An Insurer without Insurance?

What do AirBnB, Uber and Smart watches have in common? There are of course a lot of logical answers to this question but these companies highlight the new trend that I see more and more of and which is redefining whole sectors. Think about it, AirBnB transformed the Hotel industry by offering low priced rooms with a real life experience, Uber transformed the Taxi industry by offering low prices and convenience, Smart watches redefined the watch industry by offering products where telling the time is just a byproduct. So what is the trend here? The trend is new entrants transforming a market without possessing the actual foundation and characteristics of this market. AirBnB is a hotel chain without hotel rooms, Uber is a taxi chain without the cars and Smart watches are watches without the watch…. Sceptics may say that these companies still need to proof themselves on the long term but meanwhile e.g. Uber is showing mind boggling statistics. According to Uber CEO Travis Kalanick, who spoke at the DLD Conference in Munich, the whole taxi market in e.g. San Francisco is about $140 million per year. Uber’s revenues in San Francisco, meanwhile, are now running at $500 million per year. That’s more than 3-times the size of the taxi market, and Uber’s revenues in San Francisco are still growing at about 200% per year.

Now picture this in the Insurance industry. Would it be possible to have an insurer without insurance policies? An InsurairBnB? If so, what would it be based upon?

Before answering that question, first let us discuss another trend more on the tech side enabling rapid, some say disruptive, change. This is the trend of the connected world. The real world is rapidly coming online as more and more objects are getting connected, with sensors and machines enabling the “Internet of things”. As IDC research shows ( by 2020, 40% of the world’s data will be generated by connected devices.

This is more than just communication between devices. It is a new digital landscape with a layer of intelligence that enhances the real world by steering it rather than just observing it, thereby creating a new market with blurring boundaries between the real and digital worlds.

The sheer volume, velocity and variety of data  that will be generated is overwhelming, but will also be a rich source of intelligence and Insights ready to be harvested with new techniques like In-memory and Data Lake powered Analytics becoming mainstream, thus generating real business value.

Suppose we can combine these two trends: Internet of Things (IoT), and Disruption, and project it on a market where consumers are at the least not totally satisfied with the performance of their Insurers. Customer satisfaction is at its lowest, as seen from a recent study by Capgemini ( What would it take for a new entrant to enter this market with a totally new concept derived from a totally new angle and powered by Big Data Analytics? As Mark Twain once noted “predictions are difficult to make, especially about the future” but in this case predicting disruptive change is not so hard. The signs are clear; the connected world is becoming more and more a reality and will affect the Insurance industry too. For instance, what is the insurance policy needed for connected, self steering cars (e.g. Google Car)? What is the coverage needed for home insurance if our homes become self steering entities? What should health insurance cover when the patients and medical practitioners are increasingly connected in real time through the new wave of health wearables? What if this new connected world organizes itself in totally new supply chains including a form of Insurance totally paid in services instead of money or benefits in kind?  

Another sign for change is the fact that we as citizens of this new connected world are fast adapting to the new possibilities and are embracing new technology at a faster pace. E.g. It took decades for the telephone to reach 50% of households, beginning before 1900.  It took five years or less for cell-phones to accomplish the same penetration in 1990 and smart phones have already reached a 40% penetration in less than 3 years from getting past the innovators phase.

The third, and for the Insurance industry  possibly the most worrisome trend is the fact that customer satisfaction is low and client loyalty is based more on the inconvenience of switching providers than on real loyalty. Although we see some Insurers embrace Big Data and Analytics to counter these making interactions with their clients more meaningful, there is still a long way to go.

To summarize; client satisfaction is at an all time low, connected devices are reshaping the world we live in, and disruptive entrepreneurs are entering industries with new business models thereby transforming these markets. The underlying foundation to enable all this is Insights and Data. Sounds like predicting change is not so hard here…

In my next blog I will elaborate on ways for Insurers to raise client satisfaction and be better prepared for disruption.