I recently attended Insurtech Connect #ITC2019 alongside 7000 insurance professionals and wanted to share some of my thoughts:
History teaches us something valuable about the future of InsureTech #
With 10 years’ experience in financial services, I saw firsthand the birth of fintech. Back then, everyone claimed that the banking industry would be disrupted. They predicted banks would never be the same and that fintechs would be the institutions of the future. In support of this idea, the story of Netflix disrupting Blockbuster out of existence seemingly overnight was repeated at every turn.
Yet, I never believed—unlike the popular opinion of the day—that the banks’ time had come. My view is that fintechs will not replace the banks. Instead it will end up partnering with financial institutions way more frequently than competing with them.
Disruptor or partner? #
I get the same feeling about the current insurtech trend. I’ve spoken to many insurtech firms—each one looking for new ways to find efficiencies and innovation within the insurance industry.
Each solves a small piece of the larger problem—perhaps offering very tailored policies to niche markets or leveraging the internet of things to dynamically price premiums.
The thing is, full-service insurance is an old business, operated by large companies, with solid balance sheets, making huge investments. At the end of the day, for insurtechs to fully scale and rationalize the efficiencies they create across broader markets they will need the legal, and structural presence of the insurance companies. The future of the industry lies in cooperation rather than disruption.
The reality is that mostly everyone is interested in working together. One company contributes an innovation, another delivers particular expertise—and, together, they can provide a better product and an enhanced experience. Incumbent insurers can’t rest on their laurels.
They have a tough journey ahead. But the platform-driven model is creating ecosystems of insurers, vendors, clients and partners coming together to enhance value for all stakeholders.
The rise of the robots won’t happen—not on aging legacy systems, anyway #
As at most conferences a lot of the buzz is around the tremendous potential afforded by AI, automation, and autonomous machine learning. What becomes clear very quickly is that many insurers still work on 20 or 30-year-old legacy systems which have closed architectures that restrict access to the data needed to fuel analytics engines are going to struggle to reap the rewards of the new generation of digital advances.
Lucky that my firm Equisoft was the main sponsor of the life insurance track at ITC and we were able to bring together some of the biggest heavyweights in the industry to discuss the state of life insurance.
What emerged from those dialogues was that policy admin system modernization was the most critical first step in building a foundation for the future and enacting an organization’s digital strategy.
We learned some valuable lessons from leaders from StateFarm, Nationwide and Sunlife, who had already completed their modernization journey:
- Business commitment is critical. Modernization projects are large in scope and complexity. A solid business case is fundamental to keeping the project going as challenges emerge.
- It’s hard to be nimble when working with a system from 1968. Some of the things that legacy systems can’t do—like launching new products quickly—are becoming table stakes around the industry. Companies who don’t modernize can be left behind.
- Employee buy-in is crucial—to the extent that we have seen companies commit to their employees that there will be no lay-offs for 2 years after implementation.
- Recognize that bringing IT and the business units together at the beginning of the process as one team is essential. Modern PAS enable business people to build their own rules, giving them control instead of relying on IT.
- The cloud is table stakes right now. It’s no longer necessary to use in-house resources to house, manage and maintain core system infrastructure on premises.
Why are we still shuffling papers? Claims Acceleration is key #
Automation is accelerating many life insurance processes, reducing manual steps and eliminating paper. While the overall life insurance market isn’t growing, the companies who have a better front end and more digital capability are winning.
Great. But some areas are still lagging. Agents and clients want real-time quoting, illustration, approval and policy issuance. It makes no sense to them that the process takes weeks instead of seconds—especially for the immortals (35-year-old, cash poor, and don’t think they will die) and for the young agents who were born-digital.
They ask, “What do u mean I have to fill out a paper form and wait 40 days for an answer?”
And claims still take a farcically long time to process. Some Life Insurance Companies still work with faxes or snail-mail and require a wet signature!!! It’s so crazy and old. Claims has to be one of the next big pieces of the policy lifecycle to transform.
History continues to be a pretty good predictor of the future—even in an age of disruption. We ignore its lessons at our peril. One thing it teaches us is that often cooperation trumps competition.
The evolving ecosystem, the emergence of platform-driven models for the industry which bring together traditional insurers, born-digital insurtechs, clients and agents, and the sharing and free flow of data between stakeholders is turning out to be a win for all.
