Via Stuart Winchester Founder & CEO, Marble
Big institutions are taking note. In The Start-Up Enemies of Wall Street Are Booming, the New York Times observes that fintechs are “building on people’s growing familiarity…with tech tools and digital payments, a shift that has accelerated in the pandemic,” and notes that, “banks are extremely vulnerable because they have not kept up with what customers expect.” Jamie Dimon put it more succinctly, including a section in his recent shareholder letters, titled simply, “Fintech and Big Tech are here … big time!”
A diligent industry observer, or a close reader, will note a trillion dollar sized hole in the Times article: not a single insurance company or product is mentioned.
The industry itself is given a passing mention, but it seems that insurance has not been able to offer something compelling enough to merit a mention in this roll-call of fintech innovators.
What gives? Why does it feel like insurance is still competing on yesterday’s terms, while the rest of fintech is positioned to dominate the next decade of technology?
To be sure, insurance has of course seen its own surge of innovation. But it has been focused nearly entirely in two areas: creating new ways to sell insurance and developing new types of insurance to sell.
This March, in an effort to nail down whereexactlythe billions of dollars in insurance investment were going, I went through and categorized the last three years of investment data. As I wrote then, “Since 2018, 89% of private investment in insurtech has gone into companies that are primarily focused on the distribution (34.1%) of insurance, e.g., selling more insurance; or the creation of new paper (54.4%), e.g., building new types of insurance to sell.”
And while that research sparked an active public conversation, I was still unsatisfied with my own understanding of what was really going on in insurtech vs. fintech. If categorizing private investments was the top-down approach, I was eager to explore a bottoms-up approach as well.
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To do this, we launched a national survey, polling across all ages and demographics. The findings were striking. First, nearly 1 in 3 Americans are still using a filing cabinet or paper folder to keep track of their insurance documents. That bears repeating: one in every three people living in the year 2021 is dependent on a filing cabinet to manage their insurance policies.
When we asked the same question about other household financial instruments, things like bank documents, investment info, or household expenses, that number fell dramatically. Only 1 in 7 respondents indicated they still used paper filing for household expenses, and the same ratio gave that answer for banking documents. For organizing personal investments, the number of people using physical paper fell all the way to 1 in 13.
For all three of these non-insurance items, the vast majority of respondents indicated they primarily use some sort of digital tool to get organized. As an insurtech advocate, I found the findings embarrassing. American insurance customers are rapidly becoming a sort of Lucille Ball-at-the-chocolate-factory, desperately trying to get all their new insurance organized, under control, and paid for. Insurance companies and investors are supercharging insurance sales channels and creating impressive new protection products, but how are consumers meant to interact with it… besides buying more of it?
The survey results should give readers a clearer picture of both industries from the bottom-up — one that they can pair with our previous top-down assessment. Together they show, in sharp relief, a case of selective innovation. Banks and brokerages led a wave of innovation in their industries. Simple, but impressive, changes came of it. Incumbent brokerages, fintechs, and neo-banks, however, supercharged it.
Brokerages made online trading available, for instance, but every trade cost you… until Robinhood made it all free and took 15 million customers away from them in half a decade. Mobile deposits and online transfers were appreciated by big bank customers… until Venmo and Cash App exploded overnight and set the table for Chime and Revolut to build their no-fee, transparent “neo-banks,” which are eating market share by the percentage point.
If the insurance establishment thinks it can simply set the terms of its own innovation, it does so at its own peril. Fintechs have shown us that incremental changes from major institutions just aren’t enough for the modern customer. Insurtechs, take note.
Source: Digital Insurance
