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March 8, 2016

Insurance Companies Are Taking A Quantum Leap

Posted by Mohan Babu (View Profile | View All Posts) at 6:45 AM

Insured for the Digital Future [Source: https://www.youtube.com/watch?x6iYS44F4ts]

According to a report from the Massachusetts Institute of Technology, Microsoft has not been shy about expressing its interest in creating the essential building block of a quantum computer. The quantum computer would be a quantum leap in human progress. It would be able to tackle calculations that today's computers simply are incapable of carrying out. Microsoft is already talking about the many applications of such a super-computer - an innovation that could potentially turn around the technology industry altogether.

I bring up the quantum computer because I want to create a dichotomy for my readers. Now that you're excited and thinking about what a completely new kind of computer could do, switch gears and think about an industry where innovation has been, until very recently, almost non-existent: insurance. Known to be a conservative industry, insurance has traditionally been sold rather than being bought - a business model that has remained just the way it is for centuries.

But, things are changing. Recently, MetLife, announced that it is considering spinning off its core life insurance business, as part of a plan to ease some of the capital burden it is expected to face under new federal regulations. Frankly, I think splitting up a huge company that has been resistant to technological innovation could be the best thing for it. There are many innovative insurance startups that sense how the larger, entrenched insurance companies have been out of touch with the digital expectations of consumers. One such company that I am impressed with is Oscar, a new, innovative health insurance startup that takes a moribund industry and pumps the same kind of 'can-do' spirit that Microsoft is doing with the quantum computer. Just recently, Oscar announced that it had 125,000 customers. In a funding round in spring last year, financiers valued the company at US$ 1.5 billion, and it proceeded to receive US$ 145 million in seed funding from venture capitalists.

Oscar's stated goal is to sign up 1 million customers within the next five years. That might not be a number that a behemoth like MetLife considers to be significant, but in a constantly evolving market, startups like Oscar are smart enough to sense the transformations that the industry is going through, and a combined mass of small startups could be the start of a seismic shift in the insurance market, bringing in a wind of big change that could change the insurance industry landscape. At the heart of such sweeping changes lies a very simple fact - 'what customers want.'

With new technologies taking the market place by storm, insurance players in the market are either on the cutting edge or waking up to new ground realities. Customer engagement has become the new mantra as insurance players join each other in a fierce competition to win the race. One interesting development in recent times has been the rise of automated advice services, popularly known as 'robo-advisors'. It is an attractive option for self-directed customers who want to avoid the costs of going out to a human advisor, or would prefer to purchase insurance by themselves. Already a two-year old trend in the U.S., it is quickly catching up in other parts of the world with more and more people opening up to the idea of being advised without any human intervention. Another recent disruption has come in the form of wearable technology, which is opening up new opportunities for insurance players. Acclaimed as a technology breakthrough, wearables are being increasingly used by insurers to offer well-being benefits to a new class of health conscious customers who are open to innovative insurance products being priced appropriate to their health conditions.

These new disruptive forces are leading to a regime of value-added engagement with customers, though most insurers are still lagging behind. But it will not be long before all insurance companies realize the value of consumer engagement which is at the core of the evolution of the industry, not to mention the dramatic growth of start-ups like Oscar. It is time that Insurers force themselves to take the quantum leap.


Well written Mohan. The movement is not anymore about 'big eating small, but fast eating slow' - which comes out in Oscar case study. Good read!

Excellent analogy and very well detailed out. Insurance is going thru exciting times after such a long time, which is great.

Its great to know about new developments in the insurance industry. These technological advancements would surely create positive impact in Indian market scenario.

very informative..detailed with a great Analogy.

Wow! Just one word for insurance agents in md Splendid!! I confronted many websites but have never seen anything like their offers! Amazing! You should also consider it!

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