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Insurance and the platform economy

Opinion: Insurance customers and their risks are evolving

There are three implications for the insurance industry from the platform economy, overall. (Photo: iStock)
There are three implications for the insurance industry from the platform economy, overall. (Photo: iStock)

The platform economy is becoming a driving force of innovation and growth in the world.

Companies in this category create digital platforms to enable interactions between individuals or businesses that need something and individuals or business that provide something. The “something” may be a product, service, money, labor or other asset of value.

Related: Embrace the shift! Transforming the insurance industry from the outside-in

The distinguishing characteristic of platform economy companies is that they generally have high market value while owning no assets and having few employees. The world’s largest movie house owns no cinemas (Netflix). One of the largest and most valuable retailers in the world owns no inventory (Alibaba). The largest personal transportation company owns no vehicles (Uber). And the list of examples could go on.

Amazon, of course, has been the quintessential platform company, although their acquisition of Whole Foods now extends their capabilities beyond digital.

But, there’s a new kid on the block of platform economy companies, and that entrant is Brandless. What is their model? And what does the whole notion of the platform economy have to do with the insurance industry?

The Brandless brand

Brandless is a new online grocery retailer with a simple value proposition. Every item for sale is three dollars ($3). The company provides healthy, socially conscious options such as organic, gluten-free, vegan, and environmentally friendly products, obtained by fair trade principles. Although they are not selling name brand items, like Amazon and other online retailers, they are nonetheless connecting suppliers that create the products to buyers that are looking for items with these characteristics.

It could be just another of many online-only retailers that are based on a digital platform. Or, it could grow to become a dominant force in grocery. The irony is that the biggest challenge they may face is building the Brandless brand, something that is already underway despite the company name.  

Insurance industry implications

There are three implications for the insurance industry from the platform economy, overall. First, and perhaps foremost, is how customers and their risks are evolving. The companies mentioned and many more are reshaping industries, becoming companies with major insurance needs in their own rights, while causing incumbents in the industry to rethink their businesses or venture into the building of their own digital platforms. In addition, the risk profile is different for these platform-based businesses, as they are likely to have huge cyber-risk exposure, but limited needs for workers’ compensation and property coverages.

The second implication for insurers is that other emerging “economies” such as the sharing economy and the gig economy are based on digital platforms. They are “instances” of a platform economy. For example, the gig economy enables independent individuals to offer their labor and skills to a company or another individual that needs it, with the platform operator taking a fee for making the connection. The sharing economy, in particular, is already important for insurers, as it influences the ownership and use of assets by individuals, such as cars, homes, and bikes.

Finally, insurers must consider the rise of the platform economy models in the insurance industry. The early models tend to be digital agents and brokers, performing a similar function to live agents today, but doing it via modern digital platforms that may be easier, faster and lower cost than traditional distribution channels.

Related: Why the human touch matters when buying insurance

It's generally understood that digital agents will have a big impact on certain segments of the insurance industry. It remains to be seen if the platform economy model will be successful in other parts of insurance, such as for peer-to-peer insurers, claim repair networks, or subsets of the gig economy for insurance industry professionals like adjusters and loss control engineers.

Platforms and the future

One thing is certain. Insurers should investigate and understand the developments in the platform economy. As many insurers strive to become more digital, the creation of digital platforms and capabilities within the enterprise will position insurers to participate in other dimensions of the platform economy.

Brandless may or may not become a big brand, but the momentum for the platform economy is unmistakable and something in which insurers should be actively engaged. Will there be a future platform-based company in the insurance industry that becomes the largest force in insurance without holding any risk or employing any underwriters and adjusters?

Mark Breading is a partner at Boston-based SMA. Email him at This article first appeared on and is reprinted here with their permission. Opinions expressed in this article are the author's own.


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