Man do I hate this post. Let me count the ways:
Basic Math:
I’d say I correctly broke down how a dollar of insurance premium gets distributed, but I made two errors. I stand by the main cost being claims and brokerage. I glossed over the breakdown of the rest, though. There’s profits (5%), Reinsurance (5-10%) and internal expenses (5-15%).
Different Reality:
The internal expense portion is massively dominated by one function: regulation. In the US, there are fifty regulators a nationwide carrier needs to cozy up to. FIFTY. Insurers are NOT just pools of capital. They are money + regulation passing machines. That function is pretty resilient to ‘streamlining’.
No Balls:
So why did I decide that the smallest share of premium is the one to automate? The fat is in the brokerage because they have the power over the business.
Facile Business Fantasy (I really hate this part):
‘Silicon Valley’? WTF are they going to do for you? Social networking or cloud computing? You going to improve our process by outsourcing it? The key problem here is that if someone else has an idea that’s great for insurers, they should just start an insurance company. All you’d bring to the table is regulatory expertise and work flow systems. Not very impressive is it?
All the money is in the distribution network. Forget insurance. Find a way to take out the broker and let the insurers play with the regulators.
This is why I was worried about writing more. I start slinging stuff out the door and only later realize it’s shit.
Not Unreasonable 