The insurance industry is ripe for disruption and must innovate to thrive, despite more than a century of tradition and experience, the head of a Lincoln life insurance company said Wednesday.
Tom Henning, chairman and CEO of Assurity Life Insurance Co., said a case in point is NerdWallet, an online clearinghouse for financial products, including life insurance.
Within a minute of opening NerdWallet’s website, a potential customer sees the monthly rates for more than a dozen life insurance policies from different companies and can start filling out an application to buy coverage.
Compare that with the traditional method of buying life insurance: A salesman comes to your home, makes a pitch to explain how much insurance you need and then starts the paperwork, leaving you without much chance to shop for other products.
Digital shopping gives customers “almost perfect transparency” to compare products and prices, Henning told about 100 people at a meeting of the Association for Corporate Growth, held at the Scott Conference Center.
One study found 535 insurance technology startup companies with $4.6 billion in financing, some of which will survive and prosper.
“They’re going to disrupt our industry,” Henning said. “Napster moments are happening all around us,” he said, referring to the online music company that changed the music distribution business.
Henning said it’s easy for insurance companies, which can trace their histories back generations, to think like Blockbuster, the video rental company that once had more than 9,000 stores where people went to rent videos.
Video by mail and online video sharing pushed out Blockbuster, which failed to adapt to new technology.
“Digital technology moves at warp speed and disrupts market after market,” he said.
The need to innovate in the insurance industry is especially important for Omaha and Lincoln, he said, which have the fourth-largest concentration of insurance companies in America behind New York City; Hartford, Connecticut; and Des Moines.
The industry grew here because companies in the East thought it was too risky to sell insurance in the Midwest during the days of the pioneers, Henning said. Entrepreneurs in Omaha and Lincoln started their own companies.
Assurity traces its origins to 1890, but that’s no guarantee of future growth, he said. As a result, the company has a division that finds investments in promising startup companies and has diversified into real estate development and human resources management.
It’s important for insurance companies to adopt a culture that makes people willing to try new ventures and accept failure as a step toward success, Henning said.
Experts predict that life insurance’s share of individual financial assets will drop from 16 percent today to 12 percent by 2020, Henning said. About 30 percent of households have no life insurance, a 50-year low.
Americans today are more concerned about having money for a comfortable retirement than the traditional reasons for life insurance, he said: protecting loved ones from a premature death, covering burial expenses or leaving an inheritance.
Companies with a long history are particularly vulnerable to disruptive change, he said, because they may decide to rely on past practices and miss emerging technologies that new companies can adopt.
Insurance companies tend to be risk-averse, Henning said, but these days, “operating in a disruptive environment is normal. Doing nothing is no longer safe. It’s the riskiest thing you can do.”