The Important Lessons Banking Can Teach Insurance

Time to beat the dead horse! Customer expectations are higher than ever.

We’ve heard it time and time again; we know COVID accelerated the trend, and we know we need to use new technology to meet these customer expectations. Awesome, thanks for letting us know Erik. (You're welcome!)

We like to keep things as actionable as possible here, so instead of telling you why these things are happening and reminding you that insurance needs to innovate, we want to look at a helpful roadmap for how we can navigate this. Yes, there is a helpful roadmap for this!

In many ways, COVID is to insurance what the 2008 housing crisis was to banking. Norms, expectations, proven processes, and customer trust were all upended in what felt like the blink of an eye. Financial institutions had to fight for their lives with venture capital and new fintech startups as their sword and shield. Maybe that's a bit extreme... sure, but you get the idea. My point is that while we are absolutely in uncharted territory, we can learn a TON from how banks and other financial institutions leverage fintech to meet ever changing customer demands and retain increasingly elusive customer trust. 

Let’s talk about the biggest trends in fintech right now, and what they mean for commercial insurance. 

The API-ification of everything

Almost any information you could need is a Google search away. Almost any product will be on your doorstep tomorrow with an amazon prime account. Remember that 1000 songs in your pocket pitch for the iPod? Spotify isn't impressed.

Insurance isn’t just a database for music or products though, and you probably don't have billions of capital to deploy solely to focus on customer experience (yet). This is a complicated business and given how fast we need to adapt to change, it can't be done alone.

These customer expectations will be met through connectivity. Our business is simply too complex for a one size fits all solution. That's why this is going to be the decade of APIs. 

APIs connected to customer data will drive customized infrastructure that allows financial institutions to embrace cloud platforms fully. Say goodbye to manual data entry or having to update records in multiple places. Connectivity between all of the tools that make our business possible is the core enabler of the customer experience we need.

Incumbents + Challengers: Can’t we all just get along?

“if you want to go fast, go alone, if you want to go far go together.”- African Proverb

After the world saw several generational businesses disrupted by innovative startups, some speculation existed around whether fintech would do the same to traditional banks. Well, we aren’t depositing our checks at our local PayPal branch, so what happened? 

Banking and insurance alike are simply too critical for the economy to function to be exposed to that type of rapid disruption. What we mostly saw in banking instead was collaboration. Banks partnered with disruptors to drive innovation alongside proven processes and massive existing networks. 

As a broker or carrier, you have credibility, capital, trust, relationships, and deep industry knowledge that can not be replaced. We’ve seen plenty of capable and well-financed insurtech founders fail because they don't have what real experts have. 

Don’t get too comfortable though, the world is unpredictable and industry incumbents telling themselves they are too big to fail is a story we all know the ending to. In his book The End of Insurance As We Know It Rob Galbraith puts it perfectly:

“Many of the recent insurtech startups will fail… it’s highly likely that the vast majority of them will go bankrupt if history is any guide. But it would be foolish to bet that all of them will.”

Insurtech could be a threat, sure, but when you bring innovators along for the ride they can provide substantial value. Machine learning, AI, blockchain, and numerous other technologies can be rapidly developed through partnerships with insurtech providers.

Non-Traditional Becomes the Traditional

If banking is any indicator, collaboration with innovators drives the most sustainable growth. That doesn't mean disruptive forces are out of play, however. Customers are increasingly digitally savvy and convenience can trump the relationships, reputation and reliability that makes institutions who they are.

Fully digital banks are more credible than ever and customer trust for them is growing. Insurance carriers are seeing similar forces targeting them directly. This is addressed by Bryan Falchuk in his book The Future of Insurance: From Disruption to Evolution: 

“Today’s disruptive forces are slightly different than those from the past in that they are now being aimed directly at carriers in addition to other parts of the insurance ecosystem. Lemonade, Vouch, Root and others are building carriers from the ground up to directly take on incumbents”

Apart from the ambitious attempts to fully digitize the industry, there are other places along the value chain that are being upended. Mobile payments are more popular than ever, checks are deposited from a mobile app, and loans can be applied for without ever meeting your banker. 

The message here is to continue questioning your assumptions about what processes could be changed. Both the smallest and the most complex parts of your business could change or be challenged.

Closing Thoughts

This is an exciting time for insurance. We are going to be able to deepen customer relationships, redefine how we communicate, and see new technologies improving every process from claims to renewals. Companies that take an active role in ushering in innovation will be the winners of the insurtech revolution. 

Prioritize your relationships, keep questioning what can be done better, and get excited.

Want to make insurance more connected? Let’s get in touch.