When a brave, polite and rather clever young starlet like Taylor Swift pushed back against the emerging giants of the music industry recently, she whipped up a media storm.
In an industry that suffered from technological disruption more than any other – it was refreshing to see Taylor fighting the record industry giants on such an old fashion argument as wanting to be paid for her work.
Disruption in the music industry is nothing new. Gone are the good old days when a musician wrote a song, recorded it, pressed a record and shipped it off to shop where a fan paid cash and carried it home to play on his record player.
Today, an artist might write a song, or they might sample bits of someone else’s. They might record music in a studio – but they might also create a hit song in their bedroom, in a hotel room, or on a fishing trip to Iceland.
They might have a record company and they might sell that song on a disk in a shop – but they might be independent and the shop might be nothing more than a plug in to an app on a mobile phone. In fact, they might not even sell their music at all–their fan might just rent the song until the mood passes her by.
30 years ago, you would never have imagined that the company who made your telephone would be the biggest threat to your local record store. Now, in retrospect, it is completely logical that smart phones are a great way to deliver block-rocking beats to mobile millennials.
Insurance is not immune to the threat of disruption. Today, there is the real threat that non-insurance conglomerates, armed to the teeth with big-data, IT expertise and brand trust beyond anything any current provider enjoys,could waltz into the market and start serving customers better than established insurers do.
What will the current providers have to counter the threat? The current product and delivery models that reach back to the days of vinyl records and roller disco will definitely not be a solid defence.
As with the music industry, technology is the major driver of change for insurers. As with music, it is easy to imagine a world where the companies with the best technology will have control of insurance. Better data and smarter infrastructure are not just enabling better risk underwriting, more importantly, they are enabling much better customer relationships.
While it is the major threat to our comfortable business model, technology is not the only force driving change. Disruptors, companies whose business model is dependent on upsetting the apple cart, will introduce new, non-traditional business models.
These new entrants may come in from areas we did not imagine. A tweak in the regulatory regime or a move in financial markets may suddenly open insurance up to players who suddenly find it more interesting to deploy capital in insurance than wherever they have it now. .