- Where Insurance & Technology Meet

Are InsurTechs Defining the Next Generation of Enterprise Systems?

Since the mid-1970s, there has been a core group of suppliers who provide enterprise systems specifically designed for P&C insurers. The group changes periodically, with mergers, acquisitions, and new technology. However, the basic functions haven’t changed much. InsurTech may be the catalyst for disruption.

Back in the day ….

Insurers were one of the first users of computers. In the early 1960s, large insurers were bringing in technology from IBM and others, primarily to handle billing, payments, and accounting.

The technology was big, monolithic, centralized, and programmed to the specifics of the individual company.

Around the mid-’70s, organizations such as U.S.-Based Policy Management Systems, Inc. and Memotech RealTime in Canada developed a new models. The base code was generic, and was customized by the vendor and the insurer to meet the company’s needs.

This reduced costs for the base product and provided flexibility for the customers.

A few things stayed the same: Billing, Payments, Accounting. In addition, there was a major changing in functionality: Underwriting, Policy Management, Distribution (frequently called ‘Agency’), and Claims. .

Enter the users…

Starting in the 1980s, technology changed radically and rapidly.

Personal computers and Local Area Networks proliferated like rabbits. Executives and senior managers drove the vendors to integrate intelligent workstations with the core systems.

Local area networks (LANs) allowed sharing of information. Demand rose to extend these beyond the enterprise to business partners.

Insurers and Brokers/Agents were driving change. Vendors with sufficient resources to respond transitioned to the next level. Others were sold, or just failed.

Again, the functionality – Underwriting, Policy Management, Distribution, and Claims – didn’t change much.

Then Al Gore invented the Internet …

After the appropriate period of denial, insurers and agents/brokers were driving change for one reason: Customers were taking to this new medium and this was a new way to do business.

There were some hiccups (DotCom Bust, Y2K bug), but by the time the confetti settled after the ball dropped on the new century, insurers were preparing to come forward with internet based systems and new models,

The functionality –  Underwriting, Policy Management, Distribution (frequently called ‘Agency’), and Claims – didn’t change much, with one exception.

New suppliers – e.g., Guidewire, Duck Creek – added ‘analytics’ to their portfolio. At the outset, these were novelties for insurance number geeks, but overtime, these became significant for strategic and operational planning.

Marketers had a new sandbox to examine results of activities and promotions. Product developers could see the results of new offerings. Executives could use the data for scenario planning. 

And this takes us to the current twist …

Consumer engagement is now a critical success factor. Customers will not be confined by standards for underwriting, and claims.   They are looking for bespoke solutions.

Writing in, Paul Belanger and Cheryl Satin from Blake, Cassels, & Graydon LLP say:

Niche insurance product offerings have grown dramatically in recent years. With revenue nearly doubling from specialty programs in the last five years, these programs are among the fastest-growing types of P&C coverages. …

These coverages require deep industry, customer and product-specific knowledge and analytics based on demographic and financial trends. Underserved niche markets present significant growth opportunities for both independent niche-focused insurers and traditional insurers who possess the expertise or can acquire attractive niche insurers.

The cookie cutter products have not gone away, but they are being disaggregated.

Now, for something completely different …

Ranging from two guys in a garage to large, international organizations, literally thousands of developer shops are coming forward with solutions to handle coverages that are not defined by fixed time and data.

For example, ‘Insurance Cloud’ from Red Cloud Technologies Ltd., is a product which, according to the company, “answers the industry-wide call for an end-to-end insurance platform which is designed for the digital age.“

I haven’t researched this product, but the following description really caught my attention:

In determining the exact features, rules and workflows – for customers, partners and the service provider – it reinvents how insurance is delivered and accessed. RedCloud even empowers its customers to directly configure those parameters in order to make costly and painful change requests a thing of the past. (Emphasis supplied)

Does that mean the ecosystem now includes consumers as equal partners?

Whither goeth InsurTech?

At a recent conference, a speaker estimated there are 1,500-2,500 InsurTechs. If history is a guide, that will be reduced, but the result will be the next generation of suppliers stimulating competition at the consumer level.

I’d be interested in your thoughts.

One Comment

Peter Symons

Good article and maybe the insurtec’s will disrupt but my guess is it’ll be at the front of the transaction (customer facing) not the back. In my view, the challenge with the back end of insurance systems isn’t the depth (intellectual complexity) it’s the width (data volume per transaction). It’s going to be a while before two guys in a garage can manage a back dated indorsement on a fleet policy, and that’s what the Guidewire’s of the world do elegantly. That said, if insco’s start selling highly simplified policies then that changes the equation, but the change likely has to start with the product, not the software.

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