Enter the World of Insurtech
Jennifer Overhulse | November 10, 2016
It’s probably a holdover from all those years of starting school in September that drives a desire to change (just about) everything to kick in with a vengeance around this time of year. As adults, September doesn’t typically offer the reset school kids are afforded, and even if it did, it seems unlikely that the dramatic level of change required year over year could still be covered by a new notebook.
Adulthood in the insurance industry is particularly difficult these days. Years of consistent underwriting profits, above average investment returns, and plentiful organic growth made complacency, well, commonplace. Now, following fast on the heels of a full-blown fintech revolution and significant advances in other industries in terms of service levels, accessibility, personalization, product flexibility, and the overall customer experience, the insurance industry must stand up and face the music, no matter how difficult the change may be.
Let’s Clear Up a Couple Things
Considering the industry has set a pretty low bar, it’s not hard to be persuaded change is necessary, and insurers across all lines of business appear to be embracing transformation on some level. The health and personal lines segments have seen the most change thus far, with health insurance changes necessitated by a complex and changing regulatory environment, and personal lines insurance changes driven by an influx of new technologies requiring business-model modifications, new product types, alternative billing methods, increased accessibility, and adoption of more modern distribution channels.
Unfortunately, all those years of complacency mean there is a serious gap between where the insurance industry is now and where it needs to go in terms of technology adoption and maturity, in-house IT expertise (especially as it relates to evaluating and implementing new or emerging technologies), and maybe, worst of all, data mastery.
Consider these “elements of (insurance technology) style.” With few exceptions, insurance organizations:
- Have a problem with technology (or lack thereof). But, the industry has been making magic out of the mundane for ages, becoming experts at extending the lives and capabilities of legacy systems beyond what is sometimes either reasonable or responsible.
- Have an entirely different problem with data. Mergers and acquisitions, impartial replacement efforts, and implementation of point solutions have resulted in a patchwork of systems and inaccessible, siloed data which can’t be converted into new systems or formats. Compounded by the volume, velocity, and variety of Big Data, it bears noting that new data in new siloes is no better than old data in old siloes.
- Have an even bigger problem with talent. The industry has passed the point where talent retention is going to cut it, and acquisition is now required, but insurance isn’t sexy and largely viewed as populated by technology luddites, so attraction of prime candidates is going to be problematic.
- Love a good buzzword. That’s right, in the absence of a good strategy, the shiny object syndrome wins every time, and in the interest of getting a “quick fix,” the insurance industry is absolutely guilty of jumping on some buzzword bandwagons, which were not ultimately going in the right direction.
- Bust budgets for a living. With the possible exception of the solutions managing airline operations, insurance core administration system replacement projects demand more insight into and oversight of untold numbers of moving parts, incremental milestones, and effects on downstream systems than other large scale IT initiatives. Scope creep, anyone?
- Knows vaporware when they (can’t) see it. Insurance is a tough business that demands a high degree of domain expertise and which recognizes successful shortcuts are few and far between. Industry insiders have long been able to spot companies with slick websites, a lot of marketing hype, and secret hopes of signing up co-development partners disguised as fully-implemented, paying customers.
- Adore strategy. Over the years, insurance organizations have been charged with development of an internet strategy, an e-business strategy, a legacy replacement strategy, a mobile strategy, an IoT strategy, and most recently, an innovation strategy. Unfortunately, since insurers spend the most time and budget on maintenance of existing strategies and systems, insurance IT executives often lack the expertise to do it right, or the budget to implement it fully once a strategy is approved.
The problems above have been begging for a solution for years, and each new trade-show season produces a whole new crop of trends, technologies, and ideas vying for the industry’s attention. And, until recently, few of these silver bullets have proven to have true staying power. Enter insurtech.
