Rob Galbraith is the author of The End of Insurance As We Know It, “a one-in-a-generation book that goes into detail on why the insurance industry, long considered stodgy and boring, is experiencing foundational changes that are unprecedented in modern memory.” Rob was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Co-Founder at PolicyFly, Inc.
Rob, we're seeing investments in insurance technology continue to skyrocket, but as an industry, are we seeing the proper value from these investments?
“If I think about the value that's been unlocked or unleashed, do I think it's commensurate with the amount of money that's been invested? I would say not yet. That doesn't mean it can't get there of course. I think that’s going to be something to watch over the course of the next three to five years. There's been a ton of hype around insurtech. Now, we've seen several successful exits whether that'd be IPOs or M&A activity.
I know for those that have IPOs, there's been some stagnation, and there hasn't necessarily been a clear company that has taken off since. That's partly because the value still isn't there. I definitely think it will happen at some point, but I don't think we're there yet. A lot more thought needs to go into leveraging the ongoing investment into new technology.”
Are we at an acceptable point in the investment period, or are we as an industry getting a bit anxious that the results haven't materialized yet?
“I think as an industry, we’re starting to get a bit anxious. I know that I've talked to senior leaders that cannot believe in 2021, we still have people taking information from screen one and typing it into screen two. There's still some highly manual processes. Some of that got highlighted during the pandemic and have been addressed, but there's still a lot of manual touches and inefficiencies. I'm also amazed by how much technology is being stacked on top of each other because there’s this concern with disrupting core systems, or system interoperability of the technical data is so great, and the unwinding of that can be so painful, that a lot of technologies integrated with things like email and spreadsheets. While that may be great from a workflow perspective, I never like it when the technology is dictating the workflow.
I think you should design the process as you think it should be in an ideal state, and then try to work toward that. My fear is that a lot of the investments aren't going to see that true difference of radical change because we're only asking for incrementalism.”
Are traditional insurers currently prepared to identify and deliver high growth innovation?
“I haven't seen it, and I think it’s always really difficult to innovate from within. I've been a big proponent of saying that innovation is a discipline, just like actuarial science, underwriting and claims. I think we've started to learn over time that you can't just have innovation be one additional objective for everybody.
Unfortunately, innovation falls by the wayside. When you're innovating simply on the side, you aren't necessarily going to have radical new ideas. You're going to have incrementalism, taking a five-step process and making it a four-step process, but you're not necessarily going to make it a one-step process at the same time. I think there's been some maturity in those that are working full-time within innovation, but again, it's done very, very differently from carrier to carrier. I don't know that best practices have been established, and too often, those people are glorified procurement teams that maybe make connections, but they're not doing the work.
They're not the true subject matter experts, so it's very difficult for them to push true innovation because they don't have that expertise. It's difficult to radically change from within. I'm seeing a lot of opportunities to offer new products or access new markets, but I'm not really seeing driving losses down or re-thinking of claims where obviously there's a lot of expense, both in the loss and LAE (loss adjustment expense) perspective. I'm not seeing people rethinking contracts or product offerings in the traditional space. They're more focused on adding niche or specialty offerings such as pay-per-mile, so truly disruptive products and services aren’t being offered yet in my view. We have all the technologies there to offer some new product innovation - fueled by developments in processing power, miniaturization, cloud computing, artificial intelligence, aerial imagery and geolocation - to radically rethink the auto insurance space, the home insurance space, the commercial lines insurance space, but I haven't really seen that come to fruition yet. It’s more of a full paradigm shift that’s required, and most have yet to switch their thinking.”
How do you set a direction before you can even establish velocity towards such monumental shifts?
“I always encourage companies to start with the end in mind. I know that's kind of a cliche, but what do you think the insurance landscape is going to look like in the 2030s? Most insurance organizations I talked to are really focused just on this year - in large part because that’s what the board and senior executives are focused on and what their bonuses are based on. Many organizations may have a three-year planning horizon. Some go as far as five years, but the out years are really fuzzy. I think we know this year and the next one are really what most insurance organizations are focused on. By having such a short term focus, you can easily miss the forest (key megatrends) for the trees (short-term incremental actions).
It's important to say, what do we think the 2030s are going to look like? That's necessarily going to involve making some assumptions. Let's document what those assumptions are, and let's revisit those assumptions every six months. You want to have some ability to course correct. There's going to be twists and turns along the way. Insurance organizations need that longer term view, as many of the startups have, because they're focused on a 5 to 10 year horizon.”
Is it realistic that some of these businesses, as large as they are, can change course towards high growth innovation, or is it almost a prerequisite that you rip and replace the entire strategy and vision from the ground up?
“I think it's hard to have the right glide path. Think about a company like Apple. It felt like every time they had a product get to the maturity phase and start to get into the decline, they reinvented themselves as a company. That's how they became the most valuable company in the world. I'd love to have insurance organizations think along those lines. Insurance organizations offer a lot more products than Apple did right out of the gate, so it makes it very difficult. Think about the Steve Jobs biography, where he tells the story about having a hundred different initiatives that they considered pursuing.
They spent days as an executive team really pulling hair to get that list of a hundred down to just 10 that they were going to execute on, then Steve Jobs walks into the room and says, ‘We can only do the top three.’ Having that kind of ruthless prioritization and focus is something that insurance companies really need to strive toward to get that pace of innovation. I understand the reality of the world, particularly in a highly regulated industry like insurance. You're never going to get to that kind of beautiful story that I'm talking about there. I do think that mindset really needs to start permeating down, and if you don't have that kind of ruthless prioritization and sacrifice, you're never going to get to that next phase.”