Tech a blessing and a curse for insurance CEOs
It’s not easy being an insurance industry CEO, regardless of the size or line of business. Though the job is typically pretty straightforward — establish and execute organizational goals, policies and procedures, direct and oversee the development of new insurance products, and perhaps most important, make sure their company boosts profits — getting this job done to the satisfaction of the organization’s Board of Directors isn’t so straightforward, especially in light of industry disruptors and emerging technologies.
In fact, CEOs acknowledge that these two phenomena are significant concerns. PwC polled 95 insurance CEOs from 39 countries late last year who said they expect to be affected by the disruptive change and competitive threats made possible by new entrants to the market, and even “feel more threatened” than leaders of other industry sectors, such as entertainment and media, banking and healthcare.
The PwC report also noted fears related to the speed of technological change—a full 83 percent (up from 69 percent) believe it to be a threat to their organization’s growth, and 28 percent stated their belief that over the next five years, technology will completely reshape the industry’s competitive set.
McKinsey found similar results earlier this year when it queried 75 CEOs, alumni representing its Bower Forum from Asia, Europe, and North America, to share their top concerns. Many Forum members were convinced that technological change is the biggest, most disruptive force facing today’s corporations, says McKinsey, and keeping up with fast-moving technology (notably, how to better prepare themselves for the disruption that will more than likely confront their companies) is their biggest challenge.
Insurers of all sizes are concerned about technology disrupters--from robo-advice to pay-as-you-go and sensor-based coverage, notes the PwC report. Further, these competitive threats are “heightened by competition from lean and agile insurtech entrants, which can get closer to customers while still being able to undercut more established businesses on cost and price,” said PwC. “Incremental innovation and marginal cost savings won’t be enough to sustain profitability and growth in this disrupted marketplace.” This may be especially true for small- to medium-sized insurers that operate with restricted budgets in niche markets.
But all this makes sense in light of the fact that disruptors are a relatively new thing to insurance. Even five years ago, most insurance CEOs maintained a traditional approach to doing business, bridging their aging legacy systems to agent and customer portals in the hopes that their agents and customers would use them. When they looked over their shoulder it was at their peer competitors, not insurtech entrants.
Today, with $15.8 billion in investments currently fueling the insurtech world, these CEOs have a right to be concerned, because these two phenomena (emerging technologies and industry disruptors) really represent one: technology as a differentiator that enables them to change how they do business. And it speaks to the desire insurers (of all sizes and across all lines of business) have to remain relevant.
Let’s face it: unlike the coal industry, insurance is a vibrant, growing marketplace with incredible potential. And if you consider it a commodity, it’s as relevant as it gets. So those insurance CEOs who can look beyond the immediacy of organizational goals, policies and procedures and focus more intently on embracing technology as a differentiator will probably keep their jobs. Why? Because they’ll also end up embracing insurtech disruptor partners as a way to develop new insurance products for yet-to-be-discovered markets, growing their businesses, and boosting their profits.