Enterprising Developments

Gartner's Dire Warning to the Insurance Industry

Joe McKendrick
Insurance Experts' Forum, January 10, 2012

A few weeks back, Gartner, the IT research group, published a fairly dire prediction to both the financial services and insurance industries, warning that social networks are commoditizing both sectors.

Such “disintermediation” is occurring because social networks have become a way for users to spell out significant events in their lives – weddings, births, retirements, deaths, and so on.

This is where it gets interesting: Gartner analyst Juergen Weiss say the social networks themselves will offer banking services, and then "naturally, insurance services as well, perhaps initially through joint ventures with existing financial institutions but not necessarily the bigger firms.”

Gartner's warning, reported by ReadWriteWeb's Scott Fulton, advises “insurers to plan now for the commoditization of their products and services, implying that they should perhaps be sold through portals the way cloud service customers purchase bandwidth and virtual machines today.”

As for banks, Gartner analysts Stessa Cohen and Peter Redshaw cite a rapid increase in the number of online banking transactions, which “has already driven banks to accelerate the establishment of their social presences through Facebook, Twitter, LinkedIn... This is a natural extension of the rise already seen in comparison and aggregator sites, especially for more commoditized products, such as small loans, general insurance and credit cards,” they write.

Gartner's discussion of commoditization and disintermediation has a familiar ring to it. There was a lot of speculation on this same kind of thing happening during the dot-com boom of the late 1990s and 2000. At the time, there was serious speculation that Microsoft and Intuit would become the dominant banks of the world.

It's hard to imagine Google or Twitter or Facebook getting directly into the insurance business, and these freewheeling ventures may chafe at the mounds of regulation that the industry needs to deal with. Plus, many policies are complex to write, underwrite and administer, and customers often want to see or speak to a human – be it an agent or customers service representative – to help them navigate claims.

But that doesn't mean insurance companies should relax, either. Commoditization does dominate the auto insurance sector, and companies with self-service websites dominate. The savvy insurers – meaning ones that are in the business now – will figure out how social networks can deliver data that will help them better understand customers, as well as reach new markets and provide more seamless ways to sell and upsell.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (1)

I don't think Google or Amazon will be the insurer, but I do think they can be portal, representing the carrier, program writer, or comparative rater who can offer the product through a competitive and pleasing online experience. Google and Amazon have the eyeballs of the buyer - access. Of course this doesn't mean the carrier goes away (though it can certainly threaten the agent or broker), but it can certainly offer opportunity to the savvy carrier and shift signficant market share from the traditional carrier and their costly distribution system. For example, imagine that Amazon lets the carrier write the business direct for a 1% transaction fee instead the current commission.

Posted by: Edward G | February 5, 2013 2:32 PM

Report this Comment

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

Boosting Performance with Integrated Underwriting Tools

A unified, comprehensive platform can help underwriters perform their jobs more efficiently — and profitably.

Opinion: Halbig Decision Creates New Level of Uncertainty for Obamacare

Time will tell if the Halbig decision remains viable. But in the meantime, a new level of uncertainty has been injected into the process.

CIOs: "We Don't Have Enough People to Run Our Mainframes"

Insurers will be competing with other industries for both legacy and “new IT" talent.

4 Ways to Keep Insurance Data Quality Healthy

Continually building trust and credibility in the data is the key to a successful data warehouse.

Customer Experience Trend Watch

Three recent HR moves demonstrate that large life insurers recognize customer experience as a strategic differentiator.

Insurers Have a Lot of Data, But Too Many Silos

Insurers actually have more data analytics resources than other industries.