Is your agency prepared for digital disruption?
In a rapidly changing world, the basic concept of insurance has remained remarkably stable. Agents are the link between customers and carriers, who create risk pools and price coverage to both indemnify and produce a healthy profit margin. It’s a model that’s worked well for everyone involved, but how much longer can we expect it to remain intact?
That’s not paranoia or doomsday thinking. It’s reality. The business world has been radically transformed, and it’s only a matter of time before our industry undergoes similar disruption. What Amazon® has done to retailers, what Uber® and Lyft® have done to taxis, and what travel websites have done to local travel agents are all examples of how industries have been profoundly transformed overnight.
So does that mean you should just give up? Hardly. We’re on the eve of digital disruption to retail insurance, and the agencies that recognize opportunities and adapt are those that will thrive in whatever new environment awaits us. Agency owners who resist disruption, pretend it won’t affect them, or simply try to ignore it won’t be around much longer. Now is the time to take a frank look at the future and see how your approach to business can adapt.
Being ready will create a tremendous competitive advantage because most companies try to avoid change. Accenture recently released research concluding that 93 percent of corporate strategy officers believe their industries will experience disruption in the next five years, but just one in five think their companies are doing enough about it.1
What kinds of changes can we expect to see? Some of the most likely involve business models. As Amazon and its peers put more control in customers’ hands, there’s an increasing expectation that other industries will offer the same. If I can comparison-shop for laundry detergent in seconds on my smartphone, why should I have to wait a few hours for your CSR to call me with a quote for revised coverage? In fact, why can’t I just get the answer myself? Carriers and agencies will need to meet those expectations.
In addition, savvy folks in the industry will create entirely new carriers built around service concepts, such as peer-to-peer networks. We can also expect to see successful companies outside the industry dip their toes in the insurance market. Did you ever expect that you’d be able to buy groceries through Amazon? What if homeowners could get their coverage as easily?
Another area of change will be new pricing models. The idea that a carrier offers customers only two or three payment options will seem increasingly restrictive, so we’ll see customer-centric pricing approaches appear. That could include everything from custom coverage packages that customers could select, to more “name your price” options or even automatic bank deductions on a more frequent basis. There may be an infinite number of options, but flexibility will be at the heart of all of them.
Finally, other changes in our lives will lead to the creation of new kinds of coverage. The rise of ransomware may trigger a demand for simple cyber security policies. If self-driving cars become the norm, how will auto insurance change? If a self-driving car hits the neighbor’s mailbox, is the owner at fault? The manufacturer?
Again, the coming disruption is not gloom-and-doom being spouted by pessimists. It’s starting to happen, and the pace of change will accelerate. Panic is certainly one option, but if your goal is to maintain a profitable business and remain meaningful to your customers, now’s the time to start thinking and planning. Waiting to see what happens will mean being left behind.