Unicorn Cover Genius credits 25-year-old disruption theory

One of the founders of Australian insurtech leader Cover Genius has credited a renowned disruption theory from a US academic as underscoring its successful strategy.

Cover Genius Co Founder and Chief Innovation Officer Chris Bayley says Clayton Christensen’s “disruptive innovation” theory in his 1997 book The Innovator’s Dilemma helped guide the insurtech’s embedded distribution strategy. The Economist described Mr Christensen as the most influential management thinker of his time.

“We inherently knew that that the underlying disruption thesis was one that we wanted to be on,” Mr Bayley said during a fireside chat with Antler attended by insuranceNEWS.com.au.

“Disruption takes the lion’s share away from the incumbents. The theory from Clay Christensen is all about, through better pricing, undercutting them all and then growing those distributors. That’s exactly where we’ve sat.”

Cover Genius, valued recently at a billion dollars to be dubbed a “unicorn,” just raised $US70 million ($109.08 million) and set a new daily record of $US1.1 million ($1.7 million) in gross premiums, with revenue almost tripling as it served 10.5 million customers.

Mr Bayley warned aspiring startups that the successful disruption theory was not easy and not for everyone, and collaboration with incumbent insurers may be a better strategy for some insurtechs.

“It’s very difficult to set out to do that. I don’t want to discourage anyone that’s doing sustaining innovation because it’s got its place. There’s plenty of people – and friends of mine – doing sustaining innovation for insurers. That’s fantastic,” Mr Bayley said.

He added though that collaboration was unlikely to produce the same rate of success as the Christensen model.

“It’s not nearly as big an opportunity, in my view, as developing something genuinely disruptive that is going to move that market share and shift value towards digital disruption,” he said. “It’s important to understand disruption versus sustainable innovation.

“Sustainable is all about doing things for the incumbents. Disruption takes the lion’s share away from the incumbents.”

Mr Bayley said technology firms were the future in insurance and across the business world.

“Really, digital companies are going to occupy the seat that they have in every other industry, where … they are the absolute future of pretty much every single industry out there through the application of technology, better customer engagement, loyalty, etc,” he said.

Cover Genius, founded in Sydney, now distributes across 60 countries from 10 global offices.