Let’s face it, there’s no positive connotation in being called a Neanderthal. In business, the term is widely applied to any company or organization deemed so far behind the times, it’s in danger of becoming obsolete. That’s because the Neanderthals are a cautionary tale for any large, dominant enterprise that fails to adapt to the changing times.
Neanderthals roamed the Earth approximately 150,000 years before modern man (homo sapiens) first arrived. They shared 99.7% of man’s DNA but they had some significant physical advantages. They were bigger, stronger, had bigger brains and better eyesight. And yet, within 5,000 years of mixing with modern man, the Neanderthals were completely extinct and it was not because they were directly killed off by man. Instead, man used its increased cerebral capacity, its extended network of clans and its larger, better-organised group populations to eventually establish world dominance. In short, they created a new world order and the Neanderthals were simply unable to adapt despite their superior size and strength. larger, better-organized group populations to eventually establish world dominance. In short, they created a new world order and the Neanderthals were simply unable to adapt despite their superior size and strength.
So it should set off alarm bells within the insurance industry when it’s pointed out that, in terms of embracing the worldwide technological revolution, the industry is more Neanderthal than man. And the stakes have not been lost on some of it’s key players.
“(Insurance) has been lagging behind every other industry – it has been paralyzed. Either you understand it and you move towards the forefront of change…or this industry will disappear,” said Mario Greco CEO of the Italian Generali Group in May 2015.
The Insurance Industry’s Uphill Climb
Part of the insurance industry’s challenge is the fact it is not a sector that is beloved by its customer base. Its 42.6 Net Promotion Score (NPS), a metric used to determine overall customer satisfaction, is very low compared to most other industries. Insurance companies have historically fallen short in inspiring loyalty and satisfaction in their customers. Put simply, people don’t like or trust insurance companies.
This becomes even more troublesome when we take a quick look at the purchasing habits of Millennials, the generation born between 1980 and 2000.
· They spend one day per week on their mobile phone
· 82% have shopped online
· 61% use internet banking
· By 2018 they will have more spending power than any other generation
· 29% won’t complete an insurance purchase without user-generated content (positive consumer reviews)
· 88% would buy usage-based insurance
It is the last two points that should be extremely alarming for the current insurance industry. Their current model which has remained relatively unchanged for the past century is ill-equipped to accommodate how Millennials prefer to shop.
Current Tech Readiness of the Industry
According to a study by Gartner, ‘Insurance CIOs worldwide have identified digital transformation as the most disruptive factor for their industry’. They found that only 15% of insurance business and IT leaders consider their organizations to be digitally progressive. They estimate by the end of 2018, escalating IT debt will force more than 100 insurers to restructure, be acquired, outsource their IT operations or go bankrupt.
This is yet another cause for concern when you consider how rapidly the industry is changing. Insurance industry technology (Insurtech) is quickly becoming one of the hottest sectors for venture capitalists. In 2016 alone, more than $3.6 Billion was spent in Insurtech investment. That’s up from $2.6 Billion the year before and $800 Million in 2014.
These investments are yielding some amazing new tech as well as insurance applications for existing tech including: Big Data & Predictive Analytics (data analysis to improve efficiency & predict future outcomes), Smart Cities (Cities with digital technology embedded to make citizens lives better), Usage Based Insurance (Policies based on user behavior that better align costs with risk), and Payments & Crypto Currencies (Financial transactions and secure digital currencies) just to name a few. These new technologies all point to a digital and tech overhaul in the way people shop for, use, and pay for their insurance packages.
The insurance industry is at a crossroads that could determine whether or not it will thrive or struggle to survive in this brave new world. And if you’re wondering what can happen when you don’t adapt to the latest tech, just ask Blockbuster. They were caught flat-footed, totally unprepared for when video on demand streaming services became the norm for a more tech savvy generation and they became, what’s the word for it? Extinct.