By: Rob Tyrie
It’s important to look it the past to create the future.
Thing like bundles, aggregation, new distribution, and embedded insurance have existed in some form for over 50 years.
I was excited one day with a round table jumping up and down about micro insurance. The new people at the table thought that they had invented something never before conceived. I was excited at using smart contracts to lower the cost of administration and sales … not the category. This is because I remember a conversation I had in 2012 with a smart, seasoned insurance representative. He said, “Oh… do you know what Debit insurance is?… It is the kind of insurance sold door to door and low cost premiums are collected weeks, like a newspaper subscription". I remembered immediately being in grade school 50 years ago and paying a buck or two from a policy on me that my mom wanted. I also remembered how the payouts wired if you didn’t die and how if you lost and arm and leg, it would pay 50% or 60% of the policy. Yeah. Micro insurance isn’t new… but there are a whole lot of ways to market, sell and embedd it given new technology, culture and regulation.
With technology advances that we have at our disposal today, it is exciting times in insurance innovation as capital investment of billions of dollars move into both carriers , and insurance technology companies.
Over the last 50 years with risk and regulation in the US almost everyone with assets, a job or a business has some form of insurance. It's a mature market in the US, Canada, Australia, Japan and Western Europe. In certain classes & segments, there is close to 100% saturation.
In the evolution of retail insurance, it a bit cynical to see a new form of embedded or bundles as something old or a consolidation as something obvious.
Those needs haven't changed. Vertical Integration or Horizontal Integration are facts on how industrial companies have scaled. Porter had described it well as did Adam Smith before him. Economies of scale & scope change... and it's not just because of the product. Most of the time, companies grow because of changes in technology, laws and regulation.
So in in the case if insurance, if it costs 10x less to deliver a policy admin system because of AI and Web3, it stands to reason a player will enter a new niche a new way. Just as reasonably, of privacy regulations increase to the level of GPRS is every state in the us, only the largest players will be able to deliver products that have the overhead of that regulation set.
Remember this.. while it’s ok to say "blockchain is not a new idea, it’s just a distributed, synched database" or "Fornite is not new because Second Life existed more than a decade ago"... it is only interesting to those who know the past and want to communicate the evolution of technology. Statements like this are irrelevant in creating new platforms to capture & delight 20M customers. Worse, you will sound unintelligent if you conflate stuff like that. Would you say Wikipedia is just like an electronic version of The Britannica Encyclopedia? There are similarities but just about as many as yellow chalk and yellow cheese. THINK SMART when you compare and contrast things please.
So, what will we see, the bigs get bigger or will the SME and aggregationists get bigger as they tune into segments?
How will insurance of the future scale after 100 years of experience?
As tech and regs change the pendulum of horizontal integration and vertical integration will swing. CEOs of insure companies with struggle with going "deep" into a veritical offering and "wide" across the market with general offerings.
Based on the past, I know that these patterns will occur:
1. Dis-intermediation and/or
2. Intermediation
The largest companies will do both, simultaneously.
In my practice at Ironstone, I help develop these strategies and new bundles on new technology platforms to help companies compete in a mature market. It's #context, #technology and #regulation that predict the potential success of innovation.
Key stable technologies like IoT, Sensors, Robots, Smart Card and OpenAPI and Cloud Services are some of the top tech that are driving the offerings we are designing for multi-sided marketplaces now.
#ApiFirst is an excellent mantra if you want to have flexibility in how you want to create and scall product offerings in the future.
The multiverse and BTC are less top-of-mind 🙏😏
#insurtech #insurance #apifirst #ironstone #strategy #iaadvice
