Disrupting insurance

Tech disruption of the insurance industry will start with the on-demand economy.  You can see it in Business Insider’s diagram of “The Fintech Ecosystem”

The #FINTECH ecosystem https://t.co/qlNOszE3VI

See that little section labeled “Insurance” in the bottom middle?  That’s a reflection of the future.  The future is on-demand resources when you need it and that will be the source of disruption for insurance.

Cloud computing offers compute resources when you need it.  Uber offers on-demand transportation.  Upwork offers an on-demand workforce.  The future is pay for it when you need it.  The missing gap is both insurance when you need it and support services for an on-demand economy.

The industry is starting out simple.  Not to overuse the phrase, but Metromile is “The Uber of auto insurance”.  Its car insurance offered via an app in a “pay-per-mile” fashion.  It allows a variable pricing model based upon risk.  Your risk profile when you’re driving commercially vs. privately is completely different, so why not optimize on demand?  It can readily go further than that as well.  Given the right data, one could readily track your driving style to understand your risk profile in a much more intimate way.  It’s a great example of disruption of traditional auto insurance.  It’s not only insurance when you need it, it’s also applied data science.

There are many coming opportunities for disruption in the insurance market.  Both in supplying this style of on-demand insurance but also in supplying insurance and financial services to the on-demand workforce themselves.  Just as computing and transportation are moving on demand, so too is the workforce.  What services are available to support the on-demand worker?  Car insurance, health insurance, pensions, liability, etc?  When and how do they need it and how does it adapt to their needs?

 

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Becoming a digital nomad

2.5 years ago I made the leap.  I quit my job in international business, sold or gave away most of my possessions and became a digital nomad.  What’s a digital nomad? A digital nomad is someone who works remotely via the internet from anywhere.  I have my own company, I live my life effectively out of a suitcase and my office is in my backpack.

I’ve traveled through parts of Europe and SE Asia, working while I go.  I’ve worked next to a pool on the rooftop of an building with an amazing view of the Petronas towers in Kuala Lumpur.  I’ve scrambled around in the rain at Lake Balaton, Hungary in search of wifi to end up huddling under a tree when combat cloud outage issues. I’ve stayed in super cheap guest houses with beds harder than concrete or a night club next door.  I’ve had to deal with stuff getting stolen and getting lost more than once. I’ve eaten $1 meals at some very questionable establishments, and $6 set menus of great food that left you completely stuffed.  Along the way I’ve surfed in Bali, toured the ruins of Angkor Wat, and braved piloting a scooter on the crazed no rules streets of Vietnam.  It’s been an incredible journey.

Why did I become a digital nomad?  Bermuda is too expensive.  I decided I wanted to manage my own business and had no funding other than my own savings.  So I opted to ‘Bootstrap’ it.  Bermuda’s cost of living is so high it is a terrible place to start an internet based business.  Everything costs a fortune when by comparison, on last minute notice, you can travel quite cheaply in places like in SE Asia.   You can get a half decent hotel room with wifi for $20-30 a night, eat a decent meal for $3-7 dollars, and get incredibly fast internet on your cellphone for a month for $5.  That’s not even considering the savings you can manage if you rent monthly and get a little plug in cooker to make your own food.  If you’re Bermudian and are thinking of starting an e-commerce business using savings then its pretty much the best way to go.

Interested in becoming a digital nomad?  The best places to start are

- www.nomadlist.com

- www.nomadforum.io

Of note: Bermuda ranks near the absolute bottom of the list as a digital nomad destination and does not come up at all as an option for somewhere for Digital Nomads to look to found a company.

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Lessons from Jersey

The Guardian has a great writeup on the rise and fall of Jersey and how it is struggling to survive under a massive deficit.  There are lessons there for Bermuda.  Here’s the most critical one:

“Price inflation had made house prices and labour market costs so high that virtually no other industry apart from finance – international finance – could survive,” Christensen explained. “The housing market was at London levels, no locals could afford to buy, unless they were employed either in the public sector or the finance sector.”

