Are the Big Techs a Real Threat to Insurance?

With their redefinition of innovation standards over just a dozen short years, Google, Apple, Facebook and Amazon, or GAFA, have become symbolic of high performance, market conquest and success. Will insurance be their next playing field?

In the late 1970s, the great French television journalist Roger Giquel famously declared that “France is afraid.” Fifty years on, French insurers are taking his words into account over Google, Apple, Facebook and Amazon. For the moment, though, insurers are not in hiding. Last year, for example, AXA CEO Jacques de Perretti announced during a conference that, “the French insurance industry is well-prepared for the oncoming GAFA wave.”

This fear is clearly not for nothing. In recent years, GAFA’s forays into insurance have increased with the alliance between Amazon and Aviva, the Google-Swiss Re partnership and Apple’s cooperation with Aetna, not to mention Tesla, which mostly makes statements about its own insured vehicle. These initiatives have a track record of solid achievement given that GAFA have redefined innovation standards to become symbolic of high performance, market conquest and success in just a dozen short years.

Despite their impressive balance sheet, fearing them is a mistake. At present, they are encountering serious obstacles, such as new European and French regulations that try to protest domestic insurers and the low confidence among 5,000 GAFA employees, perfectly summed up in the survey by the social network Blind which found that 62% of them do not trust Big Tech firms with their personal financial information.

Understanding the ways of GAFA is one thing, but the real threat might be considered to be something else — the “experience economy,” as it has been known since the 1990s. According to two American economic theorists, enterprises need not to “offer not only products or services to consumers, but more importantly experiences that enable them to distinguish a brand from its competitors and establish a stronger attachment.”* In other words, they said a company must “leave an impression inside the buyer’s head.” Such impressions have been greatly multiplied by the experiences of digital consumers.

All this time, an emphasis on the client’s experience was neglected by insurers’ restricted vision of just selling insurance, which ran counter to how consumers were evolving, as though they lived in a parallel universe or their experience did not count.

Although GAFA was the first to appreciate the value of data in transforming the insurance sector, it was the neo-insurers which first exploited it with their completely original triple combination of personalization, transparency and simplicity. Being digital natives, they dispensed with the costs of compartmentalized activities and sclerotic data processing. The result is that in just five years they have introduced the client experience model into a sector that has been rightly condemned for its “client distance.”

Being ontologically equipped to tailor their products according to client behavioral development, the neo-insurers have applied the fundamentals borrowed from Big Tech firms into the “continuity plan,” perhaps to perpetuate the service standards of removing the middleman and digitalization that their clients are already used to in their daily dealings with GAFA.

For the moment, however, insurers and mutuals resist the transformation, given their overwhelming numbers of current clients. A study published by the board of Deloitte reminds us of this fact. According to Deloitte’s study, the new insurers and other insure-tech actors still suffer from a lack of public trust, with only 4% of respondents able to name a pure player.

At the same time, if these old insurers want to maintain their status as major actors they must not confuse their priorities. They should not invest more resources in data processing or reconceptualizing, but rather in changing their work culture. This brings back into question the need for continual adroit experimentation to serve digital clients instead of the sort of over-meticulous planning that stifles action. This is the real factor causing the traditional insurers to lose their position.

And more important than their lack of public trust is that the neo-insurers maintain a certain amount of credit in the insurance ecosystem. Let us remember that they earned over $2 billion in the final quarter of 2019.

Editor’s Note: This quote, properly translated, could not be verified