New technologies, especially the smartphone, have impacted our behavior on a large scale. We are living in the age of consumer power. We can get everything, anytime, on-demand and to competitive prices. Except insurance. What are the reasons for insurance lagging behind the innovation curve?
One of the reasons, the insurance industry has high barriers to entry including comprehensive regulation and large capital requirements. Therefore, startups as well as tech giants Google and Amazon have focused on lower hanging fruits in the past. But for the past 2 years we have seen a lot of movement in the industry. InsurTech, a term unknow a couple of years ago, is today unavoidable in any insurance magazine or conference.
While those are exciting times, it also creates uncertainty and even fear within insurance organization. An industry often reluctant to change is facing a rapidly changing environment heavily impacted by new technologies. The first InsurTech unicorns, companies worth a billion-dollar, are competing with incumbents that haven’t changed their business model and products for decades. The advantage of those new organizations, they are highly agile, have no legacy and have developed new business models utilizing latest technologies to meet customer expectations.
Incumbents must act now, or they risk falling behind and getting disrupted. While a handful of insurance companies have joined the race for innovation, most insurers are still cautious about adopting new business models and technologies. Reasons why those companies are reluctant to change are ranging from the believe that their business model will still be relevant in the coming decades to the simple fact that management is not equipped to develop an innovation strategy. Many managers do not understand new concepts and technologies. But it is time that all insurers understand what is happening in the global InsurTech space and where insurance is heading. Otherwise it is just a matter of time until they will go extinct.