The Industrial Era is Coming to an End. Here’s What’s Next

The industrial era model, from the factory to the classroom, was built for scale. It worked for 200 years. But something new is replacing it.

The Industrial Era is Coming to an End. Here's What's Next

Big transitions are fascinating examples of how desperately companies try to hold onto the past; driving by using their rearview mirror. That never works. Case in point, the transition out of the industrial era.

You don’t need me to tell you that we’re living through an era of tremendous transition and disruption for traditional industrial era industries. Tech behemoths such as Amazon and Google have radically altered retail, publishing, and advertising. Uber has decimated cabs, Airbnb is attempting to do the same with hospitality. Amazon has recently set it’s sites on healthcare.

The threat is clear. Long time icons of the industrial era, from GE to Kodak, are failing fast, and not in a good way.

The question everyone has is, what and who is next on the list of candidates for disruption? Actually, I’m being kind. Let’s call it what its is, decimation.

The answer comes down those bastions of the industrial era which harbor the greatest friction and complexity in how products are sold and serviced, and yet have been protected by significant barriers to entry, such as, regulation, the perceived value of their brand, or consumer acceptance of their inefficiency due to a lack of alternatives and any differentiators other than price.

A Crack In The Industrial Era’s Cornerstone

Stop and think about which industries fit that description and it’s likely that one which pops to the top of the list is insurance.

We accept insurance as such a necessary part of living in the modern world that we forget how recent its wide availability is. Broad-based insurance for individuals that protects against residential property and casualty, accidents, life, and health are all relatively recent advances of the past 200 years. In many ways insurance is a cornerstone, some might say the foundation, of the industrial era.

Yet, it is an utterly convoluted, highly regulated, and an inherently difficult to navigate business process. Few of us understand the inner workings and the complexity of the insurance business. For example, look at this animated illustration of an insurance ecosystem, all of the partners involved in writing a policy, and you can appreciate the incredible costs of coordinating such as vast ecosystem of partners.

Insurance companies, on the other hand, don’t see themselves as being especially vulnerable to existential threats, due to the government protections in place that regulate how insurance products and services are sold. They are, in effect, all operating with the same level of constraints and inefficiencies.

However, as the saying goes, sacred cows make the best burgers.

While some insurers are already making efforts to apply new technologies, these are primarily meant to compete against other incumbent insurance companies. For example, GEICO’s online insurance applications and instant turnaround have enabled it to run on a 300% surplus of cash over committed liabilities; the standard benchmark for the insurance industry is only 30%. That means GEICO has ten times more cash to invest than its competitors.

Another example is Progressive’s Snapshot onboard tracking sensor, which reports on your driving behaviors to offer rate incentives.

There’s a clear competitive advantage in both of these cases, but they pale in comparison to the new insurance business models coming from outside of the industry; the existential threats which ultimately create the big changes in any industry.

Upstarts such as Lemonade, Huddle, and Amazon are already starting to offer products for Property and Casualty insurance. Lemonade launched in 1/3 of all states offering instant quotes using an AI bot and what it calls, “Insurance powered by AI and driven by social good.”

Others, such as Ladder ( use an online application and backend algorithms to provide an instant quote on life insurance without the need for any human intervention, for example a broker. Although, in some cases a visit from a lab technician is required depending on your health history. I went online and within five minutes had a quote for a multimillion dollar policy ready for me to accept.

Still other insuretech upstarts, such as MetroMile, which I profile in my book Revealing the Invisible, are starting to provide car insurance in more of an on-demand model which only requires you to purchase insurance based on use.

And Now For Something Completely Different

But here’s the really big news. In a recent J.D. Powers study an amazing 33% of millennials said they would choose to get Property and Casualty (P&C) insurance from Google or Amazon. (The number was slightly lower for a cross demographic population. See the survey results below)

J.D. Power’s P&C Insurance Industry Practice went right to the source – the consumer – to ask how real home insurance customers would feel about the presence of tech companies in this space.

I talked to Tom Super, Director of the J.D. Power Property and Casualty Insurance Practice, and the person who led the research for J.D Power. What he described was an industry that not only needed to change because of how technology is enabling new ways to collect information and determine risk, but also due to demand from consumers who are increasingly looking for alternatives to the old model of insurance that involved brokers, agents, obscure pricing, and long wait times.

Here’s a bit of what the J.D. Power study found:

1) 20% of Consumers Would Use Amazon or Google for Home Insurance

The data revealed that 20% of consumers would use an Amazon or Google for their home insurance. Millennials showed even higher interest at 33% for Amazon and 23% for Google. Of those that indicated that they would be willing to switch, 80% currently have insurance with the large national carrier.

2) 75% of Consumers Interested in Home Telematics

Smart home technologies are revolutionizing many areas of the home, from simple comfort features that can now turn lights on and off or access in-home entertainment by control of your phone to home security and emergency support with automatic shutoffs and alerts.

The insurance industry is taking notice and wants in on the action. Insurers see smart home technologies as an opportunity to deepen their relationships with customers, while at the same time improving home coverage options and underwriting. While leading home insurance carriers have begun to venture into these areas, not much research has been done to understand the consumer’s demand as these features become available.

3) 46% of Consumers would be willing to allow their home insurance company access to smart home sensor technology in appliances, such as refrigerators, air conditioner, to help prevent loss and malfunction.

4) 34% of Consumers would likely switch to a home insurance company that offered smart home technology loss and protection options. That goes up to 57% for millennials!

Industrialization to Individualization

It’s pretty clear from these findings that the insurance industry is ripe for disruption. Expect that large players such as Amazon and Google will soon step into these markets with offerings that they build or acquire (most likely the latter). If you want a greenfield opportunity to build a newco that stands a great chance of being acquired this is an ideal space to think about.

And it’s not just insurance that will be disrupted. According to research done by Accenture, 93% of chief strategy officers across all industries believe that their company will be disrupted within five years. And yet, only 20% feel they are ready for it.

The bottom line is that we are living through a transition from the industrial era, in which scale meant depersonalization and delivering one size fits all products, to an era of hyperpersonalization in which every product will have to fit the unique needs of each consumer. The Answer to what’s next is that we are entering the era of individualization where every product and service is not just customized but built to the specific needs of each person.

It may be hard to buy into that after having grown up in the era of industry, but companies that don’t get that, be they in insurance, banking, healthcare, education, manufacturing, retail, or any other industry will soon find themselves at the helm of the past.

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This article was originally published on Inc.

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Thomas KoulopoulosTom Koulopoulos is the author of 10 books and founder of the Delphi Group, a 25-year-old Boston-based think tank and a past Inc. 500 company that focuses on innovation and the future of business. He tweets from @tkspeaks.

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