The Boston Consulting Group (BCG) recently published their State of Insurtech report for 2020. Looking back at the impact of the pandemic on investments in insurtech, one of the key takeaways is the mounting pressure to digitize.
The pandemic has accelerated the industry’s digital transformation by at least five years — forcing incumbents to open or enhance digital distribution channels and to make corresponding upgrades to back-office capabilities.
— State of Insurtech 2020
It’s worth noting that most of the investments are in various “full-stack” insurtechs: startups that are competing with you, the carrier. There’s another category of insurtechs like Joshu that are building products to empower, rather than compete with you. You might not feel the pressure from the full-stacks yet. They still control a small fraction of the market. But their market share is rapidly growing.
As more startups turn their attention to commercial insurance, the drip of Digital is growing to become a formidable stream. Consider the gushing river of digital that‘s going to describe commercial insurance 5 years from now: how will your business navigate it?
The Retail industry can be a good lesson. I’m guessing neither Walmart nor JC Penney thought of Amazon in its heyday as a threat. It was a cool online bookstore. Fast forward 5 or 10 years and it grew out of books and into Retail’s largest challenger in decades. Now look at all the insurtechs that join the fold and challenge you. They still have a small market share today, but 5 years from now?
Easy to say yet hard to do. Some studies have shown that 70% of digital transformation efforts fail. That’s an abysmal metric. No one wants to start a project that’s more likely to fail than to succeed. Especially when the price tag is often in the millions of dollars and years of work. The good news is that if you’ve failed before on this front, it’s probably not your fault. When you pay for the transformation instead of the result your vendors have an incentive to lengthen the transformation for as long as they can.
We are covering some of the challenges of setting up digital distribution in other posts. One key mistake many organizations make when trying to transform is doing too much at once. It’s nice to think about the all-digital future when the whole org lives up in the cloud with all data singing in harmony. It’s also the hardest goal to achieve. The more we try to do at once, the more likely one piece will fail and break the idyllic promise of the all-inclusive project. To reduce the chance of failure, you need to take smaller bites. Start with one or two pockets to experiment and iterate until you find a winning formula. Then you can model other areas around that success and expand.
Joshu helps you achieve both goals. First, it allows you to digitize one product, iterate fast and repeat until you unlock the right setup. When it takes hours and not months, you can try and err several times without losing hundreds of thousands of dollars for each iteration.
Second, our business model is based on the volume of traction that passes over Joshu. We do not charge by the project and have no incentive to prolong the transformation process. We’ve been on the other side of procuring software for insurance and hated paying for hours of implementation work that did not show any results.
The first quarter of 2021 exhibited even bigger investments in insurtech so the pressure keeps mounting. Your investment in technology becomes one of the most crucial strategic decisions for your future. Now is not the time to coast on current success. Try Joshu, try other insurtechs that seek to help you. We’re here to make your digital transformation a success.
It is now time for incumbent insurers to accelerate their digital transformations and acknowledge the strategic role that insurtechs can play in helping them rapidly adapt to, and survive in, a post-COVID-19 world.
— State of Insurtech 2020