Insurance professionals are exceptional at managing and mitigating risk. But for tech start-ups, quick prototyping, rapid iterations and the courage to make a big gamble is needed to succeed. The risk-averse nature that is so key to insurance could be holding the industry back in the tech race.
Insurance Business UK spoke to George Ornbo, managing director of digital innovation consultancy Pebble Code to find out what the insurance industry could learn from fintech start-ups to beat them at their own game.
What customers expect from insurers is changing. Feedback has indicated that the next generation of consumers would like to see insurance transition from being a ‘safety net’ to more of a ‘guardian angel’ role, protecting customers from risks instead of just getting them back on their feet when something goes wrong.
This is the area tech start-ups see an opportunity for competing with traditional insurers, offering digital products to better communicate with customer.
“The traditional insurers are still quite telephone based, they don’t necessarily care about design, they don’t care about digital very much,” said Ornbo. “But they are starting to care about it now and I think that’s what people are waking up to, almost like a slap in the face.”
Ornbo said the with the ease of changing policies these days, customers are now not particularly loyal. The only way to keep customers is to make sure their experience is positive, and technology hasn’t made the industry easier to work in.
“It’s actually harder in my opinion,” said Ornbo. “You can’t just sit there with your product and let people come to you and they’ll just renew, there are going to be newer products that make people’s lives easier, but once you’ve got those products there will be other products that are even easier, and people will be flighty and move over. It’s definitely harder.”
It’s here the opportunity for big insurers arises. The bigger companies already have the history, reputation and a customer base that start-ups don’t. An insurtech company will have to spend a dramatic amount of money on advertising. An established company doesn’t, giving current insurers have a substantial head start.
The problem for big insurers is that risky ideas need to developed in order to find the one that eventually sticks.
“They are organisations that need to manage risk moving to organisations that need to embrace risk, in terms of creativity. The standard way to do that, with precedence of Xerox and a number of another large corporation, is to establish ‘skunkworks’.”
A ‘skunkworks’ department is a division of a company that is outside the corporate structure and largely left alone to work on a project. While it has a defined goal, it isn’t restricted by the bureaucracy governing the rest of a company.
“That’s very difficult for traditional managers and business owners to grasp, because they’re used to quantifying exactly what they are going to get and when, and how much they are going to pay for it,” said Ornbo. “Suddenly you’re embarking on this totally entrepreneurial idea that may or may not succeed, and there’s all kinds of factors including the open market, timing, consumer behaviour that could derail it. It’s probably the biggest challenge I see for insurance is how to engender that culture that they need to become, how to attract the right people and how to retain them is also very difficult.”
For brokers, the opportunity to offer exceptional customer service both online and off is the area in which they can set themselves apart from solely online brokers. Ornbo said Apple is a perfect example of how to merge excellent online and offline business.
“They’re a digital business, they sell digital products, they sell some hardware products, and you can do all that online, but they still have retail stores in very expensive locations and employ customer service people. That’s one of the reasons they are so successful, their brand is very easy to engage with. It’s easy to get that support, and I think brokers might do well to look at that model and see how they could play more of a guardian angel role.”
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