According to experts, the insurance industry is primed for disruption. What will that disruption look like and how can you prepare? I recommend studying the business models of so-called disruptive companies (here's a great book to get you started).
Google's business model is simple: it provides helpful free tools (like Gmail, Google Maps, etc) in exchange for your data. It then uses that data to serve you highly relevant digital ads. Companies pay for the clicks on those highly relevant ads.
Uber is another interesting business model - and one that the insurance industry needs to particularly understand.
Before Uber, the supply of ride sharing options consisted of taxis and private cars. Uber changed the ride sharing industry by expanding the amount of supply. Uber empowered non-taxi drivers so they could provide rides to consumers. Additionally, Uber made a seamless connection between the increased supply (drivers) and demand (people needing rides) through technology. Uber created an elegant, simple mobile app that allows riders to quickly request and access a ride.
Like traditional taxis, in the insurance industry there is limited supply of risk management services. Services don't scale. Risk management services require more people that are experts in contract review and analysis. Often times, insurance agencies and brokers offer risk management services but only the largest clients take advantage. And that's okay with the agents and brokers because they don't have enough people to service everyone equally.
But what if technology could allow an agency or brokerage to offer the same level of risk management services no matter the size of the client?
The insurance industry's risk management services look a lot like the pre-Uber ride sharing services:
1. There is not enough supply of risk management.
Risk management is a service provided by individuals that work within corporations, brokerages, agencies and insurance carriers. Each risk manager is assigned an account or a topic and they try to minimize risk through various activities, one of which is diligent contract review.
The problem with this model is that supply is limited. People have only so many hours in the day. Just as one taxi driver can only provide so many rides in a day, one risk manager can only provide so many risk insights in a day.
The answer to the problem is to create more risk management supply.
2. There is no technology efficiently connecting risk managers and those needing risk management.
As we were getting ready to launch Riskgenius [link], I had the opportunity to speak with and survey hundreds of risk managers. Nearly all of them use the same three tools to review and share contracts: Microsoft Word, Adobe Acrobat, and Email.
These tools remind me a lot of how I used to get a taxi in Kansas City. I would call one of the two taxi services, listen to the phone ring fifteen or twenty times, and pray someone would answer. When someone did pick up, I would be informed that a taxi would pick me up in an hour.
Email works much the same way. A customer might send an email to an agent, broker or carrier requesting a contract review. Often times, this first step never happens because customers aren't even aware risk management services are offered (just like I wasn't sure if someone was going to pick up at the taxi company). But if an email is sent, the contract review occurs in a vacuume and is then sent back to the customer. The customer might schedule a call for any follow up questions. It's an inefficient process.
The answer to the problem is to create a technology that directly connects the risk manager and the customer during contract review (i.e. contract review collaboration).
In Part 2 of this article, I will expand on what the answer to these two problems looks like for the insurnace industry.