A recent State Farm commercial advertised that its call centre will be open 24-hours. Progressive’s latest spot informed viewers that all of the tedious tasks necessary to buy insurance can be done online. Not to be overshadowed, Nationwide hit the airwaves with the news that it will actually call its customers. While the insurance industry should be lauded for improving service, many would agree, these steps aren’t incredibly innovative.
Aside from the struggle to innovate, insurers realize they need to adapt to advancements in technology and changing consumer demands. Articles about driverless cars, for example, and their effects on insurance, appear daily in insurance news. Industry professionals are increasingly speaking about this innovation. However, in attempting to address the future, insurers are missing the present: the on-demand, or sharing economy.
A quick scan of a recent industry event schedule revealed no sessions about the on-demand economy - but there was a seminar on the ten least-known functions of Microsoft Excel! Meanwhile, sharing-network companies and their secondary service providers continue to find it difficult or impossible to procure insurance.
In failing to recognize that the on-demand economy is now, the insurance industry is under-serving its customers while missing a glorious opportunity to develop a new market. Insurance has been saturated for decades and the industry complains that growth is difficult to achieve. Yet it has ignored the first significant growth area in nearly a century, estimated to expand from $15 billion currently, to $335 billion in ten years1.
This non-approach has made the insurance industry ripe for disruption by Insurtech startups, and that disruption will only gain momentum as more innovative entrepreneurs launch ventures specifically to attack insurance.
The industry is correct to prepare for driverless cars and for other future innovations, but it would do well to focus on the present opportunity created by the sharing economy. Insurtech is acting on this opportunity and will revolutionize the insurance experience for consumers. That makes Insurtech a real and present danger to the insurance industry.
PriceWaterhouseCoopers LLP, “The Sharing Economy”, Consumer Intelligence Series (2015): 14