I wish this is something that could be made readily understood to those leading the country.  The island’s cost of living is strangling us in the same way that it strangled Jersey and is strangling San Francisco.  We need tangible strategies for how to cut Bermuda’s housing costs.

I’ve long argued that town should be allowed to become a city.  Sadly it likely won’t happen.

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Innovation or disruption is violent and risky

One thing I didn’t really understand when I worked in international business is why change is so difficult.  I can’t stand wasting hours every day on something that could readily be automated with a limited investment.  I also hate bureaucracy.  Yet, any time I tried to change things I faced immense resistance.  It didn’t make a whole lot of sense.  Why keep doing things inefficiently if there’s a better and easier way?

What I’ve come to learn is that innovation or disruption is violent and risky.  Change is scary.  You may have a great product or solution that you want to convince your manager or an organization to take on and yet it isn’t as easy as just saying here it is.  There is risk involved because taking a chance and failing is far more noticeable than failing because you followed the status quo.  It’s sad, but its true in most cases.

In order to overcome such resistance it helps to look at it from the perspective of the people you’re pitching the change to.

You need to clearly explain the context by answering:

“What is this? Why do I need it?”

You need to understand what you might be implying by how you present your alternative:

“Are you saying I’m stupid or that we’re stupid?  Are you implying everything we do now is stupid?”

You need to understand the risks faced by the person or organization you’re trying to convince:

“What if it doesn’t work?  Will I be laughed at?  Will I get fired?”

Thus you can’t change anything if you don’t clearly explain the context, do so in a way that doesn’t imply stupidity and overcome inherent risks.  If you can’t do that, don’t expect buy in no matter how good your product, solution or idea is.

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Being an entrepreneur in Bermuda

Being an entrepreneur can be a harrowing experience.  As an analogy, consider being dropped on a isolated desert island and left to fend for yourself.  Being an entrepreneur in Bermuda is almost like that, except the desert sand is actually quicksand.  It takes a special kind of person to start a business in that kind of an environment, and no, not special in a good way.

Having your own business is a big gamble and an even bigger risk.  As an entrepreneur you expect business to be tough, full of challenges and competitors.  What you don’t expect are the roadblocks unrelated to your product or service.  Roadblocks which prevent you from actually managing your business.

No one tells you that it will take endless months and you still won’t have been able to open a simple bank account.  Sure, if you’re opening a simple local account it may be quick.  Care you take a payment from a client in Mexico or the Caribbean?  Expect 11+ months of back and forth paperwork, forms and bureaucracy.  You want to take credit cards online?  Good luck, expect to provide copies of business agreements, contracts, evidence, you name it.  Even then you’ll still be waiting. You might have a viable business but when you can’t pay anyone or reinvest revenues you’re stuck. Something so simple as not being able to manage money can take a successful business and make it likely to fail.

One lesson learnt is that you have to deliver greater value to the entities you work with than you derive.  Sometimes you just can’t. Bermuda is a tiny market.  Large international banks don’t care about small international businesses.  This isn’t because they’re evil but because there is no incentive.  Regulatory hurdles far outweigh the value they’ll derive from servicing a small business.  Never mind if that business has potential.  Compared to a global market of big players, small business in a small market doesn’t scale well.  Foreign owned banks just don’t derive the same kind of value from investing in Bermuda.  At least not how local banks used to.

Another hard lesson is that flash is a much more effective sales tool than substance. Flashy perceived value at a high level will trump tangible value on the ground.   You have to make sure that if your business isn’t flashy that the value it delivers is well explained and understood.  If not, you’ll be thrown under the bus in favor of someone else who presents something flashier.  Even if the end result is that they provide less actual value which in the end costs your customer more.  Don’t expect your customer to be educated if you aren’t the one educating them.

