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The echo of disruption

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Shhh, can you hear the echo from disruption?

It usually sounds like a complaint or an outrage. Then it turns into marvel at a new company’s growth and vision. Finally, it turns into regret for “why didn’t we think of that?”

When someone who has no business being in your business reinvents your business, that’s a “Napster Moment.” Even though Napster is no longer in existence, they inspired the term because they invented the file sharing system that allowed the music industry to be disrupted by Apple.

If you asked the record executives why album sales were on a steady decline, they would have told you it was because they just needed bigger hits. Meanwhile, there was this unscratched consumer itch to listen to only the songs they like, and not the crappy ones. Napster knew this. Apple did too. What did Apple get right that Napster missed? It was that people are willing to pay for music if you make it easy. Now more music is being sold today than ever before, just not only in album/CD form.

The record companies missed both insights. They spent a lot of time fighting legal battles about copyrights. Apple found the model that would ultimately preserve the payments to publishers and artists, create profit and satisfy the consumer itch to avoid crappy songs. It wasn’t really about illegality, it was about something more important: customer experience.

Does any of this sound familiar?

The life and health insurance industry can learn from the sound of disruption, hopefully before too much regret sets in. Here are three sounds to watch for, and examples of how they impacted other industries, and ours.

  1. “But it’s inferior!”  We heard that about online retail. Was it because we thought people must “touch” something before they buy it, or that they would be afraid to give their credit card information online? We were obviously wrong. Our industry heard that about the online model of selling life insurance. According to LIMRA, in 1996, 80 percent of life insurance purchasers preferred a face-to-face model. In 2013, it was only 50 percent. Many distributors who shunned the direct marketing model are now investing in it. And unlike Amazon’s CEO and founder, Jeff Bezos, they have some regret for not doing it sooner.
  2. “But it is/should be illegal!” We’re hearing that about the ride sharing services of Uber, Lyft and others. The cab companies are fighting to regulate these companies the same way the cabs are regulated. However consumers are voting with their wallets. Maybe the right fight is not about regulation, but rather to improve the customer experience. This reminds me of the battle that the life insurance industry keeps fighting to preserve tax benefits of life insurance. Yes, I believe they are important and valuable. But is that the place where the battle of increasing the household ownership of life insurance will be won? I doubt it. However, the industry isn’t investing enough in that part of the equation.
  3. “But it’s irrelevant!” Facebook is my favorite example of this. “Who cares about sharing every moment of your life online?” We’ve all heard someone say that. Heck, I said it. But 1.2 billion people disagree. This was hard to see because it didn’t really improve any particular experience, it created a brand new one. How does that relate to insurance? Check out crowd funding models that help people raise money quickly for all kinds of things, positive and negative. The notion of getting communities to give money for a common cause isn’t new, and in many ways inspired the modern insurance model. However, technology and social connectivity has made collection very efficient. Many in our industry would say it has nothing to do with insurance. I say it does. Again, it doesn’t improve the experience; it creates an entirely new one.

So if you hear yourself saying these “buts,” you might be focused on the wrong thing, and missing an opportunity to improve customer experience and differentiate your company in a profound way. 


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