Industry Impacts

Disruption in Financial Services

Where Will It Come from and What Can You Do About It?

by Scott Kallenbach

Mr. Kallenbach is research director, LIMRA Strategic Research. Visit

November 28, 2017 — Disruption is among today’s buzzwords, and used so often that it loses meaning. It frequently describes innovations regardless of their impact, as well as anything that presents even a mild challenge to an organization.

LIMRA defines disruption as having a more significant impact and includes things that can severely crimp revenue or have a crippling effect on a business or an entire industry.

In a recent whitepaper, LIMRA explored where the greatest disruption will emanate. Many cite new regulation, advances in technology, or changing consumer behaviors and expectations. However, LIMRA believes that new market entrants, like Ladder Life or Lemonade, are arguably the greatest potential disruptive threat to the financial services industry.

Who are the disruptors?

Specifically, there are three types of new market entrants that have the potential to disrupt incumbents, and can be classified by how they may enter:

  • Under the Radar – comparatively smaller and more agile than incumbents, targeting underserved markets with products that are initially inferior to those of incumbents. For example, discount retailers disrupted full-service department stores.
  • Head On –direct competitors who take aim squarely at established players as Uber did with the taxi industry.
  • Here I Come – Firms that make their intentions known far in advance of entering the market. Many startup FinTech firms describe themselves as disruptive technologies, essentially announcing their strategy to would-be competitors. A strategy that P&C insurer Lemonade deployed.

New market entrants do not usually start out with the intention to disrupt. Rather, they see an opportunity or something lacking in the marketplace and they take advantage of it. Our analysis has shown that this type of disruption typically comes from outside of the industry. These disruptors often benefit because that are not constrained by current or past practices.

Doing nothing is not an option

What can insurers do to mitigate disruption? Doing nothing is not an option, nor can every company be a disruptor. The answer is somewhere in the middle, and actions must be taken. But which ones? Incumbent organizations can employ a number of different tactics to fend off disruption.

New market entrants do not usually start out with the intention to disrupt. Rather, they see an opportunity or something lacking in the marketplace and they take advantage of it

  • Be vigilant, keep your radar up – Make environmental awareness part of your organization’s DNA. It is conceivable that organizations can protect themselves from disruption if they are aware of new market entrants perfecting an offering for the mainstream. Listen for the faint signals.
  • Remember the need won’t go away – Products may change, and the ways that consumers wish to engage with companies may evolve, but there will still be a need for life insurance, annuities and other risk products.
  • Reflect on why you’re in business – Ask yourself why you’re in business. Is your company’s mission to generate revenues, help people protect their families and futures, or something else? Are your measures of success tied to this mission?

In today’s world, companies are likely to face some form of disruption – technological, regulatory and demographic changes spur disruption of the status quo. LIMRA has been studying the financial services industry for more than 100 years and history has shown that the most successful companies embrace the change and often lead the disruption.