The linked article was written back in July 2021 and is even more relevant today.

Big institutions are taking note. In The Start-Up Enemies of Wall Street Are Booming, the New York Times observes that fintechs are “building on people’s growing familiarity…with tech tools and digital payments, a shift that has accelerated in the pandemic,” and notes that, “banks are extremely vulnerable because they have not kept up with what customers expect.” Jamie Dimon put it more succinctly, including a section in his recent shareholder letters, titled simply, “Fintech and Big Tech are here … big time!”

A diligent industry observer, or a close reader, will note a trillion dollar sized hole in the Times article: not a single insurance company or product is mentioned.

When you are involved with insurers and insurtech it is easy to get carried away with the news on VC investments, new products and the growth of digital initiatives by carriers and brokers. We sometimes need an outside view for a reality check.

Last week Revolut announced the addition of pet insurance to its product line-up. Revolut is eating incumbent bank's customer bases for lunch despite incumbents launching some slick mobile banking apps. 

Tencent and Ping An have changed insurance forever in China; legislation and compliance in Europe and the USA ( not to mention each US State having its own licensing requirement and different compliance rules) have kept that type of revolution at bay.

NeoBanks and other competitors are forging ahead unhindered by a carrier's or broker's  ages old mainframe core systems and more technology stacks than a Cobol or Fortran developer could dream of.  Read 'Bancassurance, NeoBanks and competing with insurers' for more on that competitive threat.

Meanwhile!

“Since 2018, 89% of private investment in insurtech has gone into companies that are primarily focused on the distribution (34.1%) of insurance, e.g., selling more insurance; or the creation of new paper (54.4%), e.g., building new types of insurance to sell.”  Stuart Winchester in Digital Insurance 

You can see this in the digital maturity of carriers in home and motor in the UK which is generally said to be ahead of North America for digital automation and innovation.

Now compare that with pet insurance which neobank Revolut is now attacking.

Yiu can expect Revolut to be customer focussed, with delightful digital and online experiences  as indeed is full stack insurtech BoughtbyMany as you can see below.

Then compare incumbent market leader PetPlan!

 Stuart Winchester in Digital Insurance explains that:

'nearly 1 in 3 Americans are still using a filing cabinet or paper folder to keep track of their insurance documents. That bears repeating: one in every three people living in the year 2021 is dependent on a filing cabinet to manage their insurance policies.' 

And all the while customers can manage their bank accounts, investments etc  from phones and tablets wherever they are whatever the time.

 Incumbent brokerages, fintechs, and neo-banks, however, supercharged digital transformation whilst insurers have mostly focussed on automation and efficiency- internal priorities rather than customer ones.

Brokerages made online trading available, for instance, but every trade cost you… until Robinhood made it all free and took 15 million customers away from them in half a decade. Mobile deposits and online transfers were appreciated by big bank customers… until Venmo and Cash App exploded overnight and set the table for Chime and Revolut to build their no-fee, transparent “neo-banks,” which are eating market share by the percentage point.

If the insurance establishment thinks it can simply set the terms of its own innovation, it does so at its own peril. Fintechs have shown us that incremental changes from major institutions just aren’t enough for the modern customer. Insurtechs, take note.

I recently published an article How incumbent carriers survive, thrive or will be disrupted.  

The Revolut announcement made Maarten Ectors ask me ' Mike Daly Still feel as comfortable about your title? Revolut is kicking large UK retail banks out of the consumer space. How long will it need to do the same with insurers?'

I changed the title to 'could survive' and also that only the top two quintiles likely to do so. Those that will survive and thrive will those that plan and execute more than incremental change. More than just automation. They have the technology available as long as they have the vision, leadership, strategies, resourcing and business execution capacity to so so. 

More than that should insurers and brokers change structure, organisation, culture and the the way they so business? Maarten Ectors and I have offered advice to some as follows.

Our suggestion would be to stop trying to migrate old products to the cloud but redefine new digital offerings. Basically, set up a separate unit whose task it is to come up with digital products that are sold and supported only via digital channels, e.g., comparison websites, D2C, no call centre, fully automated, ...

Telefonica a decade ago, created Telefonica Digital which was tasked to find digital revenue sources. A similar concept could be followed. Basically, starve the core business and make the digital business grow. Instead of organising into functional teams [marketing, operations, technology,], it is better to organise by customer objective, e.g., first by platform/product, then by quote, claim, service, and create multi-functional teams, e.g., claims team has both business, operation, and technology people. All should be focused on full automation. 

Finally, insurers should move away from product only but create eco system platforms, e.g., combine alarm, home automation and insurance into one smart hub which can upsell heating servicing, ... Also claim platforms should become "uberised" and be expanding beyond servicing insurer claims to offering any type of repair and maintenance service

My next article is on choosing the right technology partners. 

For UK insurers and insurtechs that find the digital maturity insights interesting you can subscribe to them at very reasonable rates to help plan and execute digital strategies. ( I declare an interest as an associate of Altus the publishers). 

Just drop me an email to mike.daly@altus.co.uk for more information or a free trial. Same if you would like to set up new business units to to come up with digital products that are sold and supported only via digital channels