{"id":3071,"date":"2017-02-01T22:17:56","date_gmt":"2017-02-02T03:17:56","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/idi-digitizing-the-way-into-disintermediation-in-israels-insurance-market\/"},"modified":"2017-02-01T22:19:09","modified_gmt":"2017-02-02T03:19:09","slug":"idi-digitizing-the-way-into-disintermediation-in-israels-insurance-market","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/idi-digitizing-the-way-into-disintermediation-in-israels-insurance-market\/","title":{"rendered":"IDI: Digitizing the way into disintermediation in Israel\u2019s insurance market"},"content":{"rendered":"

In mid March 2016 it finally happened, a great birthday present for <\/span>Moshe Schneidman<\/span><\/a>: His majority-controlled company, IDI insurance, or \u201cBituach Yashir\u201d in Hebrew, passed all other insurance companies in Israel with a valuation of ILS 2.8B.<\/span><\/p>\n

So what was the secret?<\/span><\/p>\n

\"idi-new\"<\/a><\/p>\n

Schneidman started with a simple idea: He wanted to disintermediate the insurance agents; it was 1994, and the insurance market in Israel was entirely controlled by them. \u201cEveryone laughed at him\u201d, said an insurance professional, \u201cthey said that everything will collapse once the lawsuits start coming; how can you have an insurance policy without an agent? Who will take care of you?\u201d Schneidman sought to sell insurance product directly over the phone, and later – over a platform he\u2019d already sustained – directly online to consumers.<\/span><\/p>\n

 <\/p>\n

Most insurance companies joked on the idea, had little faith in Schneidman\u2019s line of thought, and ignored the potential disruption. Some took the threat more seriously but instead of framing it as an opportunity, sought to increase the barrier to entry by litigation, a battle which they ultimately lost.<\/span><\/p>\n

\""Israel's<\/a>
“Israel’s first digital insurance company”<\/figcaption><\/figure>\n

Several actions enabled the direct insurance method to rise to prominence. Below those actions will be examined under the lenses of <\/span>value creation<\/b>, <\/span>value capture<\/b>, and the <\/span>underlying operating model<\/b>.<\/span><\/p>\n

By disintermediating the insurance agents, IDI solved more than just a margin problem; they tapped onto the inherent conflict of interest between the insurance company and the agent – the company wants to see <\/span>good customers<\/span><\/i>, insurance agents want to increase <\/span>the number of customers<\/span><\/i>, regardless of their quality. <\/span>By focusing on technology<\/span>, IDI established a significant database with dozens of parameters that allow better understanding of who the insured are. According to some sources, IDI\u2019s algorithms were so precise, they could not only identify a strong correlation between a car\u2019s color and probability of theft, but could also identify a driver\u2019s parking habits based on their demographic data.<\/span><\/p>\n

Until IDI\u2019s arrival, differential prices were non-existent: a good driver paid the same as a bad one, even though the company made no money from the latter. A differentiated pricing scheme, based on their proprietary technology, allowed IDI to attract new good customers and avoid the bad ones.<\/p>\n

From the customer perspective, as discussed, many hesitated. In the mindset of the average Israeli customer, insurance agents added value as the people who help us navigate through the maze during times of distress. IDI invested significant amounts in marketing and came up with a brilliant approach. Their controversial campaign introduced \u201cShuka\u201d, a fake insurance agent who is portrayed as a lazy, good-for-nothing agent who enjoys making money off his customers\u2019 back\u2019s. In some ads, a client would run into Shuka while at an upscale restaurant in Paris, ordering the entire menu, and say \u201cnow I understand what it means to fund an agent\u201d. The recurring theme in these ads was <\/span>\u201csave the agent, save money!\u201d<\/span><\/i>.<\/span><\/p>\n

