Head For The Hills
Doom is nigh: Google and Amazon are becoming insurers
We have all seen the articles that breathlessly announce that Google, Amazon, and other digital players are going to become insurers. And somewhere in the next sentence or within the same paragraph, the writers exclaim that insurers much change their ways because doom is nigh.
More appreciation, introspection, and detail critically required
I’d like to see more appreciation, more introspection, and more detail concerning what insurers do (and have done since what I think is the start of the “modern insurance era” when Lloyd opened his coffee house in the late 1600s).
I’m not saying that insurers don’t have to innovate: they do.
I’m not saying that insurers don’t need to better understand how to meet, if not exceed, the needs and expectations of their customers already on the books and their target prospects: they do.
And I’m not saying that insurers don’t have to reduce and bring up-to-date the far-too-many core administration systems keeping the company running: they do.
I am saying: let’s take a breath or two and identify where the competition is and could come from for an industry that is heavily regulated, requires continual licensing and training of its sales people, requires specific types of investments (different for life and P&C insurers if my memory serves), and is capital-intensive.
Further, let’s not forget what an insurance policy is: a legal contract with a financial wrap (i.e. the promise to pay a claim according to the terms, conditions, and restrictions of the contract).
What does an insurance company do?
I welcome others to add to this list of major activities an insurance company does:
- Carries the risk
- Creates the product
- Prices the product
- Files the product forms (different for each State)
- Markets the product (i.e. determines what the customer needs, creates company brand awareness, creates product awareness)
- Sells the product (keep in mind that each sales person whether an agent or a faceless person at the other end of the phone or the other side of the web screen MUST be trained and licensed for each insurance product in each jurisdiction the company wants them to sell insurance – and the training must be continued throughout the salesperson’s career)
- Underwrites the product (whether life or P&C, underwriters must minimize adverse risk as well as strive to put profitable business on the books)
- Services the customer who bought the product (administrative “change of address” or similar transactions; claim adjudication which includes simultaneously provision of responsive and empathetic service while setting reserves, estimating IBNR, and identifying and avoiding / managing fraudulent loss events)
- Complies with all government and industry regulations
- Makes investments required by regulations and industry standards.
Are Amazon, Google, and other digital players really going to become insurers?
Will Amazon, Google, or other digital players really want to become insurers? Are they going to want to do everything on the list above?
Or will they decide to become rate comparison sites? Or marketing sites (and which insurer is going to carry the paper – carry the risk?) I’m not saying that no insurer will agree to carry the paper BUT an insurer must do so.
Or will Amazon and Google provide customer service? If you love FAQ pages now or waiting on hold for 25-30+ minutes now with a question or concern for either of them ….
Insurance service is a not FAQ, self-service situation at time of claim.
Insurers do have to understand where any non-traditional competitor could or will participate in the value-chain and ask themselves what will happen to their business (i.e. customer retention, profit, growth) if they don’t respond accordingly.
But, let’s take a breath. I think it is highly unlikely the digital technology firms are really going to become insurers.
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