I participate in a Yahoo! Group called “RiskList.” This email discussion group consists of insurance and risk management professionals from around the world and is an excellent source of information about technical, real world insurance and risk management issues.

Today, one of the participants posted about an Interesting startup called “Bought by Many” where prospective insureds can be grouped to buy insurance, including some existing products and not yet available but that could be made available by group demand. This is an interesting idea, but what are the advantages of actually placing coverage through a facility like this?

That’s hard to determine since their web site focuses on price savings, just like the vast majority of industry advertising we see from lizards and discount store clerks. Their web site says “18.6% Average Discount.” Average discount on what? Apparently the coverage provided by alternatives to their products makes no difference. The only distinguishing feature they focus on is price. Price for what?

When my son moved into an apartment, the property management company required renters insurance and they had a relationship with a vendor that could provide it. You could read the policy online. No endorsements. Limited named perils. Minimal additional coverages. $50,000 liability limit. Overpriced junk. For an extra $80, I could get him a good HO-4 from a decent company. For an extra $120, I could get him a premium policy. He went with that AND a personal umbrella policy. I told him if he was ever short in paying for this superior coverage, I’d pay it, but he was going to protect his assets and income stream AND, even more important, he was going to protect innocent members of the public from his possible negligence.

These start-up “disrupters” are becoming a dime a dozen. What many of them may be best at is PR hype and hyperbole and conning ignorant venture capitalists into investing into gimmicks. “Disrupting” is what they claim to be doing. Sounds revolutionary. Gets attention. It’s sexy. Gets venture capital as if it’s something entirely new. It gets insurance media writing about it because the writer often knows very little about the insurance industry, has almost zero historical perspective, and it makes their job easy by reproducing press releases without asking hard questions and challenging assertions.

Reminds me of a quote:

“We must treat ideas somewhat as if they were baby fish. Throw thousands out into the water. Only a handful will survive, but that is plenty.” — Anne Heywood

Every now and then this growing “disrupter” pool produces a big fish like Uber and Airbnb, but my guess is that the vast majority will become extinct as the existing predators devour them.

As always, I encourage insurance professionals to educate their customers and prospects that insurance is not a commodity distinguishable only by price.

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information

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