 <\/p>\n

(See examples and screenshots at the end of the post)<\/span><\/p>\n

 <\/p>\n

IDI not only used its digital superiority with big data on the backend with their pricing model, but also invested heavily in delighting the customer despite removing the agents. They were among the first to introduce a state-of-the-line digital app, thereby eliminating most human-related interactions. IDI swiftly became by far the most popular insurance company among millennials, even though their pricing model often charged them more; arguably, this proves that <\/span>millennials see value in not talking to a human.<\/b><\/p>\n

\"Millennials<\/a>
Millennials prefer apps over humans<\/figcaption><\/figure>\n

 <\/p>\n

To conclude, IDI\u2019s new business model of disintermediating insurance agents, first via phone and then online, enabled them to disrupt the existing market and be clear winners in Israel\u2019s insurance landscape. <\/span><\/p>\n

Costs that were saved on the disintermediation were invested heavily on a strong infrastructure, and state-of-the-line digital superiority (front end – via a mobile\/web add, and back-end – with a differential pricing model. This created a new operating model that relied heavily on the value capture and value creation mechanisms. An aggressive ad campaign helped in the go-to-market strategy and ensured that public opinion drifts the right way.<\/span><\/p>\n

 <\/p>\n

Appendix –\u00a0<\/span>IDI Advertisements d<\/span>isplaying \u201cShuka\u201d the useless insurance agent<\/span>:<\/b><\/p>\n

\"\u201cNow<\/a>
\u201cNow I understand what it means to fund an agent\u201d https:\/\/www.youtube.com\/watch?v=MJ3lO-sF5uk<\/figcaption><\/figure>\n

 <\/p>\n

\"Shuka\u2019s<\/a>
Digital superiority – Shuka\u2019s secretary pulls an old typewriter and a flip-phone to help the client:
https:\/\/www.youtube.com\/watch?v=rwPYPC4m3eA<\/figcaption><\/figure>\n

 <\/p>\n

\"ddd\"<\/a>
Digital superiority – Shuka’s secretary calls a hotline for “help with the computer”, which she doesn’t have. She is told to “drag the file over the window”, and does it… literally.\u00a0 https:\/\/www.youtube.com\/watch?v=DzhaT9fQTJA<\/figcaption><\/figure>\n

 <\/p>\n

 <\/p>\n

Sources:<\/span><\/p>\n

http:\/\/www.globes.co.il\/news\/article.aspx?did=1000799434<\/span><\/a>: Globes, Israel \u201ceconomist\u201d – millenial insurance costs<\/span><\/p>\n

http:\/\/www.globes.co.il\/news\/docview.aspx?did=1001112088<\/span><\/a> Globes, \u201cHow Muki Schneidman turned IDI into an empire\u201d<\/span><\/p>\n

http:\/\/www.bloomberg.com\/research\/stocks\/people\/person.asp?personId=11500653&privcapId=5604059<\/span><\/a> Bloomberg, Moshe Schneidman<\/span><\/p>\n

http:\/\/www.calcalist.co.il\/local\/articles\/0,7340,L-3668405,00.html<\/span><\/a> – IDI wins awar for \u201csocial employer\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

In mid March 2016 it finally happened, a great birthday present for Moshe Schneidman: His majority-controlled company, IDI insurance, or \u201cBituach Yashir\u201d in Hebrew, passed all other insurance companies in Israel with a valuation of ILS 2.8B.<\/p>\n

How?<\/p>\n","protected":false},"author":427,"featured_media":3072,"comment_status":"open","ping_status":"closed","template":"","categories":[894,503,1060],"class_list":["post-3071","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-insurance","category-millennials","category-transformation"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers\/","yoast_head":"\nIDI: Digitizing the way into disintermediation in Israel\u2019s insurance market - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/idi-digitizing-the-way-into-disintermediation-in-israels-insurance-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"IDI: Digitizing the way into disintermediation in Israel\u2019s insurance market - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"In mid March 2016 it finally happened, a great birthday present for Moshe Schneidman: His majority-controlled company, IDI insurance, or \u201cBituach Yashir\u201d in Hebrew, passed all other insurance companies in Israel with a valuation of ILS 2.8B. 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