Consider the attempt to recover Bermuda tourism.  The tourism authority is focused on boosting visitor numbers and creating new experiences. It is easy to understand that more visitors means better tourism.  The perceived value of marketing and creating new experiences is great, it seems like a great idea.  Big flashy ideas like a fancy website offering package deals end up being the focus of funding.  Funding to helping those already established who aren’t new and and aren’t exciting is less appealing.  Investing in what works today and empowering it to be more successful just isn’t flashy.  If the value of what we have now isn’t well understood then flashy wins because new always seems better.

It is worth noting that perceived value of a goal everyone can readily grasp trumps tangible value of a realistic one.  Offering packaged air+hotel+tours on the tourism website is of high perceived value.  Who wouldn’t want packaged tours?  Everyone understands packaged tours but few take a step back to examine what percentage of people actually want to buy a package and haven’t already bought elsewhere.  By contrast, making tours bookable everywhere can be hard to understand.  Distribution to every website, concierge, info booth and mobile phone is an abstract concept.  It is hard to perceive the value of making it easier to sell to people already here.  It isn’t new and exciting.  In many ways it is already done, just not supported well enough.  It contrasts with the larger goal of a focus on attracting new visitors.  We’re so busy chasing “new” that we’re eroding what little tourism support base we have now.

If you’re considering being an entrepreneur in Bermuda, a considerable lesson is that Bermuda is a terrible place to try to found the next AirBnB or the next Uber.  If you’re looking to found a little side business selling some shorts or some jewelry, sure.  If you’re trying to found a global eCommerce company?  Bermuda isn’t the place.  It is small, expensive, over-regulated and slow.  There is no venture capital environment and no support network.  That is, unless you’re starting an insurance company.

Bermuda wants to be entrepreneurial.  It wants to incubate the next great ideas and copy what everyone else is doing to achieve it.  Startup weekends, rocket pitch competitions and attempts to attract global entrepreneurship conferences.  Great.  The problem is that few people understand that starting businesses is the easy part.  Establishing a viable business model is hard.  Scaling a business with no funding, no banking and no mentorship is harder.  Doing so while challenged by subsidized government quangos is near impossible.  Trying to compete on top of all that with well funded global competitors is crazy.  It is wholly unlikely Bermuda will ever produce a world competitive startup.  At least, any outside of reinsurance.

Being an entrepreneur in Bermuda is like fighting quicksand on a remote desert isle.  You become so engulfed trying not to sink that you can’t even come close to actually getting off the island.  Especially if your interest was never to leave but to instead convert it into a paradise that everyone wants to come to. Only a special kind of person would be crazy enough to even attempt it.  Few are that ‘special’.

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Perceived value of a Bermuda vacation

One of the more interesting stats highlighted in the data session of the Tourism Summit was the perceived value of a Bermuda vacation measured by air exit surveys.

42% of people rate the value of Bermuda vacation as higher than expected, 52% rate it as expected, this is including air visitors.  This is an interesting metric that was primarily mentioned in passing but is of alot more importance than it is given credit for.  Many Bermudians believe that one of our biggest problems is that we don’t offer value for money when it comes to tourism and the reason why tourism suffers is because we’re too expensive of a destination.  This metric from the exit surveys seems to indicate otherwise, that the value we offer is not a fundamental problem.

One of the key takeaways from the summit was that awareness of Bermuda as a destination is very low and that this is a primary cause of our struggling tourism industry.  Thus raising awareness is a core focus of the Bermuda Tourism Authority.  It is an interesting point and warrants further reflection.

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Tourism summit detox

After a rather long day at the tourism summit I think overall it was a good event, a nice thing to see done in Bermuda with many positive signs and aspects.  Ultimately though I am left with mixed feelings as to how successful the end results will be.  It was kind of like a pep rally, it was inspiring, empowering and made you feel like tourism was definitely going to turn around, but after the euphoria fades it is kind of hard to see the next steps.  The sessions I attended were heavy on talk, ideas and information but rather light on real explanations, especially on how to put ideas into action.  As suggested, it was a good event, it is just hard to know if it and the larger strategies will deliver on the hype.

