How Insurance could become the Innovation industry:

There is an allergy going around that did not exist a generation ago. Like other allergies, it is a damaging immune response to something—an allergen—to which a body becomes hypersensitive. Also like other allergies, some bodies adapt better than others, and only some bodies experience full-blown symptoms.

The allergen causing this allergic response is the twenty-first century. The symptoms are not just itchy eyes and runny noses, but relentless pressure that challenges fundamentals, value propositions, and traditional business models.

The insurance industry is one of the bodies sneezing most. Three forms of this pressure are particularly acute for the industry.

Economic and Technological

First, there is economic and technological pressure to automate. In response, insurance functions—especially underwriting but also mid-level clerical and claims positions—are increasingly being automated. In a 2013 report, two Oxford researchers estimated the likelihood of automating the functions of insurance sales agents, appraisers, claims and policy processing clerks, and underwriters at 92%, 98%, 98%, and 99%, respectively.


Second, the industry faces an employment crisis. The insurance workforce is quickly reaching retirement age; roughly a quarter of the insurance workforce will be within five to ten years of retirement age by 2018, according to the US Bureau of Labor Statistics. Large numbers of retiring workers will soon need to be replaced and many aging workers lack the digital skills desperately needed in an age of automation.

Generational Wall

Third, efforts to expand the insurance industry customer base are meeting a generational wall. Goldman Sachs estimates there are 92 million Millennials in the United States alone, making it the largest generation in American history. It’s the youngest in the workforce and least likely to buy insurance. A Princeton Survey reveals that only 10 percent of Millennials have homeowners insurance, 12 percent have renters insurance, and 13 percent have disability insurance, drastically lower than older consumers.

To be sure, one would expect the percentage of insurance buyers to be lower among youth than their elders, but for Millennials it isn’t just age that affects insurance decisions. For example, declining rates of car ownership and the increasing popularity of mobility sharing services such as Zipcar and Uber among Millennials have, in some cases, eliminated the need for auto insurance altogether. According to research from the University of Michigan, only 76.7% of 20- to 24-year-olds had driver’s licenses in 2014, down over 15% since 1983.

Unfortunately, Millennials, the reluctant customer base for insurance, is also the reluctant employee base for insurance companies needing to infuse their workforce with digital experience.


It’s clear the insurance industry must innovate. AIG, StateFarm, Anthem, and other large insurance companies have acknowledged the need and created internal innovation teams. And while those teams are positive first steps, as yet, none have been successful in relieving the symptoms of the twenty-first century allergy. Alternative traditional routes – buying up potential industry disruptors and launching big, and expensive, strategy development initiatives – do not guarantee long-term results. There is, however, a prescription available that will reinvigorate the body and give the industry time to build up immunity.

  1. Automate, but let few if any employees go.
  2. Aggressively court Millennials with employment opportunities.
  3. Create teams that combine the people whose jobs were automated and the new Millennial hires.
  4. Empower them to transform your business.

Like many treatments when first introduced, this one probably seems counterintuitive, and perhaps even crazy. In fact, it makes perfect sense if you imagine two widely different paths to the future the insurance industry might take.

Two paths to take

On one, old-line insurance companies pursue the traditional model of automation that typically sinks morale among uncertain employees—since tasks are automated, jobs are cut—and creates an ideal business bogeyman, which in the past has been used by industries, particularly fast food, to counter calls for increasing wages. Sure, shareholders might make more money, at least for a while, but the companies that survive into the future become even less attractive to Millennials and ultimately do even less business. Competition from disrupting digital startups accelerates, and the insurance industry finds itself in the same situation the medallion taxi industry did when confronted by a then-largely unknown startup called Uber. Under such a scenario, the city of Hartford—known as the “insurance capital of the world”—might come to resemble Detroit circa 2013.

On the second path, your company follows the prescription above to create a healthier and more active body. Automation becomes not a harsh reality but a welcome improvement that eliminates drudgery. You focus on giving workers with long tenures—and who are a valuable knowledge base—the time and opportunity to be subject-matter experts who contribute to revamping the industry.

Millennials and those workers capable of both replenishing the dwindling workforce and infusing digital expertise remain an elusive ingredient for you, but companies like General Electric have shown possible ways to attract young workers away from the romanticized high-tech sectors and startups and into other industries.

It is almost impossible to miss the TV commercials and online adverts that feature the young software developer, “Owen,” newly hired by GE to help write a new operating system he says is going to “change the world.” GE is spending $2.5 million on an ad campaign to attract not customers, but potential employees. It’s a full frontal attack against competitors in the talent war as it becomes increasingly difficult for the U.S. economy’s venerable giants of every industry to fill jobs that require digital skills.

New Industry motto

It wouldn’t take long for the insurance industry to develop its own pitch: “Creative destruction is our new motto. We’re establishing a fully funded and resourced innovation incubator right here, just for you. Come work with us and do what you’d do at a startup, but without the lean years. We’ve got amazing talent who know insurance and we want to pair them with you, your digital skills, and your ideas. Together, disrupt us from within.”

You could leverage powerful incentives to attract younger workers and with them, their ideas for new forms of insurance. The newest generation has shown they are changing the way most industries function. Many have already seen insurance as fertile ground for disruption. Metromile, for instance, has targeted the Millennials that still require auto insurance. Its pay-per-mile insurance that fits precisely with a generation that drives but doesn’t own cars, charging customers by the mile (up to 150 per day); the company has even created policies specifically for Uber drivers.

Bigger picture

It’s not just auto insurance that faces disruptors. Trov provides on-demand insurance for personal items through a smartphone; it was launched in Australia, is coming to the United States in 2017, and allows its mostly Millennial customers to turn insurance on and off with the “flip of a switch” and file claims through an easy, texting-like interface. Fitsense makes it possible for life and health insurers to personalize their products for anyone with a smartphone or wearable device. Sureify appeals to Millennials by tying wellness, savings, and rewards programs to an insurance policy and supports insurers as they engage with policyholders and try to expand their offerings.

With the exception of Trov, not one CEO or founder of these companies (and a host of other disruptors) is older than the early 30s. Compare that with 63, the average age of CEOs of large, traditional insurance companies like State Farm, Liberty Mutual, Northwestern Mutual, MetLife, and Berkshire Hathaway. If those younger workers were working for you instead of adding competition, Hartford would be the next Kendall Square—the capital of innovation for the insurance industry.

The combined innovation workforce of insurance experts and Millennial thinkers could create new products that combine the ease of technological solutions and high-quality customer experiences Millennials expect with something they can see is worth buying. The new teams could actually accelerate the process from innovation to marketplace by helping bypass a lot of what slows down external startups.

Likewise, you would have done something truly counterintuitive: let automation be the driver of the very innovation the industry needs if it is to capture its next generation of customers.

The insurance industry is ailing from its allergy, visible in the wheezing, sneezing, and drops in revenue. As the twenty-first century allergen threatens to remain for some time yet, the industry must adopt changes in order to cope. To thrive, a willingness to try a bold, experimental treatment of innovation and automation is necessary.

Sunny Ahn is a Partner at Endeavour Partners, a boutique strategy consulting firm, focused on initiatives at the intersection of technology and business.  Sunny has worked extensively with TMT service providers, device manufacturers, insurance and healthcare organizations in the US, Europe and Asia.  The engagements he has led focus on future business models, innovation, transformation strategy, business ecosystem formation, customer discovery, IP strategy, sustainability, and new product development.

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