Common wisdom has it that established insurers are not able to leverage InsurTech – the use of digital technology innovations designed to squeeze out savings and efficiency – with the same efficacy as start-up enterprises. We challenged two assumptions in our last post and will now address the third.
In the last episode …
I previously examined the InsurTech landscape and its benefits for the insured and for the insurance supplier. I also reviewed a post by Michael Tempany, director at consultancy SMS Management & Technology Asia, which posited that established insurers cannot replicate offerings by dedicated InsurTech companies.
I suggested that two of the factors Tempany cited – established staff with a predilection for the status quo, and the use intermediaries – were a bit broad, and I cited examples from the Canadian environment.
But I saved the largest conundrum for last …
The third stumbling block for incumbents is ‘legacy systems’. Tempany does not mix words:
… traditional insurers are crippled by legacy systems — creaking green-screen pre-floppy behemoths that no amount of lipstick can overcome. They’re not capable of ever supporting a product offering like Lemonade’s.
Strong stuff; but here’s the logic:
– All traditional insurers have legacy systems.
– Legacy systems are incapable of supporting InsurTech.
∴ Traditional insurers are not capable of doing InsurTech.
There’s only one issue …
Traditional Insurers are already doing InsurTech.
As discussed in the last post, Economical Mutual created a new company – Sonnet – and created sophisticated analytic and customer interface tools to support the new direct writing enterprise.
Also, Gore Mutual developed front-end tools to enable its home business product and the unique distribution scheme and configured print products to serve the customers.
And, in both cases, the technologies are being adapted to support elements of the existing books of business for the traditional as well as the new business models.
Let me be clear on one thing. Tempany is more than 50% right in his assertions. Legacy systems are a very convenient whipping boys for not examining InsurTech (and other innovative technologies and approaches).
As significantly, suppliers are supporting InsurTech
Core system suppliers are watching InsurTech developments carefully and are responding. Denise Garth, SVP Strategic Marketing at Majesco, recently told us that their clients are looking to Majesco to be a strategic partner.
“As we have tracked, observed and talked to our customers and other influencers / leaders in the industry this year, we are convinced this is not a ‘new fad’, but a movement with substance that is just getting started,” Garth noted. She added, “They are seeking to define new business models and processes that create a better way to ‘do insurance.'”
At the recent Guidewire User Group meeting, CEO Marcus Ryu looked beyond the horizon and saw the future as expanding beyond the core systems. “The current era requires, first, surrounding the core with data and digital functions into one unified source of truth; and, second, rendering this source of truth accessible to internal and external parties,” he said.
Does this mean that InsurTech will be absorbed into business as usual? While it’s early days, I suggest the answer is ‘No, but …’
It’s “No,” because adopting InsurTech is more than learning a new coding language or development protocols. The principals and practices begin – in many cases – by transforming the insurance product itself to better engage the consumer and to define new processes to provide an efficient, seamless experience.
It’s “But …” because insurers who are adapting the new processes are also bringing important historical context and wisdom.
Mark Breading, principal at analyst firm SMA, recently proposed a new construct he refers to as ‘MaturTech’ – bring the good part of the old together with the new with the goal of becoming the Next Generation insurer. In a recent blog post, Breading writes: “Our central theme at SMA has been the need to bridge from today’s insurance company to the Next-Gen Insurer of the future. And it is really much more about transition and adaptation than disruption.”
Where does this go?
Breading will be moderating a panel – consisting of insurers and InsurTech developers – at the 2017 Insurance-Canada Technology Conference (#ICTC2017) on 28 February 2017 at the Allstream Centre in Toronto. I am looking forward to helping Mark develop this with a Canadian context, and would like to get your input on topics questions.
Please feel free to drop me a note with your thoughts.