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Empowering local tourism

“In April the decision was taken to fund our next generation website as well as rebranding architecture. That has cost millions but we feel will make a difference in the long term.” - Bermuda Tourism Authority CEO Bill Hanbury

The Tourism Authority has spent millions on a “website as well as rebranding architecture”?  That needs a lot more explanation because it is hard to understand how this could possibly be justified and how one can imagine what they’ve really built.  Hopefully more details are forthcoming and we aren’t following the same mistakes of the past of throwing a lot of money at hail mary ideas.  Spending millions on a website and branding is concerning as the Tourism Authority already focuses too much on marketing at the detriment to private business.  The Tourism Authority needs to be more than just a marketing entity.

That being said the Tourism Authority is started down the right track with positive efforts that should be recognized.  Their focus on investing in tourism experiences is wholly welcomed and applauded.  As much as it can it should be focusing on facilitating and empowering not only new players but also existing players across the tourism industry.  It should be helping every tour, activity, guesthouse, hotel and tourism participant on how to get the most our of their efforts.  Training and assistance should be offered for how to improve their own marketing efforts.

For example, here are a few efforts / seminars etc that would be nice to see happen:

  • How to build a good website
  • How to do search engine optimization
  • Education on tools available such as google analytics
  • How to maximize reviews and feedback
  • How to do social media marketing
  • How to generate content
  • How to empower your users and your brand
  • Facilitate strategic partnerships between various tourism industry participants to improve distribution of product and branding.

Today the Tourism Authority will be holding a Tourism Summit which will hopefully introduce and cover many of these, though the fear is that it remains far too hotel focused as it has been in the past.  Hopefully there will be a broader focus that attempts to empower all participants across the tourism spectrum with ideas like those listed above.

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Traditional advertising won’t save tourism

One of the greatest problems we face today is that the industry has changed greatly and we haven’t changed with it.  You can see it in the Tourism Authority’s strategy of throwing millions at a website as well as in Shadow Tourism Minister Zane Desilva’s commentary regarding the website investment:

“Bermuda commercials and promotional material are virtually nonexistent in the international arena, yet the BTA has spent millions of dollars building a website that has yet to go live.”

It is then suggested

Mr DeSilva said the next PLP government would increase the advertising budget as part of its tourism plan, as well as strike advertising agreements with the major broadcasting networks in North America, the UK and Europe to build on current markets and increase exposure to new markets.

There is an overhanging fallacy that if you simply throw more money at marketing and advertising that everything will improve.  It not only hasn’t worked every time we’ve tried it since the 80s, it gets increasingly less effective each time we do.

Buying advertising on TV, sponsoring events and the like doesn’t yield the kind of results it once did because the market and industry has changed drastically.  We live in the age of the internet and social media.  Things are very different now than they were 20 years ago, 10 years ago, 5 years ago, even 1 year ago.  Sites like Facebook, Twitter, Trip Advisor and individual websites count for just as much if not more than traditional outlets like tv, radio and sponsoring events.   Tourism marketing needs a much broader focus that empowers all tourism participants to market and promote Bermuda, not simply a singular body with a big budget that throws money at major broadcasting networks or websites.

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Millennials need more mentorship and guidance to succeed

Insurance industry heavyweight Brian Duperreault expressed his dismay regarding reports from US studies that few millennials are interested in careers in insurance.  Honestly, it isn’t terribly surprising.  The motivations that attracted generation X and baby boom workers aren’t the same that will attract millennials.  Put simply, the work environment has drastically changed and millennials have a different mindset than those that came before them.  Among the many changes required, businesses looking to attract and retain millennials will need to offer a clearer and more guided path of advancement and achievement than is presently available.

