To Disrupt or Not to Disrupt: That is the Question for Insurance

Many industries are seeing Uber-type disruptions, but insurance may not be one of them.

That’s the prognosis of insurance industry veteran Nick Lamparelli, who reported on events at the Insurance Disrupted conference. The poster children of disruption, Uber and Airbnb, are not likely to have a doppelganger in the insurance sector. “The taxi industry is literally fighting for its survival. No, that will not be the fate of insurance. Insurance will be a lot more difficult to shake up or disrupt.”

Lamparelli provides a list of reasons insurance will be a difficult industry to disrupt, starting with the fact that “scale and immense capital is required to cover worst-case scenarios, which rules out any new business model not having that potential.” No country for peer-to-peer providers, he observes.

New business and analytical models driven by digital services, autonomous vehicles and the Internet of Things are changing the future of insurance, he states. However, this is changing the way existing players do business, not disrupting with Silicon Valley-style startups.

While Lamparelli may have soothing words for insurance executives nervously watching the digital disruption wave wash ever closer to their shores, it doesn’t mean it’s time to relax. Insurers have already been experiencing challenges from purely online players who have disintermediated agents, with Progressive.com as a classic example. Then, there’s the whole mobile revolution, incited by Millennials who want no other way to do business. The rise of aggregators are injecting digital competition into the market.  

The chances of a sparsely staffed startup usurping Allstate or State Farm’s customer base is not likely to happen anytime soon, it’s clear that the players who understand and leverage digital opportunities will take the lead. Partnerships with Silicon Valley firms will likely be the rule. For example, as documented by INN earlier this year, Google partnered with CoverHound and Compare.com to deliver auto insurance quotes. “Getting a quote through Google Compare for Auto Insurance takes you to landing pages or agents for CoverHound or Compare.” The deal includes 14 carriers, including MetLife Auto and Home and Mercury Insurance.

It is partnerships such as these that will carry the day. A report issued by BSG predicts that alliances will create digital “ecosystems of companies, individual contributors, institutions, and consumers that interact in new relationships to create combined services and mutual value.” Many “non-insurance partners will be building their own relationships and brands with insurance customers.” The alliances they forge could potentially make or break the fortunes of existing insurers. These “’adjacent’ players (operating in industries with high-customer engagement) are well positioned to embed insurance cover in the products and services they sell.”

No, there may not be an Uber waiting in the wings for insurers, but there are plenty of Ubers ready to add new digital impetus to established industry partners open to change.