If life was a pita, then all of life’s ingredients would come together perfectly . But, for most, life is not a pita; it’s a Wonder Bread with oily shawarma on top. A known Israeli chef who recently opened a spot in NYC said that pita is the most genius bread in the world. You see, unlike a hero or a baguette, a pita can hold many ingredients together, without taking the spotlight. And if I had to use a tech term, I’d say that a pita is a platform, which gives different ingredients a seamless integration into someone’s mouth.
As you know, Expedia, the pita, just took in an ingredient called travel insurance by AIG. If you’re realistic, then it’s not difficult to see how the digital world is ruled by platforms, which like pitas, can only hold so much; Expedia only chose one insurer. So, did Grab. And so will others. But, even before the digital world became popular, platforms have always had a strict selection process; in 2004, around 10,000 new suppliers applied to become Walmart vendors. Of those, around 200 (2%) were accepted.
If you think Walmart’s selection process is tough, then you’re in for one frustrating digital adventure. Google, the biggest search platform in the US offers 10 first page spots, plus 3 for the highest bidders. And when you consider the fact that most insurance search terms on Google are brand-less and contain the word quotes, it gets worse. Display advertising for insurance is out of the question – it’s like hitting on someone in a relationship; only lead-gen sites can be successful thanks to their $19 per month car insurance ads. There’s Facebook, but that’s reserved for cool and inexpensive insurance products such as $5 renters insurance. And then there’s live TV, which is dying; the 2018 Oscars ratings hit an all-time low, since Nielsen started tracking Oscars viewership numbers in 1974.
So, how did we get to the point where the future of distribution is controlled by a select group? Michael Eisenberg, of Aleph VC, which invested in Lemonade said it well: “Of course companies like Google and Facebook are revolutionary. But in some ways, they had it easy. No one was really doing what either of them created so they didn’t have to fight the status quo, overturn regulations, combat pay to play politics, or spend their time and resources focused on something other than creating their platforms and growing revenues. That’s unfortunately not the case for most startups in regulated industries.”
In a tech world that’s lacking regulation, winners take all. Amazon, Google, Facebook, Apple, Expedia, Uber and Netflix dominate their industries. Thankfully, insurance is a regulated industry, which means that Amazon won’t wake up one day and decide to include homeowners & renters insurance as part of their Prime membership. Just ask Walmart; they applied for a bank charter in 2005. But, these massive platforms have disrupted distribution, which leaves a behind-the-scenes industry like insurance with a serious challenge.
Effects of time
Street food has been around for a long time. Over the years, street food vendors have evolved from carts to a hole in the wall, and some even offer limited seating. What was once associated with the lower class is now getting the recognition it deserves; in 2016, the Michelin Guide made history when it awarded two street food vendors a Michelin star.
The street food evolution has many similarities to the online one; both faced issues regarding quality, trust, and a limited experience compared to offline shopping / fine dining. And most importantly, it took time for both to become mainstream. Similar to fine dining, most insurance companies relied on personal, premium service through agents because that’s what sets you apart when you offer the same product. But now, the insurance industry is on the verge of a major customer acquisition challenge, as more consumers feel comfortable shopping online. Companies will have to find ways to differentiate themselves significantly in a very limited environment with a very limited product. And then there’s the location issue. AIG-Expedia and Chubb-Grab left the industry with a shortage of 2 platforms with powerful distribution. And when a lead-gen site attracts almost the same amount of traffic as a brand like Allstate, you understand that online advertising can become very challenging.
Insurance is a risk-taking business, and ironically, many companies are at risk as they didn’t risk going beyond insurance . Companies like Amazon, Google and Apple understand that no product or service can withstand the effects of time. This understanding led them to enter new industries and offer additional products and services, which increases their chances of staying relevant in the future. These companies created giant pitas with different ingredients and flavors, giving consumers options that satisfy most taste buds. And while people will always need insurance, that alone won’t guarantee the future of most insurers.
This leads to the ultimate question – should insurance companies focus on just one ingredient in a world ruled by platforms and multiple offerings? If they do, they better have one incredible secret ingredient.