Lipstick on a pig or real insurance disruption?
I recently attended a superb event called Digital Insurance Agenda (DIA) in Barcelona. The event featured many forward-looking insurance companies, technologies and solutions. But do these new innovations translate to real insurance business disruption or is this merely "putting lipstick on a pig?"
During the two days we attendees saw more than 40 showcases and pitches from a variety of brave, disruptive and modern innovators. The message was clear: Big things are happening right now. The event was packed with cutting-edge technologies and business models, but the attendance of Nordic insurers was disappointingly low. I really wish I had seen more people participating from Nordic insurance companies. It sure would have paid off.
So what revolutionary is cooking in the insurance sector?
While not all of the content at DIA was completely new or revolutionary, a couple of items really struck me at the event.
First, it is clear that start-ups and other forward-looking companies are boldly exploiting combinations of existing businesses and new technologies. One company showcased at DIA has developed a social media channel service with one simple purpose—identifying the best insurance solution for the needs of individuals. Anyone looking for their first insurance policies simply contacts the service through a social media channel like Facebook, Twitter or other platforms. The service then connects the potential insurance customer and their needs to numerous insurers, who transparently compete for each customer. This puts insurance providers in a new situation. They are forced to reorganize their operations models to provide insurance solutions to this new customer base or start losing market share to competitors that are active in these services.
Another critical observation is that new insurance companies and totally new actors in the insurance value chain are heavily utilizing new technologies developed by other industries. It is quite amazing that with today's technology, it is possible to run an insurance company with mobile phone features and social networks only. The effects of this mobile-based business are clearly self-evident in home insurance services, for example. Picture recognition features allow any item to be insured on the go, with nearly instant identification, assessments and insurance premium calculations. This is possible at a fraction of the cost associated with traditional insurance processes. Why wouldn't these models and solutions work in traditional insurance?
What should we think of this development?
The effects of disruption and digitalization depend heavily upon your place in the insurance industry. For insurers it raises a question—do you become part of this development or ignore it? If insurers are not exploring the possibilities of new technologies and ecosystems to their fullest, there is a major risk of seeing current business being cannibalized or the current value-chain weakened.
For a service provider like us at Tieto, the situation is quite similar. Everyone involved in insurance needs to ask themselves another important question. Can you compete against these globally spreading innovations or should you partner with them in your ecosystems? For us, the answer is quite simple. We need to be a part of new ecosystems and embrace new innovations. This contributes to our understanding of the current situations and enables us to simplify the potentially painful journey from outdated insurance IT systems to lean, lightweight and cost-efficient solutions that are in sync with the expectations of modern insurance customers.
So let's return to the initial question—is this development lipstick on a pig or disruption? Realistically, half of the content at DIA was frivolous and is likely to disappear or have limited impact. But the other half showcased the extremely smart people, tools and gadgets in our world, and they are impacting the insurance business as we know it right here, right now.
For Nordic insurers, this means that merely "putting lipstick on" is not enough. Insurers need to expedite their digitalization development agendas and keep these new innovations, possibilities and ecosystem partners on their radar. Being passive and uninterested may weaken current businesses quicker than we realize.
Let's keep our eyes open.