November 5, 2019
Insurance Innovation’s Growth Challenge
by Euan King
Building an environment that offers low-cost, no-code functionality via API integration gives insurers real opportunity.
Pushed by internal and external process stakeholders, customers and board directives to drive innovation and growth in increasingly competitive and often shrinking markets, insurance company CEOs are not sleeping much these days. Topping the list of insurance CEO nightmares is a world where it is impossible to access new markets with new products that have plentiful, ready-to-buy customers. In a world where new ideas and revenue streams are difficult to find, at best, nightmares can quickly become reality.
Technology is often held up as the single silver bullet for all of the insurance industry’s problems, but the best minds know that the greatest opportunities surface when insurtech startups partner with incumbent insurance organizations and ambitious managing general agencies (MGAs) to promote new business models, introduce products and provide solutions actually applicable to the world’s new ways of working.
Industry veterans can easily identify the challenges involved in trying to build and launch insurance products, especially in a regulatory environment as complex as that in the U.S. Even when forward-thinking underwriters and marketers get time to ideate, it takes six months and a $500,000 investment (or more) to take a product to market, and that makes an iron-clad business case to scale the efforts hard to see. This means many promising opportunities will fall by the wayside.
See also: Focusing Innovation on Real Impact
Traditionally, insurers often considered simplification and amalgamation of technology solutions onto a single platform or to a single provider as ideal. It seems reasonable to assume that it is easier to launch products and provide a better customer experience when there is only one system to consult and one single source of data for policy information, right? Unfortunately, this quite often proves to be an incorrect assumption, and, not only do insurers suffer when the selected single platform becomes a bottleneck, but the journey to get there is also high-risk and high-cost. In fact, rarely does everything else get switched off, and, even if that is achieved, inevitable weaknesses get amplified (because EVERY platform has weaknesses).
No Single Silver Bullet
Today, insurance buyers expect 24×7 access to information, instant delivery of products, outstanding customer experience and rapid claims resolution. It is not realistic to expect a single solution or platform to deliver every capability and to do it in a seamless, high-quality way. Often platforms focus on back-office functionality, and strength in this area is important; however, the real value for insurers sits at the actual customer interface. Insurance buyers, whether commercial, personal or intermediary, don’t care how well the back-end technology feeds accounting and underwriting systems. That part is, in effect, the insurers’ problem, and not the producer’s or policyholder’s problem. A solution that provides a single view of the customer and integration with back-office systems will ensure smoother operations, no doubt. But this shouldn’t be the only driver for what insurers use to take products to market.
The truth is, no single platform, technology or solution can effectively handle both front-end and back-end functions – no matter what the technology people may say. As with most other things, the best solution to complex requirements is to create an ecosystem of solutions to deliver appropriately. And, while “appropriate” delivery may not be the most dynamic of terms, the concept is far more exciting.
In very few other areas of business or life would the technology tool be allowed to determine what can be accomplished. The all-too-often-used “that’s not the way the system works” mentality and heavy lift of customizing monolithic legacy systems means that the entrepreneurial spirit erodes. Instead of innovation, diversification and growth, insurers are forced to settle for roughly on-time, hopefully on-budget and various not-ideal workarounds.
Increasingly, however, insurers are waking up, and a number of dynamic businesses are combining legacy and insurtech for more agile, flexible solutions. These digital, API-enabled, front-end-focused platforms combined with sophisticated underwriting allow insurers to rapidly address the challenges by creating portals and functionality that sit outside the archaic change request process, where IT road maps are locked down months in advance, limiting any opportunistic ventures.
See also: The Components of Innovation Capital
Building an environment that offers low-cost, no-code functionality via API integration gives insurers real choice. Internal leaders and growth champions will have tangible ways to access new markets, rapidly develop products and streamline processes. Ultimately, the real barriers to innovation are not modern cloud native systems or a lack of ideas but legacy mindsets and an inability to understand or want to do things in a different way.