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September 02 2014 | Denise Garth

Historically, the insurance industry has assessed its competition by looking at those companies within the industry that directly compete and sell in the same market segments, offer similar products, use the same distribution channels, or have similar market size. But, in today’s fast-changing digital economy, this approach has become outdated, and insurers are being blindsided by new challengers and competitors from outside the industry. The new challengers may not compete directly by offering and underwriting insurance, but they are competing in new ways to capture customer relationship, loyalty, pocketbook, and much more through innovative offerings, engagement, and business models. Where are all of these coming from? This new breed of competitors is coming out of the technology and Silicon Valley companies.

There have been numerous articles and blogs regarding the potential of companies like Google, Apple, Amazon, eBay, and other technology companies entering the insurance space, fueling speculation, concern and for some, even fear. Each of these companies and others like them have a large part in leading the digital revolution and redefining everything from business models to customer engagement, revenue models, partnerships, customer empowerment, the use of data and analytics, and more. Centuries-old industries and the companies within them are feeling the pressure to reimagine themselves, and insurance is one of them.  

And most of these new challengers have emerged in the last 15 years, many in the last 5 to 10 years. In a short period of time, they have attained fast growth in the areas of influence, breadth of users, and impact. But the influence and impact of these technology and Silicon Valley companies is only beginning. Why? Because of the massive numbers of users they have as engaged and loyal customers. Insurance companies pale in contrast. This contrast in growth of customers between new challengers and insurers highlights the dramatic foundational shift occurring in terms of customer engagement, loyalty, and expectations, and illustrates why these technology and Silicon Valley companies pose a competitive threat to insurance.  

The growth and influence over the past ten years by these industry challengers has greatly accelerated in the last three years due to the rapid experimentation, adoption, and acceptance of the technologies used to create a transformed and new customer experience.  

Adding fuel to this growth and influence is their drive and commitment to emerging technologies and innovation. The result is a paradox for the insurance industry: an industry of tradition, based on decades, even centuries of business assumptions and models that have changed little within a culture of risk aversion – operating within a world changing rapidly, creating new businesses and customer engagement models, and embracing new and emerging technologies. The insurance industry, like so many other industries, is feeling the portending tremors of a coming quake of seismic change that will redefine competitive boundaries, landscapes, and customer loyalty.

In the research brief, The Shifting Competitive Landscape: A New Breed of Industry Challengers, we have identified and discussed key business attributes that detail the differences between these technology companies and insurers, and that are underpinning the rapid growth and influence of these industry challengers. Furthermore, each of these challengers is rapidly developing new and innovative capabilities that continually reshape, transform, and enhance the customer engagement and experience. Whether part of their R&D, or emerging from their dedicated innovation centers, or through investment or acquisition of start-ups, or through partnerships, the mechanisms of change continue to advance, faster than most realize. The research brief reviews a sampling of the breadth of capabilities for each of these companies and their experimentation and adoption of new and emerging technologies into their core solutions or as extended offerings. Together, these capabilities and the acceptance of emerging technologies reflect the bombardment and pace of customer exposure and experience presented by these companies that have raised the bar for every other industry.  

The contrasts between the industry challengers and insurance could not be more different or stark. The focus and strategic vision of these organizations reflect the shifts and challenges of the new digital economy: 

  • Customer vs. Product  
  • External vs. Internal
  • Customer power vs. Company control
  • Connecting people to an ecosystem vs. Connecting people to the company
  • Pulling and engaging vs. Pushing and informing
  • Selling an outcome vs. Selling a product
  • Creating an experience vs. Processing a transaction

Insurance is just beginning to acknowledge and experience the impact and implications. Just like other industries, this overwhelming change requires insurers to go back to the fundamentals … discuss “who we are, what we do, what we offer, and how we offer it in this new digital era. Will we be a product manufacturer, an underwriter of products, a distributor of products, a provider of services, or all of the above? And how will we leverage new and emerging technologies and redefine the customer experience?”

Disruption, convergence, change, technology adoption, and the digital world are unfolding more rapidly than anyone realized, and many are unprepared. To be just viable, not to mention successful in the new digital, customer-driven world, insurers must first leverage their deep expertise and experience regarding risk by providing risk transfer products and providing risk management services that meet the needs and expectations of customers. Second, insurers must decide if they will manage an ecosystem of partners to provide services to repair, reimburse, and restore after loss events. Third and most disruptive and transformative, insurers must decide if they are going to broaden their offerings and services beyond insurance to own and manage the customer relationship and loyalty. 

Today, many insurers are accustomed to asking, “What products and services do we manufacture and what channels do we use to sell them in order to grow the company profitably?” The insurance leaders of tomorrow will be asking, “How can we connect, educate, inform, and enhance our customer’s lives or businesses through innovative offerings that provide meaningful value in helping to eliminate, reduce, or manage risk in a world of changing risk?”

Contact me at dgarth@strategymeetsaction.com if you’d like to learn how SMA can help you on the innovation journey and discover new opportunities for the insurance industry. Click here to learn more about SMA’s research. 


For more information, please contact Deb Smallwood at dsmallwood@stratetgymeetsaction.com