In sports, there’s a famous phenomenon known as the “Hot Hand Fallacy.” It’s the assumption that a player who has made several shots without missing will keep making them - or, at least, the player will in the minds of the crowd watching them.
It’s a fallacy, rather than a theory because it’s not really true. Change is, unfortunately, inevitable.
I think there are a lot of parallels between this idea and the way the competitive insurance industry is perceived. Just how confident can you be that what worked yesterday will keep working tomorrow? Let me quickly explain via another one of my favourite pieces of cinema history.
“If you challenge conventional wisdom…”
Welcome back to my blog series of comparing the financial industry to my favourite movies. Oh yeah, I’m still going strong. That’s where Moneyball comes in. Great film, by the way - a story about adapting to succeed, overcoming the odds, all wrapped up in a delicious baseball wrapper. By challenging the status quo and finding success through innovation, the Oakland Athletics are playing the same game, under the same rules, but with a new set of tools.
Insurance providers are in a great position to benefit from next-generation tools that let them maintain their characteristically diverse set of products - while using fewer resources in the process. Better yet, it begins to let you become more ambitious in your targets for the future. This is how technology can transform insurance - it’s about simplifying the things you do already, and expanding your capacity for new business as a result.
Just like Oakland A’s General Manager Billy Beane proves by favouring the innovative, data-driven "Sabermetrics" of Peter Brand over the traditional methods of assessing player value - similarly, the technology that is beginning to influence finance has challenged a lot of existing assumptions about what a business needs to succeed, and what becomes possible. It is the potential to produce a far more robust, future-ready back-office operation.
“No matter how successful you are, change is always good”
When Beane signs an injured catcher, an ageing outfielder, and an unorthodox pitcher to the A’s, it was on appearances alone that people doubted the decision, despite all the data backing it up. In insurance, the difference is that this technology is a less ridiculous concept - it’s a highly valued asset that many of your competitors are looking to adopt.
To further the analogy, the fans in the bleachers are screaming out for those same tech-driven services and products as well. The new generation of customers has been pretty vocal over the past five years about what they want. They want convenience, security, and simplicity.
Like a match made in heaven, financial technology like process automation was built to enhance exactly these kinds of things for financial businesses.
“You have to always be upgrading. Otherwise, you’re f***ed.”
In the end, the Athletics eventually clinch the 2002 American League West title, only to lose to the Minnesota Twins in the 2002 American League Division Series. Billy Beane is contacted by the owner of the Boston Red Sox, who realizes that sabermetrics is the future of baseball.
Beane declines and returns to Oakland. Two years later, the Red Sox win the 2004 World Series using the model the Athletics developed.
I think that’s the biggest thing about the race to competing as a digital provider. Technology is already changing finance. Insurance providers are already beginning to adopt new tools they hope will change the game. It’s difficult, maybe impossible to predict the future, try as we might. I’m no gambling man, either. But if there was ever an opportunity that was more suited to transform the way insurance providers operated for the better, this could be it.
I’ll leave the last word to Moneyball’s author, Michael Lewis, on where tradition doesn’t always mean correct.
“Managers tend to pick a strategy that is the least likely to fail, rather than to pick a strategy that is most efficient. The pain of looking bad is worse than the gain of making the best move.”
All quotes attributed to Michael Lewis, author of “Moneyball: The Art of Winning an Unfair Game”
Become a challenger with the cloud-based Nucoro Engine in a matter of weeks, not years. Contact me at J.McCann@nucoro.com