Historically, the main approaches to winning markets have been one of two options: sell first or sell cheaper.
Within the insurance industry specifically, companies like American International Group found success with being early to market and companies like Allstate, GEICO and Progressive grabbed market share with lowered pricing. Needless to say, this approach has always worked. It’s a tried and true method, so why change it?
The short answer is that it’s time. At this point in the insurance sector’s lifecycle, change is inevitable. Now more than ever, especially with the rise of technology and insurtechs, competition in the space is cutthroat. And that is why first and cheap are no longer going to cut it.
Today, the most important thing a company can do is sell differently. The most valuable asset a founder or CEO can have is a bird’s eye view of the industry they’re operating in--and then strategize about differentiation. What are the overarching pain points people are facing, and how can we leverage this to sell our product/service? What can we do that no one else has done yet, that addresses these problems? How can we do that differently than current solutions?
This tactic of differentiation isn’t net new--and builds upon what others have done before us. Think of home insurance and BOP products, which began interweaving multiple insurance products to share costs, drive down price and simplify the customer experience. Similarly, startups today focused on infrastructure will digitize multiple insurance processes for parallel goals.
Many companies in insurance recognize the growing need to differentiate their products, services and brands. But what’s interesting is the why. Why do we feel the need to innovate? Why now is the perfect time to do so? People understand that differentiation is key, but they don’t understand what characteristics set up our ecosystem to be a prime receptor of innovative methods and technologies.
The reason why we as an industry are able to move on from being the first or cheapest to market and push further into selling differently is that we’re in the third chapter of insurance.
Let’s break this down:
Chapter 1 is when the incumbents are born. These are the “sell first” group of people, like the aforementioned AIG. Initially, it’s a land grab and then moving forward incumbents have the advantage of heritage and name recognition.
Chapter 2 is when the challengers arise. This is the initial wave of companies that, despite coming into the game a bit later, have the advantage of watching incumbents and learning from them. These are also the people who fall into the “sell cheaper” category. They may not be first to market, but they can compete with their pricing model. They offer bundles, discounts, and reward systems to give people more incentive to use their service.
Chapter 3 is when players start to compete mainly by differentiation, making way for a new era of disrupters. This group has a thorough understanding of the industry, having observed and learned from the first two chapters. These disrupters leverage the availability of data, technology, and social triggers (in this case, COVID-19) to position themselves in the market and sell their product or service.
Ultimately, what this means for insurance is that our industry is no longer a bifurcated story of incumbents versus startups. As companies and as people, we are intersectional. People with startup backgrounds have joined the incumbents, just as incumbents have joined the startup ecosystem. Some startups will find themselves partnering with or being acquired by incumbents that they once viewed as old school competition, while incumbents that have been stuck in their ways for decades are now seeking out the help and technology of the newer generation.
Furthermore, individuals themselves are multifaceted. The story has evolved from an “us versus them” narrative and must be understood with a more nuanced, complex, and intersectional lens. And this new mixing of talent and people yields new ideas and solutions.
While at first blush this innovation, this shift towards winning markets by selling differently, might seem disruptive and new, the truth is that it couldn’t be more connected to the foundation of insurance. At its core, insurance is communal. We combine resources to protect each other.
The next wave of insurtechs are taking that communal philosophy to focus on infrastructure, on building out platforms to support core processes that distributors are all struggling to do. We’re carrying on what insurance has always done well: finding creative ways to pool resources so that we can optimize and protect.
We’re just doing it a bit differently now.
