Part of the hype involved with the Facebook IPO this week is the vision of its founder to establish it as a platform for people to use when interacting on the internet.  To me, this means not simply linking from the S.N. to another site, but to actually complete commercial transactions on the social network itself.  For insurance, this would have a minimum benefit of avoiding tedious data entry of demographic information that the network already knows about you, age, sex, address, etc.

If you don’t think transacting insurance on a site other than that of the writing company will happen, you can stop reading now — you won’t be interested in the rest of this post.  If, however, you are game to consider that a company will try this, read on and get ready to post a comment and make your pov known.

What would be the characteristics of the first U.S. P&C insurance company to use a social site as a platform for its business? Here are some considerations:

Product – Will be one of the commoditized, less differentiated products such as personal automobile, motorcycle, or dwelling: In these lines of business, price and service separate the offerings.  Being able to ease the process of obtaining and maintaining insurance will be a driver.

Segment – Likely youthful: The companies first attracted to a S.N. platform will be those with prospects who are most comfortable with the environment, aggravated by traditional insurance distribution and  less concerned about personal privacy.

Channel – Direct: As this new way of doing business will involve first-mover risks, it is likely that companies with intermediated distribution will pass on using the platform in the beginning.  Upsetting their existing agents with a direct social network approach will be too much to bear.

Culture – Innovative: There will need to be some match between the value system of the insurer and that of the social network company. Stepping into this unknown territory will require that both parties are comfortable with their partner. Thus, insurers which have a reputation for being more innovative will be more likely to reach acceptable terms with the platform provider.  Since this will probably be either Google or Facebook, the insurer with the vibe closest to “do no harm” or  “hacking” will likely prevail.

Size — Not necessarily the largest: I do not think that the first S.N. insurer will need to be a billion+ organization, but I am sure that the network provider will demand some fairly steep rent and this will restrict the number of insurers able to pay the freight.

Technology – Probably not a barrier: The investment of many insurers in core system renewal should position most of them to take advantage of the open standards that a S.N. is built on.

Regulator view – The wildcard: The most likely insurer, in my view, is one that has a good reputation with the regulators and a decent reputation at addressing their concerns in past market conduct reviews and inquiries.  As the response of regulation to this new way of doing business is such an unknown, the company willing to take this step will be confident in its ability to respond to its overseers.

Given these parameters, does anyone come to your mind?  In days past, I would have identified the company with the pink-haired lady mascot as a leading possibility, but its recent purchase takes them off the table.  It also could be one of the specialty auto insurers targeting the youthful driver market as well.

Post a reply, or email me at mfitzgerald@celent.com, or contact me on LinkedIn or Twitter and let’s knock this around a bit.

Since coming back to the UK a few press releases and blog posts have caught my eye that feed well into this discussion. The first is from Robert Scoble, among other things a technology commentator and blogger. His post, 2012 brings a pause in the disruption sounds contradictory to our view but a quick read of his post provides a great view of the level of change we’ve seen in the last 8 years. Think back 8 years, to the phone you had, the way you interacted with the Internet – with the TV even. In the last 8 short years we’ve seen the birth of the social web, the rise of the smart phone, of apps (and their stores and markets), of gesture based interactions (the Wii and then Kinect were launched in this timescale) and now the IPO of facebook which launched in 2004.

The pause in disruption points to a lack of jaw-dropping disruptive technology at the start of 2012 and a consolidation in the industry, a refining of these hugely disruptive themes into concrete business models and a maturing therein. I have to agree. CES 2012 saw bigger TV’s, TV’s with gesture control and further merging of mobile, tablet and laptop devices. Even Apple, the great innovator, presented the iPhone 4S as something they could ship in huge numbers rather than go for massive change. One technology I would watch is 3D printers, which are still gaining ground slowly but mostly in geek and maker communities – given another decade and cheaper prices I think this will seriously disrupt insurance and retail models. For now, we may be waving phones to make payments and having screens we can bend and see through – but consumer electronic developments in the last 12 months lack the technological disruption of past years.

This pause is good news for the insurance industry in that makes this the perfect time to step back, take a look at the opportunities and possibilities these great waves of change have on our business models, our products and the way we interact with customers.

Insurers across the globe have already made great strides in interacting with customers through social networks and understanding how to leverage them. Insurers are also experimenting with apps, mobile and connected devices. Telematics looks set to enter the mainstream in many markets, where the question is less how should we do it but now which method.

It was interesting also to see these articles regarding AXA, repositioning it’s brand as innovative within the UK, making use of social technology and games to educate businesses on the value of insurance. Perhaps not the first insurer, but the articles are indicative of recent and continued investment in this theme from the insurance industry.

The recent past - whether you call that 8 years, a decade, two decades – this short time has been an incredible period of change, insurers are already disrupting their industry and Celent contends there is no better time to review how the industry can leverage adoption of emerging technologies to creatively disrupt not only their internal perceptions and process, but the entire market.

Representing insurance technology “best of the best”, the 2012 Celent Model Insurer Awards honored projects in eleven categories.  There were common themes in the award winning projects: an emphasis on innovation and emerging technologies like mobile, telematics, and geospatial risk management tools; a continuation of insurers using SOA/Web Services and ACORD standards as insurers build lasting, integrated solutions; and the increased digitalization of processes as insurers go green and automate process flows.

