A few weeks back, Gartner, the IT research group, published a fairly dire prediction to both the financial services and insurance industries, warning that social networks are commoditizing both sectors.
Such “disintermediation” is occurring because social networks have become a way for users to spell out significant events in their lives – weddings, births, retirements, deaths, and so on.
This is where it gets interesting: Gartner analyst Juergen Weiss say the social networks themselves will offer banking services, and then "naturally, insurance services as well, perhaps initially through joint ventures with existing financial institutions but not necessarily the bigger firms.”
Gartner's warning, reported by ReadWriteWeb's Scott Fulton, advises “insurers to plan now for the commoditization of their products and services, implying that they should perhaps be sold through portals the way cloud service customers purchase bandwidth and virtual machines today.”
As for banks, Gartner analysts Stessa Cohen and Peter Redshaw cite a rapid increase in the number of online banking transactions, which “has already driven banks to accelerate the establishment of their social presences through Facebook, Twitter, LinkedIn... This is a natural extension of the rise already seen in comparison and aggregator sites, especially for more commoditized products, such as small loans, general insurance and credit cards,” they write.
Gartner's discussion of commoditization and disintermediation has a familiar ring to it. There was a lot of speculation on this same kind of thing happening during the dot-com boom of the late 1990s and 2000. At the time, there was serious speculation that Microsoft and Intuit would become the dominant banks of the world.
It's hard to imagine Google or Twitter or Facebook getting directly into the insurance business, and these freewheeling ventures may chafe at the mounds of regulation that the industry needs to deal with. Plus, many policies are complex to write, underwrite and administer, and customers often want to see or speak to a human – be it an agent or customers service representative – to help them navigate claims.
But that doesn't mean insurance companies should relax, either. Commoditization does dominate the auto insurance sector, and companies with self-service websites dominate. The savvy insurers – meaning ones that are in the business now – will figure out how social networks can deliver data that will help them better understand customers, as well as reach new markets and provide more seamless ways to sell and upsell.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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