I was recently thinking about the dilemma faced by many insurance agencies when an image popped in my head:
The Terminator. An ominous artificial intelligence machine sent back in time to kill the one human being that could save mankind (pardon the garbled plot line).
There are a bunch of insurance technology companies that see themselves as the Terminator. But instead of destroying mankind, these insurance technology companies want to "disrupt" insurance. And let's be honest, some of these technology companies are run by young entrepreneurs with little or no experience in the insurance industry.
It's time to shed some light on these companies that want to "disrupt" insurance carriers and agencies.
But first, lets set the stage.
Trying to Create the "Uber" of Insurance is Misguided
I've seen a lot of speculation about who will be the "Uber" of insurance. The idea gets thrown around a lot without any real discernment as to what an "Uber for insurance" business model would look like.
There were three huge components to Uber that made it successful. First, Uber created insanely great technology. I love the Uber app as do millions (billions?) of people. The idea that I can select a few options on my phone and a car swoops me to my destination is just amazing. Second, Uber identified pent up supply and demand. The pent up supply existed because Uber tapped into everyone who had a car that wanted to make money in their free time driving people around. The pent up demand existed because people wanted on-demand rides and the taxi services were not delivering. Finally, Uber faced limited regulation. While regulatory fights certainly emerged in various cities, like my hometown of Kansas City or in Austin, the taxi cab industry didn't really stand a chance.
When I evaluate the insurance space, I don't see the same "Uber" elements. The insurance industry could definitely use insanely great technology. But I'm not sure if I see pent up supply or demand. For example, Lemonade, which is attempting to create the Uber of insurance, is focused on the consumer market. But is there really pent up demand for more insurance? Don't people that need insurance already have it? (If you have stats on this, please send my way!) Finally, the largest hurdle for any "Uber of insurance" is regulation. Unlike the taxi industry, the insurance industry is heavily regulated in all fifty steps. One misstep and the Uber of insurance could be in hot water. Insurance regulators have infinitely more power than taxi cab regulators.
Ultimately, referring to the "Uber of insurance" is misguided. The technology that does emerge to disrupt insurance will look nothing like Uber. The "X of Insurance" will be the name of the company that actually figures out how to change the insurance game.
How to View Insurance Technology Companies
At this point, a disclaimer is necessary. RiskGenius is insurance technology. Our software delivers nearly instant policy analysis to insurance agencies and carriers. We are attempting to support and improve the exiting insurance business model. Keep that perspective in mind as you review the rest of this post.
I am a Thielite. A Thielite is a person who has read Peter Thiel's Zero to One, and believes "computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built ... to empower people rather than try to make them obsolete."
Now compare that to Parker Conrad, Zenefits founder, who recently declared that insurance brokers will be obsolete in ten years as the result of technology.
When I review insurance technology companies, like Zenefits, I always ask a couple questions.
Who is the insurance technology company trying to "disrupt"? Typically, there is one of two answers: the existing insurance business model, or existing insurance technology vendors.
I then ask myself, "How?" Again, I focus on one of two answers: the proposed solution is pure technology, or the proposed solution is technology + people. As a Thielite, I believe the companies that are technology + people will win. Pure technologists that declare the end of a profession will lose.
Look at Uber. It is not a pure technology solution. It is a technology that enables people to drive other people and make money. Uber didn't immediately jump to autonomous cars and state "we will eliminate all drivers on the road." That was too big of a leap and Uber would not have gotten off the ground. While Uber was huge, it was not a moonshot -- it was incremental growth, a natural progression of applying technology to driving. Uber empowered people.
Understanding the Insurance Technology Terminators
Starting tomorrow, we will begin profiling insurance companies that aim to "disrupt" the existing insurance business model. If you are interested in reading more, subscribe to our newsletter to stay updated (form at bottom of this blog post). I can't wait for our new writer, Clara Stahl, to join the fold.
And with that, I will leave you with one thought. How did the Terminator movie turnout?
Man + Machine defeated the Terminator.