Prediction posts are a dime a dozen. In reality, only a handful of key developments are going to matter in insurance throughout 2017. And while small in number—these impending changes have the ability to start a seismic shift in how the industry operates.
After dozens of conversations and meetings with industry leaders, upstart disruptors and tech giants interested in selling insurance this past year, I’ve personally seen four major trends gaining momentum. I predict 2017 is the year these trends will have a massively powerful impact on how insurance is priced, sold and distributed.
1. Thinking Like (and Seriously Evaluating) Startups
As disruptive startups move from minnows to market leaders in less time than ever, insurers need to take note. Some of these upstarts won’t even make ripples when facing the massive financial advantages of established industry players. But others with innovative approaches that leverage technology in novel ways might, relatively overnight, change the competitive landscape for insurers.
To cope, we predict insurers will start thinking like startups by creating more agile teams and dedicating themselves to disrupting their own businesses before someone else does. Those that don’t will be blindsided when one or more customer-focused startups change the game. The industry should also in 2017 get more serious about startup potential for disruption: there’s a ton of hype around a lot of new firms that isn’t warranted, but some may be for real. Forward-thinking insurers should take care to seriously evaluate newcomers, not dismiss them out of hand.
2. The Year of Insurtech
Insurtech companies are rethinking what’s possible in the industry. 2017 will be their year. We predict these companies will make major strides reinventing how insurance works using new and developing technologies. But what those major strides look like is up for debate.
Insurtech players need industry insiders for licenses, distribution and expertise. We’re confident some will find that kind of help in the form of innovative insurers who want a piece of the action, as well as agents with the talent and expertise to help outsiders break into the market. How fast the change happens, though, will depend on the quality of partners insurtech can attract—and the vision those partners bring to the table.
3. Rise of the Non-Insurers
Hand-in-hand with the insurtech wave will come other new, creative entrants into the market. Huge companies may find it worthwhile to disrupt the more than $1 trillion U.S. insurance market with game-changing technology and service. The point is—it’s not just scrappy startups the industry needs to worry about.
Major players in various industries (think Amazon, Walmart, etc.) may find it very attractive to package insurance with their products and services. These titans can directly compete with carriers, and have major advantages when it comes to designing exceptional customer experiences online.
4. Business Model Disruption
The insurance industry is facing an unprecedented threat to its business model. Put simply, traditional insurance is bloated, inefficient and has ceased being a consumer champion. This presents major opportunities for other companies to capture big slices of insurers’ business by offering incredible service, a seamless user experience and fully online purchasing.
In fact, startup Lemonade is already experimenting with disrupting the business model as usual. Instead of making money off claims, the company takes a flat fee and then gives the leftover money to charity if claims aren’t filed. This removes the incentive that some industry players have that causes them to draw out claims, according to Lemonade cofounder Shai Wininger.
The insurance industry needs to prepare for massive disruption to the very ways it makes money. One startup alone won’t put the giants out of business. But if enough challengers present credible alternatives that benefit consumers, it could cause a mass exodus away from traditional insurance products.
Buckle up, I predict 2017 to be one heck of a ride.
What do you think of these predictions? I’d love to hear your thoughts, agree or disagree.
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