Of all the sectors and industries that interact with our daily lives, none could be more prevalent than the powerhouse that is the insurance industry. But of all the giants currently at play within the provision of insurance, the elephant in the room still remains to be addressed: why have we not experienced the development of a monopoly within the insurance sector?
With many variables at play, the answer to this question is far more complex than ever thought. One entrepreneur who’s been redefining how everyday people interact with insurance, and hopes to offer a comprehensive solution to this age-old question is Christian Wiens, the co-founder and Chief Executive Officer of the insurance company Getsafe.
Here Christian discusses the plight of modern insurance companies, their prolonged rise to monopoly, and what increased digital adoption could mean for the future of a sector that never quite seems to peak.
The world is increasingly functioning in the digital sphere. People who adapt to these changing times can profit from cheaper, faster, and more flexible processes in all aspects of life. Young companies like Uber and AirBnb have managed to provide their services successfully on a global scale, having become market leaders in their respective industries. People of all ages and backgrounds profit from these new offers and they only have to do one thing – click a button on a screen.
The insurance sector is a trillion-dollar industry and it is unconditionally relevant everywhere, yet even industry giants like Allianz or Generali operate within the confines of their countries of origin. Why hasn’t a global monopoly in insurance happened yet? And may there be something underway?
There are several intertwining reasons why a monopoly in insurance is yet to establish itself. First of all, traditional insurance companies operate in a local setup. They offer locally dependent products and use local sales channels (for example through brokers or agents). It is also difficult for them to put customer feedback and data into action as it stems from several different operative units. Said plainly, much of the data actually stays with the brokers and never reaches the insurance company to begin with. Furthermore, they lack the IT infrastructure that works on the global level, because they carry a lot of dead weight within their old, incompatible systems. The fact that insurance is oftentimes divided into property, life, and health branches, all of which use different systems, does not help. This means that even if these insurers had access to all of the data, they do not possess the infrastructure needed to comprehensively pool customer data in a single interface in order to work with it. This is why a tech monopoly has not happened in insurance yet.
The advantage of insurtechs comes into play right here. Insurtechs have founded their companies from scratch and combined technology with insurance. They have a modern tech stack and they come with insurance know-how. The industry is heavily regulated, but it is clear that tomorrow’s insurance sector has to change in order to be competitive. Insurtechs can show the way here. In times of increasing digitisation, insurance companies need to offer more than before to stand out. Insurance of the future not only relieves the customer financially in the event of a claim, but also solves the problem. Take a house fire for example: Supported by artificial intelligence and smart home technology, the insurance company ensures that risks may not arise in the first place. And if damage inevitably occurs, the insurer will take care of the architects and construction builders needed to rebuild your home, all the while organising a hotel room for you to stay at during rebuilding. The idea is to offer all-round packages rather than just paying out the amount of damage – making tomorrow’s insurance digital, intelligent, and holistic.
Against this background, there will be a struggle for customers once tech companies and other groups expand their range of products to include insurance coverage. BigTechs like Amazon, Google, and co. have a strong market presence and good technological know-how. Many of them are starting to look at insurance and now offer so-called gadget insurances for electronic devices. Ikea as well has already launched its first insurance product, a combination of household contents and liability insurance.
However, these corporations are currently only able to provide very specific insurance coverage to their customers and they are bound once more by local regulations. This makes it questionable whether the giants with an already established identity and core product will ultimately enter the insurance business on a large scale. It is more likely that these companies will buy large insurance companies in order to offer these services from a single source. Nevertheless, insurers should not only perceive the upcoming new offers as competition, but also as an opportunity to innovate themselves. Moreover, they could turn out to be interesting channels for partnerships and exits as they have the right idea of where the market is heading.
From this follows that insurtechs and traditional insurers are required to think digitally. But the push for change not only comes from the outside, it stems from the customers themselves. They want a digital insurance experience that thinks ahead – beginning with the insurance purchase and ending with the handling of insurance claims. The stakes are high because even if insurance will always be needed, the world around it is changing drastically. Insurtechs have come up with a solution that combines all of the essential elements while discarding the obstacles that have made this industry so outdated. They have put other insurers in a tight spot and are challenging them to step up their game. At the end of the day, insurtechs are playing an essential role in driving these changes forward and shaping the insurance of the future. A global monopoly in insurance is likely already in the making, it just remains to be seen whether it is going to happen.