Since the dawn of modern business computing, there have been three major generations: business scaled computers, personal computers, and the Internet. Each of these has had distinct characteristics and distinct implications for the insurance industry. A very wise mentor of ours refers to these as the ‘Generations of the Previously Unthinkable,’ due to the wide-ranging, fundamental changes brought about by each.
We have a strong feeling that we are on the cusp of the Fourth Generation of the Previously Unthinkable. We’d like to start a conversation with you about this, with a working title of Insurance-Technology 4.0.
This post will provide a general outline of the generations to date, and we’ll go into more detail in future posts. For the moment, however, we’d like to know: Do you feel the same as we do — that something very fundamental is changing?
The First Generation: Big iron goes to work
The first generation of technology-driven change began after the second world war, and insurance was an early adopter. Joanne Yates, in a 1993 paper written for the Sloan School, notes that US Bureau of Labor Statistics found that insurance carriers made up one-third of commercial users of computer systems in 1955.
Much of the drive was for efficiency, to reduce manual data computations. However, there were visionaries who saw the transformational nature of these devices. In a presentation to the Society of actuaries, Edmund C. Berkeley, from Prudential Insurance Company of America, articulated two expectations for computers: (1) “reduce materially the present clerical work “, and (2) “enable actuaries to do many things they now only dream of doing.”
After some reservations, P&C insurers enthusiastically invested in package systems through the 1960s and 1970s and conducted proprietary development. These applications ran on large mainframes, had teams of operators and programmers, and handled a variety of policy and billing needs as well as offering new methods for rating, underwriting, and claims handling.
Second Generation: Why are you playing with those toys?
The second generation came out of the garage — literally. Some of the he first personal computers didn’t come in boxes, they came in kits, that the user had to assemble. In the late 1970s, some bright lights — the two Steves (Jobs and Wozniak) and Bill Gates came up with a novel idea: these devices could be used for business.
The latter notion was generally dismissed by the majority of IT professionals. However users caught on quickly. The IT world of the day was a very closed environment. Changes to systems were tightly controlled and new applications had to go through a number of approval cycles. The idea of a user controlled computer was intuitively appealing to line workers and managers alike, who acquired the devices outside of the normal IT approval process.
In the insurance community, the PC democratized systems for independent agents and brokers. Agency systems had been developed in the 1980s, however the cost of mid-range computers were prohibitive for all but the largest of agencies/brokerages. PCs changed that. And insurers saw opportunities to offer these productivity tools to their distributors at low cost — or no cost — depending on premium volume.
The Third Generation: The interconnectedness of it all
Like the first generation, the third generation was a war baby. The concept of an internet came from the requirement that military computers had to remain connected even following a nuclear attack on communication facilities. One implementation, ARPANET, was put into use in 1969, and grew throughout the government and research communities.
In 1989, Tim Berners-Lee added standardized addressing and protocols, and the World Wide Web was formed. As with PCs, a number of IT professionals dismissed the Web as too uncontrolled and insecure for business. But, again, users drove acceptance.
A major outcome for insurance professionals was the rise of the consumer as critical node on insurer/broker networks. As with many forms of information, product data, and the ability to conduct transactions, was no longer restricted to carrier and broker employees. Self-service was the order of the day.
What do you think: Is the Fourth Generation on the horizon?
We have a sense the next generation may be poised to come to light sooner rather than later. We have some ideas and will share them. But we’d like your thoughts first.
Two simple questions: (1) What will the next fundamental change be, and (2) how will it impact insurance?
For extra points, you can give us date and time.