Today, it seems there is an insurtech solution for every insurance industry challenge you may face, but knowing which solutions you need and how they all work together is another challenge all its own. In this blog, we share three ways to make sure you realize the benefits and avoid tech sprawl in your organization.
In the last decade, we’ve seen the insurance industry shift significantly in how it uses technology. While the technology itself has evolved significantly, the way we use it has completely reversed course, moving from monolithic systems to more specific insurtech solutions.
Prior to the last decade, we experienced 20 years of core system modernization as we moved away from our reliance on mainframe technologies. At the time, core systems were racing to provide all the functions any insurance carrier could use, on a single platform. Starting with claims, moving into policy admin and billing, and then expanding further into other aspects of the value chain, acquisitions by major core system vendors – to develop a more complete feature set — became commonplace as a feature and function arms race was well underway.
Then, within the last few years, a capital investment phenomenon came along and changed it all. Adjacent industries in financial services saw significant innovation and growth opportunities for startup technology-focused companies. Investors realized the insurance industry was a prime target for startup investments to accelerate new and specialized products. Cash-strong giants, such as major reinsurers within the industry also had an appetite to invest.
Since that time, insurtech has grown into a multi-billion-dollar segment of our industry. Carriers eventually adapted, moving beyond internal-innovation groups to also needing to evaluate innovative solutions in the insurtech space.
Meanwhile, IT technology has evolved in parallel. It has introduced technology solutions, such as complete cloud platforms, AI and machine learning (ML), automation-focused products like RPA and low code or no code solutions aimed at reducing IT development costs. The technology advancements alone can be overwhelming.
All these factors form the perfect storm, flipping the script from a single-platform industry to a “microservices” one, where every specific industry problem along the value chain has multiple innovative stand-alone solutions.
The phenomenon results in a big insurance industry challenge: We can find incredibly impressive solutions for most problems, but we are struggling to choose and implement solutions effectively. It is no longer about simply finding innovative solutions. It is about picking one and making it work within your overall processes and technology architecture.
Let’s look at three ways you can achieve the benefits of insurtech solutions while avoiding the sprawl.
1. Shift Your Strategic Approach and Identify Solutions
To succeed in the landscape of insurtech solutions, you need to first change the way you develop your strategy.
During the era of consolidating features within core systems, we relied less on developing a strong business architecture with specific capabilities. We organized around broad domains, such as underwriting and claims, and built technology roadmaps that focused on general functionality.
The new dynamics of specialization and specificity force us to be much more granular in how we think about business architecture capabilities. While it was never ideal to gloss over business architecture as a strategic under-pining to technology strategy, the consequences for under-investing in it are greater than ever. We require more granular capabilities we can prioritize and weave together.
If you can’t identify which capabilities to develop or mature first, you will quickly run into a difficult-to-manage investment sprawl that will overwhelm and exasperate your organization. You need to broadly contextualize all solutions.
2. Master Modern Architecture
Once you know where to focus your solutions, you must then learn how to focus. Event-driven architectures and microservices aren’t new. The ability to super-charge them on cloud platforms is somewhat new, but the big difference is that now the approach is mainstream.
However, the real driver isn’t that the technology is available, it is that the need for the technology exists.
The precision with which we can apply solutions within the value chain has made event-driven integration patterns necessary. Mastery of these concepts is critical.
3. Apply Insurtech Solutions Broadly
Even if you focus on the right capabilities and have an architecture to support them, you still need to ensure you apply insurtech solutions effectively in the broader context of your overall strategic approach. Most solutions are highly targeted and therefore naturally lead to an overall disjointed experience if not considered as part of a larger solution.
Improving customer engagement is a good example of how you can apply these three steps.
One advantageous result of our industry-wide shift from an insular focus on our core processes has been realizing we have to improve our customer engagement. If you go to any insurtech conference and plot the solutions on the value chain, you’ll find many focus on customer engagement elements. There is significant demand for insurtech solutions that enable insured and agent engagement.
At the same time, the challenges of achieving customer engagement are numerous. Major CRM vendors have realized the industry has some nuances that make their standard products difficult to implement.
For example, agents and brokers are key contacts for a carrier and need to be considered in any customer management system. Sales leads quickly become policy submissions or quotes. But aren’t easily accessible by a CRM for things like forecasting. Highly complex underwriting rules require full workflows across several systems, and often, a CRM is left out.
Most digital interactions with agents and insureds use an outdated portal concept that lacks experience-design principles and is tightly coupled to core systems, making it difficult to evolve. Insurtech solutions aimed at easing key aspects of customer-facing processes, such as risk data collection are difficult to integrate into the solutions. This exacerbates the age-old issues around customer file and accurate information. Most importantly, traditional data warehouses fall short of meeting the need to provide meaningful insights and AI and ML solutions along the way.
In order to crack the customer engagement code, carriers must be able to balance precise business architecture capabilities with an overall strategic approach and architecture. Broad-thinking visionaries who can put it all together will provide new holistic solutions.
For example, a customer engagement solution will include:
- A combination of a strong experience design framework
- A CRM system customized to fit insurance-based needs
- Bespoke insurtech solutions for key elements of the process
- A cloud-based event-driven architecture
- A modern cloud-based data architecture to provide insights along the way and ensure accurate customer records
- A strategy that puts it all together.
All the components to address our current industry challenges exist, but in today’s world of tailored and specific solutions, no single insurtech solution will overcome these. Carriers can only achieve true differentiation if they implement cohesively interwoven holistic solutions.
Reliance on solution providers can lead to sprawl and professional service consultancies are similarly focusing on specific elements of a solution or major cost-prohibitive transformations. Carriers that are able to leverage the right combination of solutions and services with universal approaches will gain a significant advantage in the marketplace.