Disruption is nothing new, you’ve seen it before. Companies today have two choices: evolve with technology or go extinct.
This certainly holds true for the insurance industry where emerging insurance technology is putting pressure on many in the industry who are slow to adapt. As you can see from the timeline above, this isn’t exactly new. And in case you don’t think it could happen to you, the following examples show how this belief can turn disruption into failure no matter WHAT industry you work in!
Ah, Blockbuster. Once they were the industry leader in video rentals. As technology evolved from VHS to DVD, the national chain adapted just fine. They had the proper supply chain and logistics in place to support the status quo. But the company soon became stagnant, failing to respond to video-on-demand services and video rental kiosks. Famously passing on the opportunity to acquire fledgling DVD by mail company Netflix, and the rest is history.
Much like brokerages facing evolving insurance technology, Blockbuster held onto an outdated system just long enough to fail. By 2015, a company that once boasted over 9,000 stores had been reduced to about 50 franchise-owned stores.
If you happened to photograph the damage to your car after a fender bender in the ’80s and early ’90s, it was likely on a Kodak camera. For decades, Kodak’s technology was untouchable as the company dominated the photographic industry. From the 1900 release of the iconic Brownie camera to the handheld camcorder, technological innovations kept Kodak at the top. But Kodak didn’t respond as digital technology emerged, and the company is now a shell of what it once was.
Myspace is a perfect example of brokerage management gone wrong. It was profitable at first, but only focused on connecting people on a single level. Facebook figured out this wasn’t a recipe for success. Mark Zuckerberg knew people wanted to connect on various levels, and this knowledge turned Facebook into a global force.
Facebook’s dominance in social media technology may have caused Myspace to let its guard down. Either way, Facebook surpassed Myspace in unique visitors by 2008. In 2011, Myspace sold for only $35 million, and while it had 1,600 employees in 2009, this number dropped to 200 in just two years.
Why Companies Fall Victim to Disruptive Technologies
“In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”
Charles Darwin wrote that statement almost two hundred years ago when he observed how species evolve. Had Mr. Darwin been the CEO of a modern multi-national organization, that same comment would not look out-of-place today. All industries need to evolve to keep abreast of innovations and ever-changing trends.
However, unlike the natural selection that Charles Darwin referred to, changes in the industry are measured not in eons, but in years or even months.
The insurance market is not immune from make-or-break technological innovation. New technology like wearable devices that gather lifestyle and health data give insurance organizations an unprecedented amount of data on the risk profile of their clients. Other inventions, like the self-driving car, will pose new challenges to insurance companies — like who would be at fault in an accident.
Technology will continue to change and set the pace for the insurance industry. Although technological innovation claimed its fair share of victims, they were either slow to appreciate the magnitude of the on-coming change or too blinded by past successes to look to the future. Innovation should not be feared; every firm has the potential to become disruptive innovators themselves.
The issue of falling victim to disruptive technology is actually less about the larger industry as a whole and more subjective, ultimately falling on the broker principal.
The question is not “is the insurance industry going to exist tomorrow?” Rather, are we putting ourselves in the best situation possible with the technology available in the market to meet and exceed the needs of our customers?
If you’re not addressing this question. . .look around you, look at your competitors, look at people in the insurance industry that are attaining success. Break down their strategy so you can see what works for them and apply it to your own business. Don’t reinvent the wheel.
I think it’s important for you to go through the process, but I also think it’s pretty clear from the examples above (companies operating outside of the insurance industry) that the path to success starts with a strategy that lifts the customer experience up as the core focus.
The revenue will follow.
Senior Vice President