Insurance industry must become better at risking failure, CEO says

As technological change sweeps the insurance industry in Canada, companies will have to “become more sophisticated or get out of town,” one CEO says.

The force of product sophistication and segmentation in the industry may cause some companies to either go the niche market route or to “opt out” and sell to a company that does have the scale – in terms of technology and talent – to be more competitive, Brigid Murphy, president and CEO of Travelers Canada said during a presentation at the Insurance Institute of Ontario – Greater Toronto Area’s “At the Forefront” breakfast event in Toronto Thursday.

The Dominion of Canada General Insurance Company opted for the latter scenario when it was acquired by Travelers last year, Murphy, who was president and CEO of the Dominion during the deal, noted.

Despite insurance companies being generally risk averse, those that embrace change will ultimately benefit most, she argued. “I think first of all, corporations have to get better at risking failure,” she said.

Pointing to prominent examples like Kodak and BlackBerry, Murphy suggested that business models and strategies that were once considered disruptive ultimately do become traditional, highlighting the need to embrace change.

Even rate comparison websites, for example, are now advertising on TV – a method that itself, in the age of recording programs and Netflix, has become a traditional, not innovative, way to reach customers, she noted.

“If technology really does level the playing field, I don’t count brokers out by any means,” she also noted.

The “buy local” mentality in some communities, is helping to keep brokers relevant, but personal lines and small commercial customers still want to engage and have a valuable customer service experience, not just be advertised to, she suggested.

Increased efficiency will also have to remain a priority, Murphy said. She referred to one study that suggested a new auto policy application would take a customer service representative 87 minutes to process – clearly a model in need of change, she said.

Despite that, and regulatory barriers to efficiency, some brokers and companies are pushing the envelope by investing in better technology and seeking out new ways of servicing customers online, for example, she added.