A very wise mentor of mine once noted that insurance is a very egalitarian enterprise. There are few barriers to entry for any organization – small, start up, or whatever – that has a real vision of either an under-served market segment or a better processing method. It now seems that vendors of technology are realizing that this egalitarianism extends to their offerings; that there is a very vibrant market for enterprise systems for smaller insurers.
A recent article in Insurance & Technology noted that there are an emerging number of vendors which are targeting this market segment, including Echo Ridge Partners which has been supplying policy administration systems to smaller organizations for the last year, to very well established suppliers, such as Insurance Data Processing, Inc. which has over 60 years experience supplying solutions to smaller carriers
A scan of recent wins by Policy Administration system vendors (see the list in Insurance-Canada.ca’s Directory of Policy Management) confirms that there is sales activity in the small and niche segments of the industry. It is clear that while these organizations do not have the scale (e.g., number of users) as larger carriers, they do have all of the needs (policy processing, customer/distributor service, reporting, etc.). Take SSQ, for example. This is a $150 Million Quebec direct writer, which recently licensed Guidewire’s full suite of products – Policy Administration, Billing, and Claims. According to the announcement of the licensing, SSQ has achieved double digit growth by servicing its 140,000 policy holders and has “three major objectives: prioritizing growth, improving profitability and developing new markets. These objectives require core system flexibility and scalability.”
Moreover, as the soft market continues, the needs for continuous improvement in efficiency, and greater attention to service are the same for large and small alike. As IDP President and CEO Bob Blitshtein told I&T, its InsuraSphere Agent Portal “allows insurance companies to grow their revenues by giving agents the real-time quoting capabilities they’re asking carriers for.”
From a business standpoint, it may seem easier to drive revenue from a few large sales than from many small ones. However, as anyone who has sold to large organizations (especially large insurance organizations) will attest, the sales cycle is significantly longer, and frequently the margins are not as atractive.
For the industry generally, it is good to see the movement of modern systems to a wider range of insurers. With greater capabilities at the base level, we can actually envision more industry wide solutions. There’s hope for SEMCI yet.