What if someone Kickstarted an insurance company?
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10 November 2014Tom Scales
As analysts in the insurance industry, Celent spends considerable time and effort considering new and improved ways to do business. Much of this emphasis is on technology and where our customers, and the industry, are in their efforts to improve and what still needs to be done. Our industry is evolving and implementing new innovations, particularly focusing on the customer experience, including the web and mobile. Many, if not most, companies are hampered by aging technology in their back-end systems. This is certainly true in the P&C and Health industries and particularly true in the Life industry. Life insurance is inherently a contract that extends over a significant period of time. Therefore, many insurers are using systems that are 20, 30 or even 40 years old. Let's assume that a system installed in the 1960s does not play well in an Internet connected world. So the question for this post is about disruption. While Kickstarter or other crowdfunding methods are unlikely, it is interesting to think about how an insurance company would be formed and implemented if it was a new company formed today. What would we need to start this mythical company? 1) Would you need any employees? This is the first fundamental question. Many insurers are large employers with a significant investment in people and facilities. If you were starting from scratch, would you hire industry veterans, trying new employees and open up a big office? Possibly not. Once you have capital, virtually every other function could be outsourced. There are solid Sales and Marketing companies with licensed agents to service both web applications and call centers. Reputable Third Party Administrators exist that can handle every operations functions. Good actuarial firms can be contracted to design the product. Reinsurers can not only take risk, but in many cases provide Underwriting guidelines (and technology). Financial management requires a solid accounting firm. The list goes on, but it is an intriguing question. Building a virtual company has never been easier. 2) Would you need any agents? Again, possibly not. Starting from scratch, the company could be entirely on-line, backed up by a call center. As mentioned above, there are many companies that can provide this service. Of course, they're still agents, just not the traditional independent or captive that sells locally. 3) What about capital? This might be the biggest barrier for entry. Money isn't as available as it once was and, notwithstanding the title of the post, crowd funding isn't designed to raise the amount of money required for an insurer. The purpose of this post is not to suggest that the reader run out and start a company, although let us know if you do. It is more for the existing insurers that are not able to be as nimble and change with the marketplace as quickly as they might need. Even the largest brick and mortar insurer can innovate. There are companies, large and small, in our industry that are truly innovating. If this post intrigued you, or even if it didn't, but you do not have any formal innovation process, then perhaps you should. Your competitors are staffing dedicated innovation labs to stretch themselves, and the industry. They're trying new things and failing fast. What new idea will be born in your company today?