Disruption and Insurance

The big word technology companies use when looking at the insurance industry is disruption. The thought process is if you can come up with the perfect approach, be it software platform, sales channel, or a different enough solution and you can disrupt an entire industry and perhaps build the next Amazon, Apple, or Uber. Do that and the next group of multi-millionaires or billionaires are created.

Apple completely changed mobile phones when it introduced the iPhone. Amazon disrupted the book selling industry, and countless other retail companies, when it opened its website, and Uber has put a significant dent in the taxi and limo universe. In these three examples, and many others, disruption occurred when one of two things happened. They either reinvented the product, smart phones versus Blackberry and flip phones, or they provided a new delivery system, ridesharing with an app or books and other items delivered to you at your home or office.

This kind of disruption could also take place in the personal insurance space as well, and there have been a couple of interesting developments which illustrate this. Let’s look at Google and Lemonade.

Google entered the insurance comparison shopping space in 2015 with Google Compare. People could shop and purchase car insurance through Google’s site seeing which companies provided the best rate and coverage. When Google announced its Compare program it was greeted with optimism by insurance companies and a little fear by agents. One insurance analyst told agents in Texas “they were screwed” after Google announced its program.

It turns out, the analyst was wrong, at least initially. Google pulled its Compare program last year after rolling it out in only four states. Rumors are it will be retooled and revamped to provide an improved customer experience and will re-enter the market sometime in the future. If Google doesn’t release a new effort, it will be only a matter of time before someone else does.

Lemonade entered the renters and home insurance market in New York last year. They are a web / app only insurer which sells insurance direct to consumers. To offer a lower cost home or renters rate, Lemonade chose not to use agents, either their own or independent agents. The belief is that agents make a commission when an insurance policy is sold which contributes to higher rates. Lemonade does, however, charge a 20% fee it pockets which is a commission in every sense of the word.

They refer to themselves as a peer to peer insurance company, however, they do not appear to be much different from esurance, an online insurance company owned by Allstate. Lemonade has some attractive rates for renters and home insurance posted on their website for New Yorkers, but it remains to be seen how competitive they’ll be when they expand to other states when a large natural disaster such as a Texas hail storm or hurricane comes along.

I believe the insurance industry will eventually be disrupted by someone, whether it’s Google, Lemonade, or some other new entrant. My reasoning is based on what Southwest Airlines did to the major airline carriers of their day. They created a culture and customer experience which caused them to grow like crazy. While Southwest didn’t entirely cause the death of airlines like Pan Am, Eastern, Braniff, etc., they did help reshape the industry. Insurance companies and agents must continue to embrace technological change and improve the customer experience if they are to be relevant in the future.

What do you think? Share your comments, questions, and suggestions on what insurance companies and agents need to do to improve your customer experience on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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