March 30, 2017

History in making: The Insurance (R)evolution

Sameer Datye

Head of Business Development Insurance and Wealth management, Tieto

When we think about insurance, the imagery we have is of an ultra-conservative business, best illustrated by pine stripes, dark suites, Times New Roman font face, legal jargon, disclaimers, leather brief case and polished shoes untouched by the radical technology driven changes happening around. However, this stereo typical image is rapidly undergoing a change as a brave new world of insurance is emerging.

The terms evolution and revolution are often misunderstood or mutually replaced. Darwinian evolution is a slow and tedious process with a single outcome expectation and is based on observations, empirical data and tested hypothesis.  Revolution is a fundamental change in a very short period of time which happens due to changes in the economy, culture or social and political conditions.

Revolutions are caused when we throw a spanner in the wheel of evolution and natural progression; Technology being the metamorphic “spanner”. Technology by itself is not a threat, however, it threatens the concept of the middle-man. The insurance business has traditionally been a middle-man acting as a book-keeper for the society coming together to balance and manage risks. When technology steps in and offsets this modus operandi, a disruption is inevitable.

The establishment is bound to face an internal revolution as a result of clash of cultures between the so-called old guard and the newbies with green glasses wanting a revolution. The older establishment will try and preach the Business-as-usual story and support it with solid arguments about how the business will face minor tremors but will tide over the challenges like it has for many centuries. On the other end of the spectrum is the fuss and flurry to promote meteoric change and lead the revolution.

The “challengers” or the “digital start-ups” are an interesting lot too. They come with no baggage from the past. No traditions and cultural shackles. Technology exists as an enabler to give wings to the fanciest of ideas. Investor backed high risk taking ability. Relatively non-existent fear of failing…or for that matter, the ability to take failure in their stride and bounce back. Genuine desire to observe closely how the way life is changing and create out-of-the box ideas to address these changing needs. Most important of all- the ability to have a razor sharp focus on very fine niche business opportunities instead of diluting their limited resources over a wider spread.

And the revolution it will be for sure…the question is the timing and source. It remains to be seen if it will be the incumbent establishment where it is incubated and unleashed or will it be the challengers who lead the “insurance spring”.

The disruption agents that will catalyse the revolution can be classified in 2 main areas- digital disruptions and technology disruptions. The disruptors would be rarely visible in isolation and in real life several of the elements will leverage and benefit from each other.

Technology is constantly impacting our daily routines which in turn impact our form of life. The changed Form of life mutually affects and influences our environmental, social, political and economic conditions leading to the creation of opportunities for new ideas and new business possibilities. The following picture further illustrates in details the triggers that lead to the disruptions and how the traditional business models get affected by the technology triggers. 

The triggers have been around for some time now and the traditional models are certainly challenged all the time. Let me stand corrected. I should not make this sound like the change is GOING to happen in the future for it is happening RIGHT NOW! The revolution is already brewing and fermenting. Not “if the explosion happens”, but “when the explosion happens” the insurance business will have changed permanently and irrevocably.

If you have any question or want deeper insights in the research findings, please feel free to reach out to me.

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