How to disrupt the high-tech disrupters

Technology-driven “disruptive innovation” — innovation that results in new products, services and markets and that threatens the business models of industry incumbents — is much on minds of top executives at life insurers these days.

And for good reason: Technology giants like Amazon, Apple and Google have driven long-established companies out of business or to the brink of extinction. The life insurance business, once thought impervious to such upending, could be next in the tech titan cross hairs. 

The question is, are life insurers ready for the high-tech onslaught coming their way? And, more to the more point, what are they doing to survive and thrive in a rapidly changing market that is already experiencing the effects of disruptive innovation? 

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Accenture, a global professional services company, sought answers to these questions in a new survey of chief strategy officers, both CSOs residing at insurers and their peers in other industry sectors. The report, “2016 CSO Survey: Insurance-Key Insights,” polled 561 CSOs (and those in equivalent roles) in 10 industries and 11 countries. Target companies, including the 12 percent of respondents classified as insurers, have revenue greater than $1 billion. 

Chief among the report’s sobering conclusions: Most CSOs are cognizant of technology-based threats; and most also count themselves as less than well prepared to meet those challenges. The report specifically finds that: 

• 80 percent of global chief strategy officers (CSOs) and 84 percent of insurance CSOs agree that new technologies have “rapidly changed their company’s industry” during the past 5 years. 

• 93 percent of CSOs at global companies and 94 percent of CSOs in insurance agree that new technologies will “rapidly change their industry” in the next 5 years. 

• Fewer than 1 in 5 CSOs at insurers (18 percent) believe their companies are prepared for sudden industry disruption to “a very large extent.” Globally (excluding insurers), the proportion is nearly the same (20 percent). 

An overarching theme of the study is that incumbents across industries — not least among them insurers — cannot face technology-driven disruption by themselves. To compete with disrupters seeking to take market-share, they must work with partners — tech-start-ups, technology labs and incubators, and others active in the “fintech” and “insuretech” spaces — that offer complementary skills sets and resources.

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“Insurers and other incumbents in other sectors can’t face disruption alone,” says John Cusano, senior managing director-of insurance at Accenture. (Photo: iStock)

A word to wise: Don’t go solo.

Industry incumbants, including insurers, “must engage with new technologies and new companies to meet the challenge,” says Accenture’s John Cusano. “That may entail organizational changes to be more collaborative and open.” 

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Such changes would come none too soon. Life and P&C insurers, he added, have been buffeted as never before by a “massive movement” or ratcheting up in customer expectations driven by tech giants like Amazon, Google and Uber.

Beyond the behemoths, insurers are confronting a wave of technological change, much of it fueled by innovative seed-and early-stage fintech companies that are receiving millions of dollars in capital from Silicon Valley-based venture capital firms. 

To be sure, forward-thinking insurers are not sitting on the sidelines. Many have kick-started their own venture capital arms to leverage promising new technologies and add to their bottom line. 

In the last few years, several major carriers — American Family, AXA, Transamerica, MassMutual and USAA — have joined the venture capital fray. And, to Cusano’s point, they’re not operating solo. Oftentimes, multiple insurers pool capital in tech companies that are developing mutually-beneficial solutions. 

Here’s a prime example: AXA Strategic Ventures, MassMutual Ventures and Transamerica Venture are backing Policy Genius, a New York-based firm that provides an online platform for people to buy several types of insurance including life, disability income, renters and pet insurance.  

The site includes an “insurance checkup” feature to determine how much coverage an applicant needs. Prospects can also get a quote, access educational resources and complete an application online. 

Cusano notes that many insurers with venture capital units are also starting innovation and incubator labs in Silicon Valley labs to gain a head start with promising new technologies.  

“We see that a lot of insurers are really picking up the pace in terms of not facing disruption alone and are leveraging new capabilities and tech companies in the market,” says Cusano. 

These and other technology-driven initiatives, he adds, are representative of best-of-breed companies determined to harness — and not be undone by — forces that could upend their industries. Seeking to uncover commonalities among these companies, the CSO survey identified a number of shared priorities. 

Companies that report a greater readiness for industry disruption, for example, are “much more likely” than others to collaborate on a range of business activities. Among them: marketing, product innovation, customer relationship management, distribution and business process outsourcing. They’re also more likely than less disruption-ready businesses to “have advanced these partnerships” during the past 5 years. 

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Today’s best-of-breed companies collaborate with ”ecosystem partners.” (Photo: iStock)

Team up for success.

The types of “ecosystem” collaborators that are enabling today’s integrated companies to compete on the technology front including advertising agencies, direct competitors, logistics providers, suppliers and retailers.

Related: Bringing long-overdue innovation to a premium pricing model

One example in the life insurance space: an initiative that John Hancock Financial unveiled in April 2015 in partnership Vitality Group, a provider of incentive-based wellness programs. The co-branded program avails policyholders of opportunities to save on their annual premiums and earn rewards and discounts by taking steps to improve their health.  

A signature feature of the program is a free Fitbit, the popular wireless fitness wristband that tracks the policyholders’ number of steps walked, quality of sleep and other health metrics.