In order to understand why changes in approach are needed it is useful to compare millennials to previous generations.  Baby boomers, for example, worked in a time of far more job stability.  It was not uncommon for a boomer to expect to spend most of their career working for one employer.  Career advancements came in the form of leveraging job stability, on the job experience, employer training and the opportunity to climb the corporate ladder.  Opportunities were usually available within an organization, often through seniority.  Companies were happy to invest in employees because jobs and skillsets did not change too often.

Gen Xers have worked in a time of less job stability but more career stability.  They would often follow one career path for a lifetime.  Career advancements came in the form of on the job experience, job training and focus on getting the experience necessary to laterally move to a better position with another organization in order to climb the ladder.  Companies began to invest less in employees because jobs and skillsets began to change more often.  It became more convenient to hire experienced workers from other firms rather than invest significantly in your own.

Millennials are facing a different age of less job stability and less career stability.   Millennials have grown up in an age of technology, change and rapid innovation.  Skillsets today are ones that often need heavy investments in ongoing training and sadly may be obsolete very quickly.  On the job experience counts for less and employers are not very likely to offer you lifetime employment unless it comes with limited or no advancement.  Millennials face a prospect where many jobs expect you to already be trained and have existing experience to do the job.  These same companies are reluctant invest in training or mentorship themselves, preferring to hire trained and experienced people off the shelf.  Companies are uncertain whether their investments in their employees will payoff as jobs and skillsets can change very frequently and those they do invest in might jump ship for a better opportunity.  It is a double edged sword as millennials are left struggling with how to advance while not getting the guidance and support they need to do so.

It is important to understand that millennials grew up with a very different environment and thus mindset towards goals and achievement.  Millennials are the Nintendo/Playstation generation.   Trained from a young age by video games and the link where you had a good idea what the end goals were, what achievements you needed to get to get there and the accolades you got for doing it.  Gamification is the buzz term for applying it elsewhere.  A path of clear achievable objectives to accomplish in order to advance to the next level was always available.  This is what millennials are most comfortable with.  Contrary to mistaken belief, this doesn’t mean an expectation that things are to be easy and achieved without hard work.  Millennials are just as capable of working hard as any other generation, their context however is different.

It is interesting when you see quotes like this:

“Despite our essential role, the insurance industry in the U.S. faces a looming talent crisis. 45% of management executives will retire in three years, and 400,000 positions are projected to be unfilled by 2020. Less than 5% of Millennials express interest in working in our industry”

One of the problems is that millennials simply aren’t like previous generations.  You can’t simply say “jump” and expect them to ask “how high” because simply few believe that the kind of safety nets that were around for previous generations will still be there.  As technology takes greater prominence jobs are becoming more transient and often heavily skill dependent.  When employers expect to be able to hire skillsets and experience off the shelf one can’t simply gamble their future and career on their employer’s say so.  You can’t simply point at executive roles and say “this could be you” and expect millennials to jump, willing to work endless evenings and weekends and constantly sacrifice for the eventual prospect that one day you’ll be ordained, but who knows when.  Where are the results?  Where are the points, achievements and accolades that indicate progress towards the goal?  Instead advancement needs to be thought of like a ladder.  If “Z” represents the CEO position and “A” represents entry level, you need to explain steps B through Y required to get there, and how you can get there faster in clear sets of achievements.  Not every millennial seeks to climb the entire ladder but most do seek to know what it takes to get to the next level if they’re expected to put in the effort.  Even companies like Goldman Sacks are having to adjust their approach based upon this realization.

There are many factors that will attract and retain millennial employees.  Training, mentorship and guidance are certainly some of the key ones.  Companies can’t simply expect that what worked in the past for previous generations will work with millennials.  Millennials grew up with a very different mindset and in a very different environment.  The challenges facing millennials today provide far less job and career certainty and security than existed in the past.  Thus companies that want to capture the best of millennial talent need to adjust their practices to provide the kind of environment in which they can thrive, the kind of environment they’re accustomed to.  Do that and you’ll empower them to accomplish great things for your business.

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