Throughout my writing, I’ve touched on both broad and narrow topics of insurance technology, but the common theme always comes back to this: our industry operates in the same outdated, antiquated methods and processes that were developed just after World War II.
OUTSIDERS ARE ENTERING OUR BUSINESS AND USING TECHNOLOGY, INTENDING TO DESTROY US.
Sure we have computers, email and iPhones today, but the underlying processes and our understanding of the marketplace are becoming less relevant as time goes on. So my question to you is why?
Why do we accept complacency and mediocrity in everything from the way we sell and service business to the underlying systems that support the process? Are we forever destined to stare longingly out the window as an entire generation of technology, efficiency and insight passes us by?
So here are my thoughts. First, it’s incredibly hard to face an issue of this magnitude when our firms are turning a strong profit. While it’s not easy to find success in our industry, it’s certainly not hard either. Three parts personality, two parts guts and a dash of technical capability will get you started. From there, just look your client in the eye, shake his hand and do what you say you’ll do. Be smart, get a little lucky, make some strategic acquisitions and you will find a level of financial success. You’ll then find yourself reading this article with a raised eyebrow wondering why I’m telling you what you’re doing is wrong.
Here’s the problem: the world is changing, and we simply won’t be able to get away with manual processing anymore. If we don’t get our collective act together, tomorrow’s dominant players probably won’t be our peers; they’ll be outside companies that can easily handle massive transactions, know how to capitalize on data and are looking for new sources of revenue.
You know who they are. You use them every day for nearly everything, except insurance. When the game changes, nobody will have time to catch up. It will be over before we see it coming. The first firms to change the game will be positioned to dominate the market, and no amount of deep pockets or old-fashioned market leverage will save the complacent.
Need an example? Let’s talk about car services. Just two short years ago uber was a word used by teenagers to describe their skateboard moves. Today it has an entirely different meaning. If you are a taxi or limousine company, it is a word used to describe the destruction of your industry. If you are a business traveler, it is a word to describe how much better life has become. For the uninitiated, Uber is a company that provides a smartphone app to both people who have a car and people who need a ride. That’s it. To become a driver, you pay Uber a subscription fee then drive around an area until you receive a ride request. As a traveler, you open the app and push a button to request a car. You can request a black car, taxi or just somebody in their personal vehicle. That’s it. Your credit card information is on file with Uber. The fare and tip are pre-negotiated and charged to your card. Get in, get out. Done.
So from a business perspective Uber fundamentally changed the model. Rather than start a livery company, hire drivers and set up routes, they focus solely on data. Uber knows only two things: who needs a ride and who is available in the area. The insight from these two data points is cannibalizing an entire industry.
What’s the response from the legacy taxi and limousine companies? Instead of holding a piece of paper with your name on it, the legacy limo drivers hold an iPad with your name on it. That’s innovation? It still looks like paper to me. Some have released an app that you can use to make a reservation, but it still takes at least an hour to get a driver to you. As an added bonus, the apps I’ve seen are actually harder to use than calling their 800 number. That doesn’t make my life easier.
So to sum it up, they are turning paper into digital paper and trying to create an app to get their clients to look at their digital paper.
If we substituted the limo driver sign with a certificate of insurance, we’d paint a pretty clear picture of the problem we’re facing. These attempts are just junk tacked onto a failing model. Sound familiar?
The only survival option for limousine companies is to change their model. Uber is number one, so which forward-facing legacy multi-state large limo company is number two? None of them. Number two is Lyft, a Silicon Valley Uber copycat with a slightly different twist. It was able to join the market because it isn’t married to the old way of doing business. I guess it’s just too painful to throw out a model that worked so well up to this point. It’s too painful to adopt the model of the company that so skillfully and thoroughly trounced you and too painful to survive and thrive as a new company in a new economy.Instead the taxi/limo industry is exercising the nuclear option: crying foul and looking for regulatory protection. All of the usual things you’d expect from an industry destined to die.
So What?
Incremental improvement of our antiquated insurance business model will not cut it. Deep pockets, market dominance and political leverage won’t cut it. We need some good old-time innovation from inside our industry. If we don’t provide it, somebody else will and our industry will be forever changed.
The taxi example provides insight on an industry that failed to recognize the importance of remaining relevant in a changing world. Luckily our industry hasn’t yet hit the event horizon of the black hole of digital disruption, but there’s no doubt we are in its grasp. We have some time but not much.
I’d love to give you a five-step program to follow, but there’s no silver bullet to fix our predicament. Innovation is more art than science. Over the next several months I’ll explore some of the basics of the new social economy, the strange case of the generation that isn’t motivated by money and other new realities that require a fundamental re-imagining of our industry.
Stay tuned to stay relevant.