This year Celent received well over 80 submissions each representing a different technology initiative.  Twenty-three Model Insurer Components and one Model Insurer of the Year were named.  Nationwide Insurance won Celent’s Model Insurer of the Year recognition for their successful Catalyst Program, a five year consolidation of two $1 billion commercial property & casualty companies. Nationwide’s Catalyst program was successful because of several key best practices including: a strong IT/business alignment; the use of a multi-phase roadmap with “builds” in flight simultaneously; the successful adaptation of the IT department from being a maintenance organization to a systems deployment factory; and the use of effective change management throughout the organizations ensure business readiness.

For more information on the Celent’s 2012 Model Insurer Awards please visit http://www.celent.com/reports/model-insurer-2012-case-studies-effective-technology-use-insurance. 

Nominations for Celent Model Insurer Awards are accepted year-round. We will accept nominations for 2013 beginning February 2, 2012. The deadline for nominations is November 1, 2012.   Will your recently implemented project be recognized as a Model Insurer in 2013?  Submit and find out! 

For Guidewire the IPO will provide access to public equity markets and working capital—as well as funding additional internal development in its products and technology. As Guidewire is now a publicly traded company, its customers and prospects will have more visibility into its financial status.

For the insurance software industry, the IPO highlights the importance of modern software as an enabler of growth and competitive advantage for property/casualty insurers facing a tough global economic environment.

The listing may also attract more investor interest from private equity, venture capital, and institutional investors in the entire insurance software sector.  The very active run of acquisitions and spin-offs we’ve seen for the past 18 months will continue, and perhaps accelerate.

A higher profile among investors and more money invested will make the insurance software sector stronger and more competitive, and should lead to more innovation and value delivered to its customers, the insurers.

These decisions will directly impact the use of data in insurance transactions such as claims investigations and underwriting.  Not being a lawyer, I cannot weigh in with an informed prediction about which way the court will rule, but my intuition is that it is going to be difficult to establish a standard of privacy that can be applied based on the intent of the person offering the information.  When and where we can expect privacy is very different in this age of digital communication and I can tell that the issue will be difficult to resolve.

I think it’s interesting that the revenue model for LinkedIn is quite different. There is advertising there but the main focus is around recruiting people and getting recruited. Those people who want to find the best talent pay a little extra to access features that make it easier to do just that – find the best talent.

For Facebook however, people use the site for lots of different purposes so it’s harder to hold back such targeted functionality. Actually I think Facebook could learn from Apple and Blizzard – the games company behind World of Warcraft. Blizzard made $1 million in 1 hour by selling a flying horse in their game. The horse was actually no better than ones you could find in the game, and you already had to be able to ride one (so probably had something similar already) in order to buy. It was kind of pretty and just a few dollars so, despite offering no value or advantage in the game millions of players bought it for real world dollars. Zynga and a number of other social game developers have taken this further with the possibility of playing games for free, but paying a little cash to be able to play the game faster or have that one extra thing that looks quite pretty. Virtual goods available at a low price are now a huge market.

What does this mean for Facebook? There’s a scam going around on Facebook at the moment promising to be able to turn your Facebook page pink rather than the usual blue. People are clicking on it because they want it – I have little doubt that if Facebook charged $0.10 to change the colour of Facebook profiles we would see them make $1m in less than an hour. Actually though, that’s not even the sweet spot here. If Facebook were able to control the payment method as Apple does in the App store then they could take a little revenue from everyone using their platform, from all the virtual purchases (again, as Apple does on all those little purchases through apps and in the app store). Facebook is starting to do this already - this is what Facebook credits are about.

In my view it’s not in Facebook’s interest to offer Facebook branded products (save except for caps or t-shirts possibly), but rather to corner social commerce, to create a platform where it’s easier and more convenient to purchase items in Facebook credits – all the while seamlessly sharing the purchases and implicitly recommending products to their friends.

What does this mean for insurers?

One is do the virtual goods need insurance? Personally I’m not sure about digital equine & aviation insurance in World of Warcraft or virtual farm insurance in Farmville, but Eve Online did have space ship insurance built in. Does anyone remember Second Life and the virtual businesses operating in it?

The second and more important one is that Facebook will become a platform for doing business. The infrastructure is already in place, the opportunity is too great and the current client base too large for this to be ignored. Today Facebook credits are just for games, tomorrow why wouldn’t young drivers top-up their pay-as-you-go car insurance on Facebook? All the while sharing the product and provider with their friends as they do it.

Facebook isn’t going to be the next virtual shop on the high street, it will be a new high street on which established brands and new brands build their shops.

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$195. If you are unsure of your client status, please contact Chuck Smith at +1.617.262.3125 or csmith@celent.com.

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I’ll assume that everyone reading this post knows something about insurance products and the process of selling those products. So take your own “Is It Just Me?” test. 

After you watch the next five or ten insurance commercials on the tube, ask yourself a few questions.

·         What are they selling?  Does this commercial actually identify an insurance product?

·         Have they given me some good reasons for buying that product?

·         Do they show prospective buyers and customers as intelligent and sympathetic–or as stupid and/or overweight and/or ridiculous?

·         And if the latter, why should I want to do business with a company that has such a low opinion of its customers?

There are exceptions of course. Some commercials are both entertaining and informative (think GECIO and AFLAC).  But all too many, apparently have two goals:

·         Demonstrating how clever (or worse edgy) the people who made the commercial are

·         Making insurance as obscure and offensive as possible

Is it just me?

The announcement is located at http://sec.gov/news/press/2012/2012-3.htm The posting also includes a useful summary of compliance issues for companies to consider regarding social media (a National Examination Risk Alert titled “Investment Adviser Use of Social Media”).

I wish the authorities all the best in continuing to be successful in these endeavors.  If there is a next Bernie Madoff, let him do his damage outside the realm of social sites.