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And now think about the market. What distinguishes insurance companies? How can they innovate? Aside from structuring the policies there is little room for inn

And now think about the market. What distinguishes insurance companies? How can they innovate? Aside from structuring the policies there is little room for innovation. And the competition can easily copy them. What remains is to reduce the sum of the expected claims. This is where blackboxes and stop smoking campaigns come from. But again this is not really that successful. IMO the most obvious strategy is vertical integration. After all, most people are not interested in insuring against hospital or car repair invoices, but to obtain good health-care or a repaired car. So insurance companies should try to operate their own hospitals or repair shops, operating them with little profit and stash the savings.

barrkel 7y ago
They innovate through add-ons: extra cover for salient details that might trigger feelings of insecurity or loss aversion in the customer, such that their desire to insure against the loss exceeds the cost of the insured risk. I don't know how it is in the US, but in the UK, the people you buy insurance from are usually just brokers for the actual insurance companies. Brokers may put together a compound policy for multiple risks aggregated across multiple insurance providers. Insurers themselves spread their risk by purchasing reinsurance, there's another level up on the chain too.
nunez 7y ago
I think a big differentiating factor is how invested an insurance company is in their digital presence. Surprisingly many of them are not, and it shows. Anecdotal example: Metlife was our auto insurance provider until last year. I dropped them for GEICO solely because their digital offerings were unacceptable. Extremely difficult to create claims and get our insurance ID cards online.
ssharp 7y ago
How can they innovate? There is a lot of "insuretech" out there right now. There has been a relatively large shift into direct-to-consumer insurance as well, rather than needing to go through an agent. On the tech side, for example, there are companies like Root and Metromile on the auto-side who are doing per-mile / driving habit pricing based on logged activity in your car. You can also innovate a lot on the claims-side to make the product easier to use. Lemonade is doing this with homeowners and renters insurance, allowing you to just take photos of your claims. Innovation can also happen on the backend with things like automating claims that can help drive down cost to increase margin or offer more competitive rates. Finally, the innovation has always happened on the actuarial side to better assess risk so it can be priced in a way that reduces the risk on the insurer. There is a fair amount of vertical integration happening already. Finding ways to reduce "retail" pricing for claims for insurance companies is a pretty big deal.
jshaqaw 7y ago
Insurance is one of the most regulated industries in existence so many potential innovations are just not possible.

barrkel 7y ago

They innovate through add-ons: extra cover for salient details that might trigger feelings of insecurity or loss aversion in the customer, such that their desire to insure against the loss exceeds the cost of the insured risk. I don't know how it is in the US, but in the UK, the people you buy insurance from are usually just brokers for the actual insurance companies. Brokers may put together a compound policy for multiple risks aggregated across multiple insurance providers. Insurers themselves spread their risk by purchasing reinsurance, there's another level up on the chain too.

nunez 7y ago

I think a big differentiating factor is how invested an insurance company is in their digital presence. Surprisingly many of them are not, and it shows. Anecdotal example: Metlife was our auto insurance provider until last year. I dropped them for GEICO solely because their digital offerings were unacceptable. Extremely difficult to create claims and get our insurance ID cards online.

ssharp 7y ago

How can they innovate? There is a lot of "insuretech" out there right now. There has been a relatively large shift into direct-to-consumer insurance as well, rather than needing to go through an agent. On the tech side, for example, there are companies like Root and Metromile on the auto-side who are doing per-mile / driving habit pricing based on logged activity in your car. You can also innovate a lot on the claims-side to make the product easier to use. Lemonade is doing this with homeowners and renters insurance, allowing you to just take photos of your claims. Innovation can also happen on the backend with things like automating claims that can help drive down cost to increase margin or offer more competitive rates. Finally, the innovation has always happened on the actuarial side to better assess risk so it can be priced in a way that reduces the risk on the insurer. There is a fair amount of vertical integration happening already. Finding ways to reduce "retail" pricing for claims for insurance companies is a pretty big deal.

jshaqaw 7y ago

Insurance is one of the most regulated industries in existence so many potential innovations are just not possible.