May 14, 2019 by David Gambrill
It’s a common misperception that large direct insurance companies have lots of money to invest in the best, most innovative technology, creating a divide between them and smaller, “have not” brokerages.
But digital transformation is actually levelling the playing field between small brokerages and large direct insurers, says Andrew Au, co-founder of Intercept Group, a sales and marketing consultant.
“Before, the big companies always had the best technology, they had the best talent, and it was never a fair fight,” he said in his keynote address to brokers attending the Insurance Brokers Association of Alberta (IBAA), held in Banff, Alta. last week. “But now small businesses have that advantage. Agility is the new currency, so it’s not the big fish that eat the small fish anymore. It’s the fast fish that eat the slow fish.”
Au provides consulting advice to Fortune 500 and other large companies, helping them to prepare for digital transformation. Seeing how large insurance companies on the direct side have responded to change, he told brokers that “it’s never been a better time to be a small or medium-sized business.”
Driven by the expectations of Millennials (those born between 1980 and 1994), the rapid introduction of new technologies has led to a type of new “industrial revolution,” Au noted. The new era represents a $100-trillion economic opportunity over the next 10 years, but large companies have found it hard to adapt. “Half of the companies on the Fortune 500 List since Year 200 are gone,” he said. “They’ve turned over because of digital disruption. Digital transformation is hardest for these largest companies.”
In contrast, smaller companies are re-imagining industries, Au said. He cited the example of Lemonade, a digital insurance company that offers renters and homeowner insurance in the United States. Lemonade promises a personalized insurance plan for consumers in 90 seconds, and claims payouts in three minutes. A dental insurer in the U.S., Beam, offers a Bluetooth toothbrush that connects to an app, which allows customers to track how well they brush and floss their teeth; personalized insurance is available based on the results (think telematics for teeth).
These quicker, agile companies have a competitive advantage over larger insurance companies and directs, Au said. “I’ve got a unique vantage point, in that I can see some of the inner workings of a lot of the large financial institutions that are your direct competitors — the direct players in the market,” he said. “And I will tell you that, regardless of all the press releases that you read and hear about, there are a lot of challenges and stalled transformation happening with a lot of the directs.”
Au likened large insurers and directs to cruise ships. “These large vessels are heavily invested and they have legacy IT infrastructure. They know some of the technology that they need to get, but they can’t get it, because it doesn’t integrate with their workflows. They are highly siloed and there is a ton of infighting that’s happening right now; that’s why there is a lot of stalled transformation.”
Au also noted that insurance companies and directs may have all of the latest technology available, but still experience stalled transformation because their employees simply don’t use it, for whatever reason.
He cautions that brokers often think about digital marketing when they think about digital transformation – mobile-friendly websites, using social media such as Instagram, etc. but the marketing aspect is “just one small piece” of digital transformation, Au said.
And so how do smaller brokerages add value in the customer’s digital journey?
“We need to rethink the business in terms of how we engage our customers? Also, how do we empower our [employees], which is a missed opportunity for most organizations. How we make better business decisions using the right tools? And how do we innovate our company?”