One could argue that insurtech, as a literal combination of insurance and technology, has been around forever. But, there is another element which goes into defining this movement, and that is innovation. In better defining insurtech, it seems worth mentioning that in some circles it is popular to attempt to limit this definition to companies offering technology products or services to and for the insurance industry. Unfortunately, this definition excludes startup or greenfield insurers, new distribution channel disruptors, and more traditional insurance organizations using technology in new, innovative ways to achieve a true competitive advantage.
Matteo Carbone, principal for Bain and Company and founder of the Connected Insurance Observatory, said in a recent interview with Business Reporter in the UK that an insurtech firm is “…a player that uses technology to achieve a strategic goal.”
In the interest of being inclusive instead of exclusive, it seems fair to say insurtech also includes any insurance-focused business driving a majority of revenue from the sale of technology products and services or which actively engages in research and development (R&D) efforts to find technology that can have a transformative effect on the industry, or which has used or is using technology to drive a change in business model, distribution channel, and the industry at-large.
This broad definition creates an insurtech universe currently experiencing its very own Big Bang, expanding almost exponentially each day. The sheer size of the movement, let alone the level of complexity involved, makes it challenging for insurers to engage successfully.
A Jumping Off Point
But, as previously noted, challenges present opportunities, and the insurtech challenge is no different. Since the launch of the Insurance Technology Association, ITA Pro has provided coverage and analysis of insurance and technology, and now, through Launchpad, provides a starting place for insurance organizations, industry executives, and interested parties in need of a tool for better interpreting, evaluating, internalizing and operationalizing insurtech.
Make no mistake, this is a danger point for the industry where it has yet to be determined whether insurtech will have a real, positive impact, or whether innovation budgets, venture capital (VC), and private equity (PE) money will end up in a black hole without ever creating measurable change in any area or line of business. In fact, many insurers today have actual innovation budgets in addition to technology or IT budgets, which anecdotal evidence says remain, with as much as 70 percent of spending, focused on keeping the lights on (KTLO).
Few, unfortunately, have a solid approach to allocating innovation budget money. Must innovation spending naturally include emerging technologies provided by startups, or can incumbent technology providers and insurtech firms benefit from this trend as well?
Once, the industry worried about technology being implemented for the sake of technology, for the sake of being one of the proverbial cool kids. Today, innovation is being demanded not only by insurance customers, but also by board members and C-level executives throughout the industry. Insurance organizations must now determine how to invest in innovation responsibly and quickly.
Change is coming to the insurance industry. It cannot be avoided and mechanisms for engaging in the insurtech revolution are needed now more than ever before.
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Lucens Group Announces Corporate Name Change to Claimify to Reflect Commitment to its Software Platform
- The Co-operators Drives Innovative Claims Process with Guidewire InsurancePlatform Cloud-Based Predictive Analytics System
- Insurance Technologies Releases FireLight® e-Delivery to Seamlessly Automate the Delivery of All Insurance and Retirement Policies and Documents
- Global IQX API Unleashes Wealth of Data for Employee Benefits Insurers
- Survey: Millennial business owners most likely generation to work with insurance agents
- Duck Creek Technologies Reports 85% Bookings Growth and 30% Revenue Growth in SaaS-Delivered Enterprise Software Solutions for Fiscal Year 2018
- Optimum General Selects Guidewire InsurancePlatform for Core Operations
- Blue Cod Technologies Announces Corporate Name Change to Activer Solutions
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2019
The tide is up! It's time to register for ITA LIVE 2019, our annual educational and networking conference! Our theme is "The InsurTech Revolution: Cutting Through the Hype." and we'll be bringing in a torrent of industry thought leaders, amazing insight and wonderful perspectives on the world of insurtech and its impact on the insurance landscape.
ITA LIVE 2019 will present real-life examples of true startup technologies that are helping insurers gain real advantage -- and a competitive edge -- in the marketplace. We’ll highlight the more successful InsurTech partnerships, while offering case studies that demonstrate exciting innovation and cutting-edge techniques impacting all aspects of the insurance ecosystem.
Ride the wave to LIVE 2019. Sign up today! We look forward to seeing you in May, 2019!
BLOGS AND COLUMNS
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE