Why InsurTech Won’t Transform Insurance Until True Product Innovation Occurs

The real measure of innovation is when underwriters are forced to think outside of traditional policy constructs, driving all other participants in the value chain to follow suit and adapt.

(Image source: Hackastory.)

As massive amounts of venture capital have bolstered the InsurTech market of late, with that follows a rising number of entrepreneurs who, in a certain respect, don’t fully understand how the industry works. What does this mean for the market as a whole? As you might suspect, these up-and-coming entrepreneurs are laser-focused only on the pain points that they’re cognizant of in the value chain. Translation: the user experience. This is all well and good as there are some benefits for customers, but in reality, slapping a fancy skin onto an existing product isn’t a catalyst for transforming the industry.

So how did we get here? Let’s backtrack for a moment to look at the current landscape. We can think of the insurance value chain like an iceberg. Customers rarely see the pieces lurking below the surface, meaning interactions with products and insurers. To bring these experiences to market there’s a multitude of activities and transactions that must take place behind the scenes.

It makes sense that when a customer purchases a product and then uses that insurance product, they only interact with the product and claims process. Yet, in order to enable the process, there’s much more going on behind the scenes. The insurance value chain is busy coordinating a host of activities like underwriting, pricing, product development, reporting, reinsurance, portfolio management and claims management, just to name a few. Blissfully unaware, the customer rarely sees any of these activities taking place. Entrepreneurs who have only ever been customers of the insurance industry are also relatively ignorant of the complexity that exists beneath the surface.

So how do these green entrepreneurs who are new to the market create truly unique products? For starters, it’s going to take challenging the existing framework.

When a new or existing provider attempts to build a new user experience for an existing product, all of the aforementioned processes remain the same, because, well, the product is the same. We’re looking at the same document, policy period, management and reporting processes, reinsurance, etc. If the industry wants to truly transform, entrepreneurs need to start challenging the existing product constructs, forcing a rethink of the supporting methodologies and processes. Otherwise, there is no reason for insurers and the rest of the industry to change. Creating truly unique products will force the insurers to challenge their existing orthodoxies, and thus, adapt.

Addressing Systemic Problems

How do we gauge advancement? In truth, it’s hard to define. We’ll know it when we see it. Real change has the potential to arrive in many different forms. However, advancement will occur as new products come to market and create significant value with regard to one or more of the systemic problems that currently plague the insurance industry. Things like underinsurance, poor customer satisfaction, clunky and pricey distribution methods, and rigid products sets.

When it comes to the future of InsurTech product innovation, genuine transformation of the insurance industry won’t happen until entrepreneurs get onboard with creating unique products. The real measure of innovation is when underwriters are forced to think outside of traditional policy constructs, driving all other participants in the value chain to follow suit and adapt.

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Mitch Doust // Mitch Doust is Executive Vice President and Head of the Americas for Cover Genius, where he is responsible for the establishment and growth of the XCover platform and the broader Cover Genius business across North America, Canada and Latin America. Mitch recently joined Cover Genius from insurtech company Trov, where he was Global Head of Business Development and led the establishment of  Trov’s global network of insurance partnerships. Prior to his move into technology,  Mitch began his career with EY in Australia before moving to the Suncorp Group (one of Australia’s leading insurers) where he held a number of strategic roles including P&C strategy, venture investing and strategic innovation. Mitch also serves as an independent advisor at Anthemis Group.

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