The booming platform economy is creating new opportunities while shifting traditional markets for insurance agents.The American economy is increasingly influenced by the platform model. Unlike traditional businesses, platforms don't sell goods or services so much as the ability to connect sellers to buyers through a mutually accessible, flexible, scalable, and speedy forum. The most prominent examples are highly valued companies with few assets and minimal resources such as Airbnb, Uber, and eBay.
The platform economy isn’t new, however. As VEON’s Chief Policy Officer Stephen Collins asks, "What is a bazaar…if not a platform?” “The key distinction of today’s model,” he adds, “is proliferation of connectivity and the growing power of data and data analytics... platforms rely on interconnections and, increasingly, on the availability of low-cost, cloud-based processing, storage and tools.”
The Platform Economy and the Insurance Industry
The platform economy is rapidly changing the insurance industry, as well. As online services and mobile apps that enable agents and brokers to dispense insurance on-demand continue to multiply, the traditional business model has begun to adapt to these innovations.
Insurtech startupSure debuted in May 2016, personalizing renter’s insurance with on-demand, data-empoweredservice. By January 2017, Nationwide announced a partnership with it, hoping to capture the relatively untapped market of millennial renters with valuable belongings.
Another insurtech startup, Lemonade, launched in New York City in September 2016, aiming to change the culture of the insurance industry through charitable giving. It's a peer-to-peer solution, the first of its kind in the United States, that creates like-minded groups of policyholders who pay their premiums into a shared pool. At the end of the policy period, the company donates any profits to charities chosen by the groups. In July, Lemonade announced that it has already donated $53,000 to charitable organizations. The company expects to be available to 97% of the US population by the end of 2017.
A healthcare insurance startup, Oscar, limits costs by reducing hospital and provider options. It did so without alienating customers by comparing patient and provider histories and determining which providers best meet each patient’s specific needs. Instead of giving patients access to large groups of specialists in specific fields, Oscar relied on data analysis to narrow these options, recommending to patients a selection of doctors with proven results in treating their conditions.
A life insurance startup, Fabric, launched an on-demand service that eliminates the costly commissions earned by life insurance agents. Its mobile app simplifies what can be a complicated acquisition process. Licensed agents are always available to answer questions, but the intention is for buyers to easily step through the online process on their own.
Platform insurance solutions don't always work. Google Compare, for example, an auto insurance, mortgage, and credit card comparison service, shut down after only a year of operation. Despite the digital giant’s hope that it could develop a commodity-based approach to a paperwork-heavy process heavily regulated by the states, Google simply couldn't produce a flexible national model.
What Insurance Agents Need to Know
While insurance platforms are increasingly dominating the industry, opportunities for insurance agents are still stronger than ever. These services are usually designed for millennials, who often prefer online solutions to traditionally offline problems, but know little about insurance itself. With widespread adoption of expected solutions such as data-based personalization and 24-7 consultations, insurance agents can capitalize on this demographic.
In addition, insurtech companies havedifferent risks than traditional agencies, creating opportunities for new lines of insurance. As users and companies continue to depend on online solutions, the need for protection against online theft and fraud is greater than ever. The expanding market for cyber insurance could provide new sources of revenue.
Remember that 63% of consumers still prefer talking to an agent when buying insurance. Although they may prefer to interact with them online, they still want to talk to a seasoned insurance professional. If you meet clients and prospects halfway and embrace insurance platforms, you can continue to rule the market.