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Disruptive, technology-led innovation has impacted different industries at different speeds. In the retail space, there’s Amazon, a behemoth that commands the attention of shoppers and competitors alike. In financial services and insurance, no single 800-pound gorilla commands such attention — at least not yet.

With technology change moving faster than ever before, is the insurance industry destined for the same future? If so, who is going to step up and become the Amazon of the insurance industry?

One safe bet is that it will be the company that first truly harnesses the power of emerging technology — specifically, who can leverage these innovations to meet the needs of real people. If you want to set your business apart as a leader in the industry over the next five to 10 years, and not risk falling behind, it’s essential to understand and apply new technology smartly to your business operations.

With the rise of artificial intelligence (AI), spatial computing and other potentially game-changing technologies, there is a great opportunity to experience unprecedented growth, but it comes with some challenges as well.

The state of the industry today

In order to plan for the future, first think about the present. The changing landscape of consumer preferences in insurance presents unique challenges for today’s insurers.

• The sum total of life insurance policyholders in the U.S. is currently in decline. As the baby boomers start to age out of the market, younger generations aren’t stepping up to fill the void. They’re more concerned with things like student loan debt, the rising cost of home ownership and figuring out their finances, and they don’t tend to see life insurance as a worthy investment.
• In the automotive insurance space, we’re seeing an increase in premiums and a consequent increase in U.S. adults shopping around for plans, because their price increase doesn’t come with a matching increase in value. We’re also seeing record highs in the number of uninsured drivers currently on the road — speaking to the state of the insurance industry itself.
• Home insurers are starting to exit specific markets where the cost to insure customers is higher than the return on investment would be. This is possibly due to the potential impact of climate change.
• Health insurance is at a crossroads. As of 2023, 77% of adults in the U.S. believe that health insurers focus more on profits than they do on patients, an increase of 7% since 2022. Half of adults say they couldn’t afford a surprise $500 medical bill. And yet, the rate of initial claims denials continues to rise in the U.S. People are concerned about their ability to pay rising healthcare costs, and they don’t trust the insurance companies that are supposed to help.

In short, the insurance industry is not in a great position at the moment, with respect to consumer confidence and trust. Your reputation is at risk — and to win as an insurer, you need to consider how people think about you.

An opportune tech boom

Over the past few years, technology has been flourishing, both in terms of capabilities and in public perception. Two major platforms have set records for how quickly they were able to hit the 100 million user mark: ChatGPT over the course of two months and Threads in just a few days.

Technology is becoming easier to adopt, and it’s being used by the same customers who are supposed to be buying insurance. Consumers love new tech, and they base many of their decisions about businesses they engage with, pay for and give data to on the types of experiences they have with technology.

It is predicted that there will roughly 175 million technology-connected cars on the road soon, and as of 2023, around 60% of insurance policies have some form of driver tracking attached to adjust premiums based on driver behavior. Smart home technology is becoming commonplace as well, adding more data points to the pool.

Insurers have never had this much access to data about their policyholders. Over the next few years, the amount of information streaming back to insurance companies will grow by orders of magnitude annually, which could be a potential windfall if leveraged properly. How could your company pivot from being distrusted by customers to serving them exceptionally well, given this much granular access to data about their daily habits?

Winning over a new generation of customers

When it comes to shopping for insurance, we know that younger demographics (almost 100% of millennials and Gen Z) research insurance policies, plans and premiums online before making a purchase.

Are you doing the right things on the internet to come across as a compelling company to the folks who are searching for you?

Most members of these demographics leverage some form of virtual assistance, whether it’s a voice assistant like Siri or, increasingly, a large language model like ChatGPT, to assist them in answering hard questions and making decisions.

Technology is at the fingertips of the customers insurance companies are trying to attract, and yet these customers continue to be unimpressed with the services that insurers are offering them.

And to date, insurers have been unable to capitalize on the data they have access to. There’s no great push to offer personalized plans and costs to customers in a way that’s going to drive their attention and affection.

Simply put, the customers you need to tap into in the future to grow your businesses care a lot less about you than your core, and they are overwhelmingly informed by technology in helping make day-to-day decisions.

If you want to be a winning brand in the future, like Amazon, you have to think about technology first, not insurance plans and premiums first.

The importance of innovation

The next Amazon of insurance will likely take a very specific and innovative approach to their customers and the world around them.

One theory of how innovation happens is disruptive — the “move fast and break things” ethos first popularized by Facebook and now championed across the tech industry. But breaking things doesn’t always work, especially in an industry like insurance.

The theory of technology-led innovation, on the other hand, essentially states that when new technology emerges, innovation occurs as a result. We’ve seen the advances following the introduction of cloud computing and mobile technology, and we’re currently exploring the potential of large language models and generative AI.

These innovations aren’t disruptive — they’re merely taking advantage of technology that already exists.

In banking, five to 10 years ago, people used banking apps to find their nearest branch. Now the app is the branch itself. Wealth managers are no longer the financial copilots for their customers, as machine learning models have taken over that role.

The insurance industry can innovate here as well. Insurance agents will give way to chatbots as policy experts and generative AI will drive customers to engage with insurance in the future. The technology exists already.

But insurers spend countless hours and dollars doing business the old-fashioned way, because that’s been successful in the past, and it may be all they know. If you want to be a leader in the industry, you need to think about things outside the scope of traditional methods and be willing to change. The Amazon of insurance will be doing things dramatically differently than in the past.

A friction-free experience

The vast majority of insurance experiences today are very friction filled, either because the insurance companies don’t want to change or because they have failed to achieve exit velocity outside of their own internal inertia to do anything differently.

Today’s leading companies use novel technology and design to decrease friction for customers in order to increase satisfaction, increase throughput of new customers and collect as much revenue from them as quickly as possible.

Does that strategy work? Compare the stock returns of companies like Amazon, Apple and Meta to the S&P 500 over the last 10 years, and it’s apparent that they’re doing something right.

How do they do it, and how can you get started?

• Focus on customer-centric decision-making: Put the consumer first, and make your decisions based on their satisfaction rather than the bottom line.
• Emphasize user experience design: Today’s consumers are more tech savvy than ever, and they’re increasingly looking for experiences that don’t slow them down.
• Adopt a perspective on leading-edge technology: Embrace innovation and be ready to adapt as new technologies emerge.
• Deploy agile processes: Enable rapid experimentation within your organization to find novel solutions to business challenges.

Who is the next Amazon of insurance?

The company that emerges as the Amazon of insurance won’t be the company doing insurance the best. Rather, it will be the company that becomes the best at using technology on behalf of its customers for insurance-specific use cases.

How can you put your company in that position?

• Assess where you’re stuck: Before you can move forward, take a step back, locate problem areas for your business and prioritize them, so you can make well-informed technical decisions to reduce friction for your customers.
• Fail before you scale: Enable your organization to experiment with emerging technology on a small scale, determine what works best — and what doesn’t — and make the decision to scale up based on those experiments.
• Have buy versus build debates: After determining which use cases work best for you, engage in debate over creating new technology to gain a competitive advantage or simply leverage existing technology with a proven track record.

How Wipfli can help

At Wipfli, we combine our passion and interest in emerging technology and user experience design with deep subject matter knowledge and industry-level experience. We understand the insurance industry thoroughly, and we also see where consumer preferences are trending in the technological space. We can help you place your digital bets early, adjust to suit your needs and help you grow your business to keep up with the ever-changing pace of new technology. Contact us today to learn more.