Looking at Insurance Through the Eyes of a Startup

The insurance industry is facing an uphill battle in the immediate future. Technology is changing our perception of why we need insurance and how much we should pay for it. At the same time, the slow march of time is positioning millennials, the lifeblood of the U.S. workforce and the generation most disengaged with insurance companies ever, in the center of these enterprises’ growth plans.

The good news is, there are plenty of resources at these companies’ disposal. The bad news is, if they don’t adapt, they are due for a swift kick in the ass.

Why We Need Insurance

It used to be people would take out insurance policies based on their assessment of risk and cost. How likely are you to get in a car accident? Get sick? Have something cataclysmic happen to your home? How expensive would it be if you had to pay for the whole thing?

But, we don’t live in that world any more. Living in the age of Big Data and the Internet of Things means everything is quantifiable.

Take the home example. Only three of Property Casualty 360’s 2015 list of the most common reasons for house fires are based on human negligence: letting kids play with fire, leaving candles burning, and smoking indoors.

And even in if/when a fire breaks out in these situations, the magnitude of the damage can be controlled faster than ever before with devices like NEST.

The rest of the entries on the list can be monitored, if not prevented, by sensors and computers. An oven can shut itself off if it detects a rise in external temperature or the presence of smoke, a dryer can notify its owner when the filter needs to be emptied, a Christmas tree stand can send a text to your phone when the water level is too low… these are all very real solutions to common causes of house fires.

The presence of such devices in a home should be reflected in your homeowner’s insurance policy, right?

Let’s take another example that has been the topic of much discussion in the last few years: car insurance.

Smart cars (as a concept, not a brand) are able to gather data on every minutiae of your driving habits and report back to your insurance company.

But if the paradigm shifts and self-driving cars become the norm, are we really going to need car insurance? Or would it take the form of product liability insurance? And are you buying that from an insurance company or from a manufacturer? How much will it cost?

An Uphill Battle

To answer these questions and navigate the impasse at which the insurance industry has found itself, companies are hiring Chief Innovation Officers or Chief Digital Officers.

These brave individuals are mandated to slay a dragon that adapts new and disruptive tools faster than you can say “iPhone 7” while their employers are used to moving slow and relying on ancient processes.

It’s no easy task, but the solutions we are seeing are encouraging.

You’ve probably seen Flo talking about Progressive Insurance’s “Snapshot” program, which provides a device that serves as a “brain” for your car as described above. It tracks every system within your car so your habits reflect your premiums.

John Hancock’s new Vitality program supplies customers with a FitBit. Customers earn points based on the exercise data the Fitbit collects. They also get discounts at health conscious grocery stores like Whole Foods and they earn points for shopping there. The points can be used to decrease the rates of a customer’s life insurance policy.

The true black arrow though, is the so called “Innovation Lab” — a branch of the company designed to work like a startup. Innovation Labs eschew the traditional hierarchy of big enterprises in favor of testing new ideas and building new products fast with much less red tape to navigate.

Inno Labs

Companies like Liberty Mutual, Capital One, and Citi Bank have all started incubators to foster entrepreneurship and inject their ancient, plodding, mammoth enterprises with the disruptive attitude found in lean, sexy startup environments.

“This is the way it’s always been done,” is a terrible reason for doing something, but it happens all the time in big companies. So one of the most common problems, according to Jesse Bean, VP of Innovation at Manulife and the drive force behind of John Hancock’s Lab of Thinking Forward, is the adherence to traditional point of views:

“One of the challenges we face is the cultural shift around examining products and processes we wouldn’t normally look at. Companies are used to, for example, ROI after 1 year and payback in 3 years but an Inno Lab may not have payback in 3 years… it may not have and ROI at all. The ‘It’s ok to fail’ mindset can be hard.

And then when you do create something, it may cannibalize something that already exists or the team members [outside the Inno Lab] may not be equipped to handle it.”

Plus, the people who ultimately make the decisions about implementing an Inno Lab (i.e. the guys who hold the purse strings) don’t always know exactly what an Inno Lab needs. One huge Boston-based enterprise Inno Lab we spoke to wanted NorthOut to provide them with a UX expert for one month to do designs so their engineering team could take over and get building.

This procedure misses the entire point of having an Inno Lab in the first place! When you work in a startup, every part of the team is involved in each step of the project. Just because your title says UX designer, doesn’t mean your job begins and ends with UX is design. Your job begins with the initial discussions about what the team is actually building and it ends when your product is published.

You might be looking at each step through the lense of UX design, but are tasked to help out when necessary and you may identify pain points well before UX necessary.

At the end of the day, the best way for enterprises to learn how to be a startup is to work directly with a startup. Bringing startup people into your workspace and sending your people into a startup’s space is an extremely valuable experience for an enterprise.

Everyone needs insurance, so the startup vets you bring in will have advice for your products and UI/UX experiences as well as advice for how best to streamline how work gets done.

If you require further assistance, NorthOut probably has the answers. Shoot us an email (nate at northout.com) and we can help your massive company crush it like a startup.