the customer experience than trying to come up with a brand new concept, similar to how Uber reimagined transportation and Google’s Waymo is developing autonomous cars for customer safety.
“The tendency for large organizations is to swing from complacency to panic,” said Mui. “But they should take a systematic approach.”
Two comparable examples in insurance are insurtechs Lemonade and Trov, he says, which use established technologies like mobile apps and AI to provide new digital insurance platforms for policyholders.
The good news for incumbents is no competitor has yet to develop a fresh product at scale. Even though insurtechs raised $1.7 billion in funding across 173 deals las year, according to CB Insights, the reality is 90% of those will fail, Mui adds.
Ultimately, innovation ultimately requires insurers to learn at a fast pace, have a diversified investment portfolio and know when the right time to launch a product is based on market trends, he concluded.
“Small and agile beats big and slow,” said Mui. “But big and agile beats anyone.”