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The ironic case of Blockbuster and what insurers can learn from its demise

The ironic case of Blockbuster and what insurers can learn from its demise

The ironic case of Blockbuster and what insurers can learn from its demise By Mark Lusted

The following article was written by Mark Lusted, MD at
Dock9
 
Imagine the year is 2000; you’re the owner of a movie and games rental company and have been approached by Netflix. Instead of collaborating you declined to partner up. Fast-forward 10 years, your business is bankrupt and the business you declined to partner with has surpassed your peak and is now worth over $28 billion.
 
This, of course, was the unfortunate fate of Blockbuster.
 
Although a highly successful retailer for years, its demise was due to its failure to adapt to changing times. This is something incumbent insurers can, and should, learn from. Especially as investments in new technology, innovation labs, rapid prototyping and user testing, as well as an adoption of agile practices are on the up among the most switched-on.
 
Despite this, much of the sector is stuck in its ways particularly when it comes to innovation. For years this didn’t matter, but in the start-up era, there are an increasing number of fleet-footed InsurTech startups changing the way consumers and businesses alike look for protection.
 
With Consumer Intelligence’s latest survey reporting that “consumer trust and confidence in insurance brands is at an all-time low”, there are clearly opportunities for new entrants who have the advantage of a fresh slate to build their technology. These businesses are leveraging data, automation, connected devices, personalisation and, increasingly, artificial intelligence to deliver simpler and smarter user experiences.
 
Crucially, the most innovative are challenging the notion that the engagement with a customer after purchase should only be at claim, adjustment or renewal. Could meaningful on-going customer engagement be the solution to the commoditisation of insurance in the age of the aggregator, and create happy, loyal customers?
 
Digital Darwinism
 
While many insurance companies may dismiss these ideas out of hand, comfortable that their line of business or specific niche is safe from disruption, this is a risky attitude to take.
 
They should look to a fallen behemoth in the form of Blockbuster for evidence of how such complacency can come back to bite them.
 
Insurers cannot afford to go down this route.
 
Constant innovation is needed to make money, with which businesses can invest in their company to spur its growth. Insurers need to be aligned with their target market, which itself is likely to be seeing generational shifts in behaviour and give them what they want in the form of slick, easy to use digital solutions.
 
Systems strain
 
Many insurers think that doing this will mean overhauling their legacy IT systems. It’s like the loft in your house - a potential new space that can be converted into a spare room, or office - but the hassle of cleaning it out is too much to bear, meaning it’s left as is and excuses are made.
 
The complexities of the insurance sector’s legacy systems can be baffling. The problem is, once norms have been set, it’s difficult to break out of them. With a history of mergers and acquisitions, it’s far from uncommon in our experience to find a multitude of independent legacy systems, often supported by a limited group of individuals with a reluctance to change.
 
However, insurers need to understand the damage using the excuse of legacy systems is causing their businesses, by hampering their advancement in an increasingly competitive market.
 
Moving away from existing systems is particularly undesirable if you’re a business that wants to quickly address the problem and move on; the thought of a multi-year system procurement and implementation project causes sleepless nights. There is also the danger that a ‘rip and repair’ project will fail.
 
So how can you stay innovative without spending a fortune?
 
The truth is that delivering modern user experiences in most cases does not require a core-system change. Rather than a full system overhaul, businesses can build middleware layers that interact between their systems and the front-end, allowing you a way to work around the incumbent technology and still provide customers with the best experience.
 
The level of complexity of the middleware developed will depend on the product, number of systems to be integrated with and amount of self-service touchpoints offered. But in most cases, this is far simpler and more cost-effective than a system change.
 
This can help incumbent insurers stop legacy systems acting as an obstacle in the way of exceptional user experience - which customers now expect as the bare minimum.
 
The insurance sector is facing a critical time. Now is the time to take an in-depth look at how they operate. They must ensure they take ownership for the complete, end-to-end user experience they provide.
 
And they have to understand that the old way of doing things is no longer the right way. Rapid prototyping and testing with real customers must be carried out continuously in order to deliver new features constantly. Above all, they must put innovation at their core, to attract a new generation of customers.
 
Insurance organisations should learn from the errors of empires like Blockbuster, and ensure they move with the times. As long as they do, they won’t be left behind by competition and forgotten about by their audiences.
 
The preceding article was written by Mark Lusted, MD at Dock9 – the views reflected within do not necessarily reflect those of Insurance Business.

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