Insurers often seem to be living blissfully on a sunny resort island, Mauritius or Mustique for choice. Very nice too, except that’s exactly the time you are most vulnerable to the ocean.
Life on the beach is great so long as the beautiful blue sea stays in its place. But when it starts coming onto the land—whether suddenly and catastrophically like a tidal wave or slowly like the apparently rising waters caused by climate change—the beach becomes a thing of the past.
The only question is, “What happens to the guy on the beach?”
Without wanting to stretch the analogy too far, the risk in this scenario is that the guy on the beach concentrates on getting his lounger into the best position, under the right palm tree and close to the bar, say, and doesn’t notice that the sea is receding from the beach, or the water level is rising. In other words, he finds himself perfectly positioned for a world that suddenly no longer exists anymore.
So what’s the relevance of this morality tale to insurance, you might ask? Well, for me, it’s the realization that a lot of the initiatives that companies out there in the industry are busily improving aspects of the business that are actually obsolete, or soon to be obsolete—either they need to be totally redesigned or scrapped in favor of something completely different. Or as I once learned in business school: first make sure you are effective before being efficient.
This, in a sense, is the danger of digitization: doing all sorts of smart things with technology to perfect a process or a channel that needs a more radical overhaul.
So, to continue to live happily on the sunny island, and remain competitive, a very practical thing you could do would be to benchmark your company not against the dinosaurs who happen to be ruling the world at the moment, but against the cheeky start-ups and innovators.
And here’s the amazing (and rather perturbing) thing: a lot of these upstarts are performing a lot better than the current market leaders at today’s processes. So that’s the first step—to be able to compete now, one needs to be able to compete with the new kids on the block. Companies like Intrasurance are probably 10 times more efficient than most of the behemoths; that is, they are beating them at their own game now.
But we are looking to the future, so also start comparing yourself to even more radical companies, such as technology solution providers like BIMA and Microensure—companies that provide technology platforms for microinsurance in the giant, emerging economies of Asia, Latin America, Eastern Europe and now Africa. These companies are more efficient at processing by another factor of 10.
And here’s the real point of this blog: they’re doing it not just through technology or conventional smarts, though those are both definitely part of the equation. They are also doing it through using those improved processes and simple productsto explore new paradigms. Imagine life insurance contracts for a month—something to make actuaries sleep more soundly at night; or policies with premiums of 60c a month—collected daily to accommodate irregular cash flows. Even think of free coverage or voluntary premiums?
If these are concepts that cause black spots in front of your eyes, chances are your time on the sunny island could be coming to an end.
Next time, more on what you could be doing at a practical level.
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