Most insurance industry players are deep in the stability stage, fighting a war of inches to maintain profitability, defend and acquire customers, and incrementally improve the manufacturing of a largely commodity product. Therefore, only two powers are available to their major lines of business: Process Power and Branding.
“Digital Transformation” is an attractive buzzword for insurance leaders, indicating a hunger to replace legacy (often mainframe) systems with cheaper to maintain, flexible, cloud-based tech. Process Power is all about efficiency through difficult to copy, internally consistent action-sets. Sucking costs out of the system and replacing messy systems with APIs and micro-services won’t create Process Power for insurers (though doing these things are critical hygiene tasks). Process Power for insurance organizations means building a rating/underwriting posture that fills your book with the best risks and pushes unattractive customers to competitors (see Progressive). It could mean developing an ability to rapidly partner with significant players across a variety of other industries. The CEO and Chief Operating Officer need to conspire to create an internal narrative and clear guidelines around a specific Process posture, and take the necessary actions to enforce their posture selection.
On the Branding side, simply look to GEICO’s massive marketing spend and other players’ breathless attempts to keep up.
The US has seen few insurance companies in the Takeoff phase over the last several decades. One notable exception is in the phone insurance market. Asurion (perhaps the most successful search fund story of all time) built the phone insurance market from essentially scratch, leveraging a Counter-positioning Power against warranty providers (a willingness to enter/create a more regulated market) and a somewhat Cornered Resource in their channel partnerships at the Origination stage. During Takeoff, Asurion developed Scale Economies in their national repair shop & depot network, and made Switching more difficult for their channel partners (AT&T, Verizon) by deeply integrating their services in store processes and web/mobile app offerings.
The Origination stage is receiving more attention with the explosion of insurance tech venture capital investment. Some of these so-called insurtechs have catered to large insurance companies’ commitment to improve processes and sell more, going the B2B route. There’s limited Counter-positioning or Cornered Resource Power in this approach (unless an insurtech holds a desirable patent portfolio or presents a compelling challenge to generalized SaaS companies like Salesforce or Looker).
Startups that have attempted to rebuild a fully functional insurance company have leaned on cost structure Counter-positioning, building lightweight teams, efficient & scalable systems, and distribution mechanisms with a theoretically lower cost of customer acquisition. If some of these companies can get fully national regulatory approval and discover the resonant notes that enable distribution without margin-eating captive or independent agents, their Counter-positions could spark a Takeoff or two. If this happens, traditional players’ worst nightmares would come true: a highly motivated (equity is an excellent carrot) team of Visigoths rapaciously seeking to bring Network Effects, Scale Economies, and Switching Costs to battle. Such a newcomer could make Uber’s take-down of the taxi industry look frivolously difficult and time consuming; not even geckos, famous actors, and extraordinary processes will save the goliaths if David figures out how to load his slingshot.
Roman Ryan 