One question Aite Group’s Jamie
Bisker often ponders is how the
insurance industry is going to
continue doing what it has been
doing, yet somehow do it better,
faster, and cheaper.
“We know times are chang-
ing and the capabilities and the
possibilities exist more today than
ever,” he says. “What is it that is
One thing that has changed
is the hybrid car, Bisker points
out the Prius and other models do
everything they used to do, but do it differently, which he claims
is the definition of innovation. He wonders, what would be
different about insurance if its basic function of mitigating risks
for companies was different?
The only innovation Bisker has seen in the insurance industry
is UBI. The question for insurers becomes what would a business
model look like if things could be different and yet still provide
risk management at a profitable situation for a company.
One of the basic ideas Bisker sees is to take the concept of umbrella coverage—risks other policies might not pick up—and flip it
so it is no longer an umbrella, but rather a foundational policy.
“You have this broad coverage and you stack specific
coverage on top of that,” he says “In that way you can say you
have foundational coverage, but you can also say you want extra
coverage for anything that falls in the gaps, which will be caught
by the upsidedown umbrella. That’s part of this mechanism.”
Bisker feels his ideas shouldn’t be dismissed quickly. He
points to Google’s self-driving car and other changes that auto
manufacturers are considering, such as adaptive cruise control
and automatic braking as examples.
“What are we going to do when cars become inherently
safer to operate?” he asks. “Insurers won’t be able to charge a
premium. If the risk significantly goes down, so will premiums.
The insurance industry is one of the few industries that works
to put itself out of business. If everything works the way they
want it to work, premium volume will go down because the risk
Bisker also believes the Internet of Things will provide con-
nectivity to service providers and safety agencies before anyone
realizes there was an emergency. Another avenue for change in-
volves non-traditional players—the Amazons and Apples of the
world—that will become interlopers to the insurance industry.
“I think these interlopers and the reality of Google and Big Data
have caught the attention of a lot of insurance executives,” he says.
The concept of better, faster, cheaper requires change
management, points out Bisker, and the quickest way to get an
insurance company to do anything is through regulation.
“You can write or talk about these points for years, but one
piece of legislation and everybody moves,” he says.
Another type of pressure comes from changes in demographics—culture, society, and their impact on business are
significant. He feels a significant number of those who fall
under the headings of Gen X and Gen Y won’t necessarily own
a car or stay at the same job for any length of time. There may
be another generation to come that is more conservative, but no
one is ever willing to surrender the gains of the past.
“The business drivers for change are the normal pressures,”
says Bisker. “Ironically, the public doesn’t care, though. They
don’t like insurance. Even those in the industry recognize its
value, but you hate it until you need it. These new generations
have different expectations and one of them is to be more in
control of the money they spend and why.”
That is why Bisker believes when someone comes along and
introduces personal risk management to the newer generations
they are going to find it makes sense. As an example, he points
out the need for personal auto insurance, but if the policyhold-
er is retired and the car normally sits in the garage, the owner
needs what Bisker calls just-in-time insurance.
“The car will be covered by my foundational policy, but as
soon as I move the car it communicates with the risk aggrega-tor, collects the data from the telematics, and know this is a trip
the owner makes every week and never has an accident.
“That’s not practical in today’s insurance, but my point is a
policy becomes the foundation coverage and an assignable power of attorney for insurance purposes for my carrier to write,
activate, and close coverage for me on the fly,” he says. “That’s
the basic idea of personal risk management. Insurance has an
opportunity, because they are rooted in improvement mechanisms, to do something different.”
Our expectations as consumers are being set by other industries, points out Bisker, and it is going to become necessary—
sooner rather than later—for insurers to adjust their practices.
“What other industry is doing things the same way they’ve
done it for the last 400 years?” he asks. “Not many.” ITA
Flip the Insurance Umbrella
Personal risk management may be the change that truly innovates the
By robert regis Hyle