Innovation Insights 2021

Applying Porter’s Five Forces to the insurance industry


For those unfamiliar with Porter’s Five Forces, originally described in a 1979 Harvard Business Review article, it is a model framework that outlines five predictive forces which shape every industry. These have also been known to be used in the modeling of various SWOT (strengths, weaknesses, opportunities and threats) analysis for strategic business planning.

Arguably, each of the Porter’s Five Forces listed here have specific application for the insurance industry today.

1. Competitive Rivalry
2. The Threat of New Entrants
3. The Power of Buyers
4. The Power of Suppliers
5. The Threat of Substitute Products
What happens if you flip this framework on its head, and choose to view the state of our industry and situation as one of abundance—rather than scarcity—through the “Infinite Game” philosophy? This is precisely what we’ve done in building BrokerTech Ventures (BTV). We asked the following questions to four of our BTV Partner-leaders, to capture their insights and alternative philosophies. They’ve offered thoughts on everything from competition, mergers and acquisitions (M&A), COVID-19 response, to addressing cyber threats and unknowns. We are effectively challenging our legacy insurance industry, through the lens of BTV and a convening platform of agencies and insurance companies.
Susan Hatten (SH): Our insurance industry has long been known as a highly competitive environment. Do you view 2021 as a change-agent for this mentality, and if so, how and why?
Keith Schuler, CEO, InterWest: Clearly the competitive nature of our industry especially in the broker community will become more intense as continued consolidation occurs. New players in the M&A space have elevated multiples and driven larger players downstream to look at smaller agencies that traditionally have been overlooked, and left to regional brokers. Coupled with the large amounts being paid up front and less on a work out basis, there will be added pressure on returns to substantiate the investment.
The insurance market itself continues to be under immense pressure due to the unknown financial effects from the current pandemic, social inflation and catastrophic losses across the country that have become more the norm than in the past. The rapid move to remote work back in March 2020 and the reduction on traditional business travel creates both an opportunity and a challenge.
How firms deal with this in 2021 could define them for the next decade. The use of emerging technologies will be the cornerstone to efficiency and survival, and we view BrokerTech Ventures as the convening platform to harness this competitive advantage.
Mike Victorson, CEO, M3 Insurance: The competitive environment and the power of buyers isn’t going to lessen this year—or in years ahead. By banding together with friendly competitors to challenge, elevate thought-leadership and activate movement in the insurtech space, we all win. Effectively, those brokers who choose to function as extensions of our client’s risk management department—almost viewed as an outsourced Chief Risk Officer—stand to weather the landscape of threats and unknowns with greater certainty, by keeping an eye on the ultimate customer.
Within our own walls at M3, we’ve adopted the 3 P’s to address predictive forces which frame and shape both our role as a broker, and our industry:
1. Public health
2. Population health
3. Pandemic specific response
COVID-19 has really shone a light on the public health challenges in our communities, and this is not going away. We would never be able to tackle a comprehensive response to these three areas of focus alone, wherein we see exponential collaborative opportunity in the BTV community.
At M3, and through BTV, we ask ourselves: “If not us…who?” We are in an immensely exciting time to be in middle market risk management, and we see ourselves as business-builders for the broader insurance industry. The threats and unknowns of cyber claims will only increase breach response for Cyber. Bitcoin work could be changing on a dime, due to state sponsored terrorism, which is actively on the rise.
We are in the business of identifying perils: Fire, Wind, Water, Earthquake—but Cyber is the most imminent threat of all. We are at a remarkable stage in our industry—with more laws, and an incredible rate of change, speed of processing information and analytics. Think about how fast things are moving right now. We are living in an amazing time. The reams of information available gives us access to intelligence and insights much more rapidly. This leads to more innovation, better decision-making, swifter action. Innovation and technology will allow us to be greater advocates for our customers.
Mike Heffernan, CEO, Heffernan Insurance: We are right in the path of change for the insurance industry. Here are a couple of points on that: Technology is starting to change the way to service and engage with clients. As we use it more, those that use it most effectively are going to be a step ahead from a competitive level. To win more, we must remain ahead of the curve. Also, I’m seeing a lot of private equity transactions in
our space. There’s a lot of attention on the purchase in our industry, rather than focusing on the level of talent. I see a slight slowing down in terms of the competitive market, and predict an increased competitive landscape in 2022 and 2023.
I view 2021 as perhaps a lull period: the calm before the storm in terms of competition coming together to change our industry for the better. The use of technology to create efficiencies in the service environment allows us to price more effectively, create better risks for our insurance relationships, and be greater advocates for our customers.
Cyber attacks: our own experience with this illustrated the sophistication, cost, damage to business, and the actual need for insurance to protect your assets. We were quite fortunate, but it was incredibly costly. The insurance companies we partnered with were true partners that assisted us in the response. As we result, we are advising our clients more effectively. Regarding small and commodity business, we have actually stepped up our game, here.
As Jay Fishman, leader of Travelers Insurance shared: [IF] “You forget that you are the trusted adviser, you are going to lose your edge.” Collaboration with our brokers and insurance companies through BTV will allow us to embrace the heightened competitive landscape in the years ahead—rather than to be disrupted by it.
Jennie Weiland, managing director, PayneWest: I sense that broker competition, and a heightened awareness of the need to collaborate with each other, will only become more pronounced in the years ahead. The items we are trying to change for our industry are systemic and massive in terms of lift. There is a change agent happening—and we need each other to change the industry. BTV is allowing us to do exactly this, in partnership with our worthy rivals.
From the consumers perspective, and from the small business purview, at PayneWest we’ve seen a growing demand to activate greater support and tools for the small business needs. The value of the broker has become apparent this last year more than ever, as our small businesses around the world were adversely impacted by the pandemic. The pendulum has swung back toward the value of the broker, and that’s not going away.
In terms of Cyber as a threat and unknown—we have also had our own experience. Thinking back to Target’s response from years ago, we thought: “Of course we’re talking to all of our customers about Cyber.” This experience has completely changed our dialogue. We have adopted the “Cyber For All” mentality at PayneWest, so that this is in our DNA and we walk the talk. We spent a lot of time pre-COVID-19 basing our thoughts on assumptions. Our customers’ reactions turned our assumptions on their head. Consumers’ appetite for digital and technology is here, and is here to stay.
SUSAN HATTEN is chief operating officer of BrokerTech Ventures and oversees corporate and community engagement at Holmes Murphy. Hatten was named the 2017 Meredith Corp. Emerging Business Woman of the Year and is a member of the 2011 Forty Under 40 class by the Business Record, among others. Hatten is a graduate of Iowa State University.
Contact her at
BrokerTech Ventures (BTV) was founded in 2019 to provide a venue for the best minds in insurance and technology to collaborate and bring to market leading-edge ideas and solutions. BTV is the first broker-led investor group and accelerator program focused on delivering innovation to the insurance agent-broker industry. BTV invests in the research and testing for each of the chosen startups, provides access to veteran industry mentors, and helps scale the technology to market through broker distribution channels.
Learn more at, or follow us on Twitter @ BrokerTechVen.