“Outside In” Innovation: What Insurers Can
Learn from the Blockbuster Bust
Disruptive new technologies are usually blamed
for the demise of businesses, from Kodak
cameras to Blackberry smartphones.
Case in point: Blockbuster video rental stores, which went from 3,600 outlets down to justone over the course of 16 years.

Bruce Bosco

Vice President
Business Development
AURA

Many would say the internet and on-demand video streaming services like Netflix are to blame.
I disagree. The problem wasn’t that Blockbuster failed to respond to changing tech; the problem was that Blockbusterfailed to anticipate that change was required – to look at its market from the outside in. The video rental industry had
been so profitable that leaders had little incentive to take the risks that were ultimately necessary to save it.
Insurers can learn a lot from the Blockbuster bust when it comes to marketing and selling to a new generation ofconvenience-driven buyers. Numerous consumer studies suggest that once life insurance purchasers experience
an online, straight-through underwriting decision, they are far less likely to respond positively to a less convenient,paper-based insurance purchasing process. Further complicating insurance sales is the fact that once a younger
consumer makes a life insurance purchase, years may pass before another life event incents that same individual toconsider another purchase.

Embracing a Data-Driven Future

To ensure more qualified prospects become policyholders, technology and data sources available today can beapplied to streamline this process. No wonder life and health insurers report mounting pressure to define a datastrategy, according to RGA’s 2019 Global Life and Health Data Analytics Survey. Eight out of the 10 major multinationalorganizations participating in this online study reported having developed a data analytics strategy, yet only half werein early stages of putting this plan into practice, and one had not begun.
It is becoming very clear, very quickly, that a data strategy, combined with process automation, can deliver
convenient, accurate, and efficient risk assessment and offers. Some carriers already recognize this reality. In RGA’s
Data Analytics Survey, eight of 10 participating insurers agreed that data analytics would have a “high” or “very high”
transformative influence over distribution and underwriting practices over the next three to five years, with 60% ofrespondents sharing the intent to invest in data-driven underwriting. When asked about non-traditional data sources,
60% of respondents reported planning to use wearable sources such as steps, sleep, and heart rate monitoring, and50% indicated plans to employ “digital fingerprint” data that draws on social media disclosures.

Recognizing the Next Big Thing

Carriers may recognize that they ignore data at their peril, but integrating it across the insurance value-chain canpose unique challenges. Anyone who has observed the insurance industry for any length of time realizes that thenext “big thing” quite often appears like nothing at all in the beginning. Even though it may seem as though online
retailing appeared overnight, it took years to develop, and risk assessment digitization and automation also will
require time and investment.

As a result, insurers can easily find themselves making large investments in underwriting rules engines that require
on-premise installation. These are not only expensive to maintain but require frequent, laborious, expensive upgrades
to keep pace with change. Unsurprisingly, carriers can easily fall behind as technologies leap forward.
Software as a Service (SaaS) presents a powerful response to this problem.
SaaS models were initially deployed in more back-office functions such as human resources and financial accounting.
Over time, carriers began to recognize that SaaS-based benefits, such as more efficient system maintenance, faster
upgrades, and lower infrastructure costs, were being underutilized and could be applied to underwriting and new
business processes.
AURA, a SaaS-based e-underwriting system using RGA’s underwriting expertise, offers a compelling example of what’spossible when investing in data-centric technology to improve efficiency and customer experience. Among its many
capabilities, AURA is a multivariate rules engine that can efficiently incorporate multiple evidence sources in automatedunderwriting assessments, empowering insurers to deliver underwriting decisions without having to fully rebuild arules engine to accommodate each unanticipated or emerging data type. This technology has been recognized as astrong performer, with the second highest score in the strategy category among the select group of companies who
participated in The Forrester Wave™: Automated Life Insurance Underwriting Systems, Q4 2019 evaluation.

Anticipating Change

It is important to note that successful carriers don’t need to abandon efficiency or practicality to integrate innovative
data sources into underwriting decisioning. Carriers should think beyond building systems that respond to change,
and focus on technology investments that anticipate it.
This requires technologies that empower the carrier to seek out market openings and adapt processes proactively tofill them. Even Blockbuster experimented with home delivery when Netflix launched its startup, but its management
preferred to focus on its core video rental business rather than risk becoming distracted by what seemed like a sidebusiness. We all know how well that decision turned out.
Companies like Blockbuster ultimately failed by getting better and better at things that people cared about less and less –in this case, video rentals in a world of on-demand streaming. They remained dominant in markets that disappeared.
For life and health insurers the time to act is now. The current generation of life insurance purchasers are making
purchases today. The next generation of buyers will have even higher expectations for a seamless, non-intrusive, data
driven experience. Just as AURA has continued to evolve to support the digital age, we welcome the opportunity todiscuss how AURA can help evolve your processes to support the digital age. Curious? Ask AURA.

For more information about the article please contact: Bruce Bosco, Vice President,
Business Development AURA, at bruce.bosco@rgare.com ■www.rgare.com