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A Few More Thoughts on Disruptions and Collaboration

February 9, 2015
Google: Testing the waters or preparing a takeover? I’m sure you’ve read more than a few articles about Google’s entry into the insurance market.  If not, here are two of the more interesting ones… • New Clues on Google’s Plans for Insurance • Will Google and Amazon offer one-click life insurance? Folks have been saying for years that the insurance industry is primed for “disruption” and could very well be the next Blockbuster.  You remember Blockbuster, right?  The national chain of retail stores that you went to religiously every week to rent your favorite videos (“Be kind and rewind”)?  Netflix and On-Demand, among others, changed the way we access entertainment.  And the Blockbuster business model went from relevance to a historical artifact in just a few years. I don’t know about the Blockbuster store in your town, but mine is now a walk-in medical clinic. Blockbuster-Closing Using a Jim Collins-term, Google appears to be firing a few strategic bullets at the insurance marketplace rather than one giant cannonball.  It’s really no surprise that Google is first testing its ability to effectively distribute auto insurance.  The marketplace is vast, the purchase of the product is mandated by every state, and after years of mass merchandising by the nation’s largest auto insurers, the product itself has become a price-driven commodity.  Google isn’t taking any major financial risks – remember, it’s just the seller, not the underwriter. But if Google’s bullets tell its executives that consumers are willing to purchase auto insurance from the search engine goliath, then it’s my guess that it won’t take them long to figure out a) how to underwrite products themselves, and b) how to sell other types of insurance policies – including life insurance and annuities – to consumers here at home and around the world. Collaboration:  The alternative to antiquation Of course, Google is not going to replace every insurance agent and company.  It’s a big market with many niches and one-size will never fit all.  I think that smaller organizations – like fraternals – can effectively compete for important sectors of that very large market if they are willing to…wait for it…cooperate and collaborate. I came across a fascinating article in a banking industry trade publication the other day expressing the support of the Comptroller of the Currency – a major federal bank regulator – for collaboration among community banks.  Community banks are the fraternals of the banking world – small and mid-size institutions serving the needs of individuals in a specific geographic area. The OCC said that it was supportive of collaborative efforts that generate economies of scale and cost efficiencies or leverage specialized expertise.  (Sound familiar?)  As examples, it cited banks sharing back-office functions such as data processing, internal audit, records management, human resources management, regulatory compliance and procurement.  (I swear I am not making this up…)  The OCC report concluded that “when conducted with appropriate strategic planning, strong risk management, and effective oversight, collaboration can help community banks thrive.” Tell me I’m not the only one worried about disruptions and thinking about how to compete in a marketplace that could be turned on its head in a matter of months, not years.  Better yet, tell me what your society is doing about it by sending me an email or posting a comment here.