More “Billion Dollar Lessons”​ Ahead for Insurers?

Author, advisor, and innovation expert Chunka Mui offers observations on insurance, digital transformation in the time of COVID-19, insurtech investment, and how one insurer seized the opportunity during the crash of 2008


Chris McMahon: Given the pandemic and that we could be on the brink of a global economic depression, how do you think this will impact investments in tech startups?

Chunka Mui: There’s going to be a seizing up of capital. Everybody’s retrenching, there’s no getting around that. But if we think about the secondary effects of all this, we’re going to see a massive acceleration to the digitization of everything. We still need some people in the middle, but we’re getting a rapid immersion in how to interact digitally and virtually, and that’s going to dramatically accelerate the digitization of the insurance industry. The insurance industry is going to massively need that because there’s going to be tremendous cost pressure. If there are insurtech plays that are far enough along that they can accelerate that process with a decent return, I think that’s a good space to be in. I don’t know if that’s the silver lining. But that’s a consequence of all this.

Tell me more about capital markets seizing up. 

In every other crunch, it was short-term credit that seized. Lehman Brothers didn’t fold because of the long-term risk; it folded because the short-term credit crunch killed them before the long-term investments could even come to haunt them. Now we have trillions of dollars in stimulus. This happened overnight, so the short-term credit crunch is not going to be the same. How does that play out? I’m not a monetary guy. I don’t know. But it’s not necessarily going to be as bad in the same way as before. We may live through the short-term crunch in order to sort out the long-term implications.

Across the board, IPOs are being delayed, and there are concerns that investment in insurtechs could grind to a halt for months. Does that comport with your expectations? 

If nothing else, we’re going to have a deficit of attention and the ability to assess the right moves. But there’s going to be a lot of great talent out there. Somebody’s going to sort out who’s viable to partner with. So this is a good time for intelligent assessment.

I remember, in 2008, I was giving the keynote speech to a cross-industry group for my book, “Billion Dollar Lessons.” We wrote it just as the economy was peaking. We said: “This is crazy. It’s not going to continue, let’s write a book on business failures.” The morning I gave the talk, Merrill Lynch folded. Wow! It was all awful and very timely.

As it was happening, Jay S. Fishman, the CEO of Travelers Insurance, was in the audience, and I was sitting next to him. He was walking back and forth, in and out of the room. Everybody was in a state of shock, except for Jay. And he said: I’m doing interviews for people to hire because they’re all fleeing these other places. Travelers was OK. They made a lot of smart bets and didn’t do some of the dumb things everybody else did. He was interviewing talent when everybody else was worried about whether they had jobs, or whether their companies would last.

There’s the short-term feeding on the fallen, but there’s a longer-term restructuring. From my standpoint, the more interesting story is: How does this shock change our assumptions about the pace of the restructuring of industries? I think that the restructuring is necessary, and the pace of change for that restructuring is going to be fairly dramatic.

Yes. Telehealth is just exploding right now, and it had been dormant. 

You want to hear a funny story? I was supposed to host a panel discussion on telehealth. We had the chief medical officers from a couple of prominent telehealth companies. We had one of the largest academic medical centers as part of that discussion, and the conversation was all going to be about the slow pace of change: How long will it take? What are the systemic barriers? How will it change the delivery systems? How will large institutions adjust? Of course, that meeting got canceled, and then these folks are overwhelmed with business.

That is not going to slow down now that we’ve had that shock. Every doctor up to now has been saying: How do I bill for that? What’s the liability? All those issues are out the window. Now they’re trying to get on those platforms as quickly as possible. And they’re not getting off of them. And all the insurance companies were wondering: Should we cover or not cover? Do we need to cover? Now that decision has been made, and the insurance industry is lucky enough that they’re not on the front lines.

If you’re a big market insurer right now, you’re asking yourself: How many of my clients will be left standing after all this? How am I going to restructure my systems? What’s the distribution channel look like? All those questions get looked at from scratch.

How does it change the competitive landscape?

After you sort out those companies’ underlying economic health, those that are in “digitally forward positions” are in a better position. But fundamental financials will trump everything else.

So, the distance between the “haves” and the “have nots” is going to be exacerbated by all of this. What else do I need to know?

There’s an aspect we haven’t talked about, but your clients are going to have to sort out some near-term implications of the pandemic on themselves: the workforce, the partners, the channels, all that kind of stuff. This is not one of those situations that gets solved. We have to manage over time, and there’s going to be operational challenges inside the walls or inside the value chain and the supply chain. They’re going to have to be dealt with, and there’s not a great opportunity for them to do that well.

Thank you so much. It’s a pleasure. I appreciate you making time for me and, of course, all your thoughts.

My pleasure. Thank you.

Chunka Mui is the managing director of the Devil’s Advocate Group, a consulting group that helps organizations stress test their innovation strategies. He’s a regular contributor to Forbes and has published in the Harvard Business Review and Technology Review. Previously, he was managing partner and chief innovation officer at Diamond Technology Partners, now part of PwC, and co-founded and directed Vanguard, CSC’s multinational executive research program on emerging technologies. He also helped establish Accenture’s Center for Strategic Technology Research, now Accenture Technology Labs. For more info, click here.

Chris McMahon is the senior marketing manager for content at EIS.

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