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If Suppliers Don’t Think Insurance is Innovative, Do We Care?

About two or three times a month, I have a technology supplier look at me, lower her voice, and ask, “is anyone in P&C doing anything innovative with technology?” Because of the frequency, I’ve had the opportunity to reflect on whether this is important.

I’ll give you my answer, if I can get your thoughts.

What do the suppliers mean?

When a supplier rep first walks into an insurance office, the surprise is evident.  Regardless of the sophistication of the organization, the rep is likely seeing large groups of people working with text-based screens doing to what appears to be clerical work. She even sees desks with paper on them!

And when the rep starts to talk about customer interaction, she finds out there are layers of intermediaries that are using different systems to process the same information that’s being handled already by the insurer. And if mobile comes up, the rep finds out that some one in IT has produced an app, but it’s still in test.

It looks like something out of the  20th century! How boring!

It wasn’t always thus …

The 1950s were early days of computing, and insurance companies were in the forefront.  In the early 1990s, JoAnne Yates, from Sloan School argued that early initiatives by actuaries and accountants improved internal productivity and actually drove interest in other industry sectors (see “From Tabluators to Early Computers“).

Companies such as IBM were given significant momentum as a result of insurers’ investment in early products.

Sounds innovative to me.

And the innovation continued… 

Early success did two things.  First, it brought more suppliers into the market. As a result, there was wide technology penetration by the early 1980s.

Second, user expectations rose.  First and second generation policy, claims, and billing systems had satisfied a number of user needs, and created more.  Product innovation became possible, as suppliers continued to offer more powerful products.

So what happened?

Two things: the year 2000 and “legacy” systems.  The early systems were not year 2000 compliant, and had to be re-mediated.  Funding for new systems was diverted to Y2K projects.

And the newly re-mediated systems had to last longer.  The support for these aging systems was costly, so new IT initiatives were pared back or cancelled.

And this forced innovation underground for a time.

Enter The Shadow IT Department

But busienss competition continued unabated, demanding new technology services.  The problem was that IT wasn’t funded to handle new projects.  The result:  Lots of spreadsheets and home-grown databases were developed by younger, tech savvy workers.

Underwriting managers were hiring underwriters to create rating spreadsheets.  Claims managers sent adjusters on courses to learn database technology to manage litigation.

And marketing found the internet.  ‘Nuff said there.

Back to the present…

Y2K is well behind us, and many insurers are replacing legacy systems.  One challenge is that all of the shadow systems have functionality that meets most of the insurers’ needs, reducing pressure for modernization.

However, this is temporary. Many of the user functions are being brought into the modern commercial systems.

But our new supplier …

… only sees a strange mix of technologies, lacking integration, and using too many “green screens”.

What she doesn’t see is that this is part of a continuum of innovation that supports rapidly changing business needs.

In the past, I have tried to explain that technologies such as telematics and cognitive computing are allowing insurers to underwrite risk in new ways and operational analytics are allowing claims professionals to reduce fraud and better service legitimate claimants.

At this point, I usually find the rep’s eyes glazing for one reason:  I’m talking more about insurance, than technology.  And she is selling technology.

So, do we care?

Not all suppliers are myopic.  Most of the supplier companies servicing the P&C industry have qualified insurance people who work diligently, and effectively, to ensure communications are clear between the customer and the technology developers.

On this basis, when I find a rep who insists on discussing how backward our industry is, I frequently look to find a way to close the conversation.

How about you?  Do you think the insurance technology  ecosystem is lacking innovation?  Do you care if others do?

 

Editor’s Note:  The 2015 Insurance-Canada.ca Executive Forum on August 31, 2015, will feature insurance professionals and technology suppliers who find insurance technology very exciting and innovative.  They would like to share their enthusiasm with you. 

 

 

 

 

One Comment

Christine Haeberlin

Patrick … your challenge is interesting because I think its going to take two to tango. Innovation isn’t lacking. However, the world is changing very quickly. As an industry, we need to re think how we move more quickly and deliver superior capability to the business of insurance. For technology suppliers, having a business focus – meaning, understanding the business challenges and goals – to ensure we are always including capability and an approach that delivers value to the business (rather than being too caught up in the fun … for some… of technology for technology’s sake) and all these two things are essential to Innovation … that matters. That’s when we care.

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