Large market/established players have all communicated the importance of innovation and digital but the degree to which they have committed to the process in practice varies greatly. In order to validate this assessment we established a grading system based on the following criteria: the existence of an innovation department/executive team member devoted to innovation/strategy, thought leadership devoted to digital, social media presence, and projects executed or inflight. Of the primary competitors AON, Mercer, Marsh, Lockton, and Truist rank the highest in that order.
That said, each of the established players have focused on project based innovation with none of them speaking to transformative change. It is for this reason we believe NFP has a competitive advantage in this area, is ahead of the curve, and should remain there with continued focus.
Digital transformation is more about changing process/culture/people than it is about deploying technology. It requires consistent messaging from all leadership in all areas. It requires all leadership (upper and middle) to be on the same page. Our competitors are siloed not only across their different business lines but within each practice areas. In addition, frequent leadership changes at our competitors adds to the challenge of driving a consistent messaging. NFP’s leadership tenure and operational structure is a distinguishing and unique feature that aids greatly in our ability to successfully execute compared to our peers.
Middle Market competitors that are getting attention are gaining market share by focusing on digital as their key differentiator. Unlike the large market competition these “rising stars” have focused more on creating a better digital user experience than specific “innovation” projects and the markets have responded as evident by the recent influx of Private Equity/Venture Capital and the higher-than-average uptick in valuations.
Touting a similar message and strategy, with more execution to point to, and a larger market cap, NFP remains ahead of these aspiring agencies but believes them to be a greater threat than the established players as with smaller size comes more nimbleness, less red tape, and in many cases a younger workforce that is more open to change.
The insurance industry has also witnessed new market entrants, in the forms of technology companies, in great abundance. These insurtech have identified an industry that has traditionally provided a very poor user experience and is focused 100% on changing that perception buy focusing their efforts on platform and digital.
The insurance industry is one built on relationships and thus us difficult to disrupt in short order. Whereas these entrants are capable of gaining market share in certain markets they do not provide a significant threat to NFP as a whole. That said, they have provided a successful proof of concept to look to, and if ignored will continue to pick up market share from non-adopters.
The insurance industry is at an inflection point, NFP has an advantage, but it is critical that all are on the same page in order to be successful.
