One of the common themes in the insurance press over the past year has been the arrival of insurance ‘Disruptors’. Although many believe disruption is all about technology, a broader view is that disruption can come from a number of different sources.

While the terminology is new, the concept is as old as the economy.

A new idea overtakes the champ. Essentially, a disruptor changes the marketplace and definition of the product so thoroughly that  you can’t think of how the marketplace and products were before. Life without untethered phones is almost unthinkable.

One disruptor that most have heard in day to day conversation is “The best thing since sliced bread.” But what does that mean? And why was sliced bread better than unsliced bread?

The first effective bread slicing machine was used by a small bakery in Missouri in 1928. It was so popular that the local newspaper wrote a front page article article on in 1930. The public’s fascination with mechanization led to the invention spreading world wide, and it spawned other inventions that needed that level of standardization such as toasters.

Insurance is a very attractive market for outsiders. They see the vast amounts of money and want to get in. In most instances, new entrants fail, but that doesn’t mean we can smugly sit back and expect their failure to continue indefinitely. Innovation is coming to the industry at an ever increasing pace.

When does innovation become disruption?

Disruption by Another Name.

Andrew Grove, the former CEO of computer microprocessor maker Intel, wrote a book 20 years ago called “Only the Paranoid Survive“. In it he describes the process of disruption from the marketplace perspective, calling these events Strategic Inflection Points. He goes on to describe how Intel successfully navigated the disruption in their marketplace while some competitors didn’t.

Grove describes a strategic inflection point as the changes that occur in a market when what he calls a “10X force” affects a market in one of a number of dimensions including:

  • Existing Competitors
  • Potential Competitors
  • Suppliers
  • Business Process Change
  • Customers

And while there is ample evidence that there are changes taking place in all of these dimensions in our industry, the rapid morphing in the customer dimension lead to the conclusion that we are on the cusp of that strategic inflection point, or more ominously, may have already entered it.

One key item of which to be aware: These processes don’t happen in an instant. They can roll out over the course of years.

Disruption Defined

Grove describes a strategic inflection point as the following, but I’m going to replace his term with disruption:

{A disruption is} “that which causes you to make a fundamental change in business strategy. Nothing less is sufficient.”¹

SEE ALSO: 5 Trends Driving the Most Progressive Minded Insurance Organizations

Insurance Buyer as Enabler of Disruption

Over the past decade, a number of changes have taken place with consumers that have changed their behavior. Most of these are so well entrenched that here at Agency Nation we call it the New Normal for customer behavior.

  • Do-it-yourself shopping
    • First, pump your own gas; now check yourself out at the grocery
  • Comparing options before you buy
    • Most purchase decisions are well researched
  • De facto commodification of personal lines insurance
    • Although experts know insurance isn’t a commodity, the public believes it is
  • Customer frugality
    • Customers take pride in spending less; conspicuous consumption is down
  • Distrust of institutions and marketing
    • Consumers value the experiences of peers and use recommendations in purchasing decisions
  • Rise of the internet and mobile
    • We are online all the time, and expect to be able to get anything we want 24 hours a day

Any one of these changes by itself has (and have had) only a minor impact on the industry. But taken together, these changes have the potential to create a foundation for disruption. A launch pad.

As evidence, shopping for personal lines via the web has become commonplace. The same behavior is taking place in commercial lines. And the statistics continue to show that the behavior is becoming more pervasive.

Insureds expect, even demand that they be able to transact their insurance business via mobile device, at any hour.

Yes new technologies are helping drive these activities. But the real changes are in customer behavior. The New Normal.

SEE ALSO: Google Compare Auto Insurance: So It Begins

Long Story Short

We can try to build a wall around our industry; try to explain why we’re different and why “It just doesn’t work that way” in insurance. Unfortunately, that train has left the station.

The expectations of the majority of our clients have fundamentally changed. They aren’t asking the insurance industry to provide a better experience than other industries, just the same.  Certainly not worse.

Many existing industry players are working to address this change of behavior. Carriers, agencies and vendors are all creating new products and business strategies to respond.

But unfortunately, many are not.

At new entrants, creative minds are working to address these new trends and radically disrupt status quo. Many will fail. This industry chews up ‘better mousetraps’ every year.

However, at some point, whether this year, next, or in a decade, somebody will get it right. An existing player or upstart, it won’t matter.  And then the rest of the industry will be required to make a “Fundamental change in business strategy.”

For “Nothing less is sufficient.”

The independent channel can choose to remain complacent, to tell ourselves that our customers are somehow immune to the new normal, or we can choose to take control of our own destiny, to be the disruptors, not the disrupted.

Good Disrupting,

Marty Agather


¹Andrew S. Grove, Keynote to Academy of Management, August 9, 1998

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