InsurTech: Beyond the Hype

Software as a Service, Insurance Technology

As published by FIA Insights

FIA: What comes to mind when talking about enabling technologies in the broker and insurance spaces?

Andre: Enabler technologies simply allow you to do more. It enables you to change your business and enables you to adapt. Technology shouldn’t inhibit or stifle change, it should encourage and enable the changes you want to make in your business.

For example, if you want to pivot into a new line of business, technology should enable you to do that. If you want to change your payment methodologies and your payment structures, technology should enable it, not inhibit it.

There’s been much talk about the remote working implications of adopting the technology. What else might we be missing when it comes to technology adoption and implementation?

We have made the necessary hardware changes and put systems in place, but, to a large degree, people in business still struggle to shake the legacy way of thinking. Ultimately, we’re still people at the other end of these technologies, and it can be a challenge to keep up with the progression of technology. As Moore’s Law infers, technology is evolving much faster than what we are.

You’ve spoken previously about the prevalence of hype distraction in the tech field. How do companies avoid being led astray by this?

When it comes to tech, we can be like cats running after a laser pointer as we chase the shiny object of the hour. A while ago it was blockchain, then it became AI. It doesn’t stop and it’s too easy to lose sight of the business problems you should be solving.

If your business problem is clearly defined it makes navigating the endless sea of solutions easier. Unfortunately, what tends to happen is Maslow’s hammer approach where technologists or CTOs want to jam the technology of the hour into every single business problem they can find. This is where an independent consultant with a deep understanding of available technologies can be valuable. But it still comes down to understanding what it is you’re trying to solve, and then finding the right tech to solve that problem.

What are the crucial technology platforms that insurers should have in their repertoire?

There’s hundreds of platforms, but generally speaking it’s important to look at technology platforms that enable insurers to lower operating costs and the cost of insurance. Right now, we’re going through a nice cycle of understanding and looking at more data, but it’s crucial that data can be fed to, and extracted from the platform quickly. Ultimately, the most important technology capability for any insurer or broker to have right now is the ability to frictionlessly plug into and plug out of different services.

How does company culture impact the adoption, and non-adoption, of technology?

Insurers are naturally risk-averse. They manage risk for a living and, from what I’ve seen in the corporate space, failure isn’t taken to kindly so people tend to make less risky decisions. When this is transposed onto technology roadmaps people are reluctant to take a chance on new platforms or to experiment and fail fast due to the potential consequences for the organization.

We need to start looking at ways of changing company culture where experimentation or fast failure is not necessarily rewarded but managed better. Once you have platforms that can launch a product quickly, you’re reducing the risk. Eventually, we need to be more comfortable with experimentation, and if it doesn’t work, we pivot and try something else. That’s the only way we are going to speed up developmental changes in the industry.

How does this relate to the banking sector in financial services? What are they doing differently to insurers?

The banking sector is about ten years ahead of the insurance space when it comes to tech consumption. Make no mistake, the same technology is available to insurance; it’s just about how we consume it and the budget available.

Open banking is something we should be looking at. How can we accommodate more open insurance, more sharing of information among each other? We should all be looking to the banking sector to find out how they achieved that and try to emulate it.

A lot of consolidation has taken place, what opportunities and challenges does this pose to decision-makers in a company?

With consolidation, there is always opportunity and risk. Traditionally, the two companies will share operational costs and share the platforms they operate on. Management must ensure the two companies can operate on the same IT stack. We’ve seen this in the broker space with these mega deals (AON for example), but we’ve also seen a slightly different disaggregation of the insurer space, with more UMAs spinning out of large carriers. All of these companies need a mature tech stack to run on.

They were used to running on a big, powerful tech stack within their mothership. When they jump out, they can’t risk their reputation or their customer experience. There are always opportunities for the CTO to find a solution that can service these carrier-attached start-ups, where they can still scale and talk back to the mothership when they send data.

Where do CTOs find API-enabled technologies that link them back to the mothership?

One of the main challenges CTOs face is how to couple back to the mothership. Many of the monolithic or legacy platforms struggle to push data in and out, so a decision must be made between building middleware or coupling it back into a data warehouse from the periphery platforms. Historically, company legacy systems can be a huge problem, which is why a lot of platforms look for scalable platforms outside of their core. For example, if you have a core platform that is running many millions of policies and now you want to test greenfields products, like the banks did, and it hits scale, the question becomes, “do I move this back to the core?”, or “can the platform it resides on currently handle the volumes?”. If the answer is yes, there is no need to move.

How does the insurance ecosystem function, and can you give an example of how this looks in the South African insurance and broker context?

From a technology point of view, the ecosystems we refer to are additional functionalities that can be added or disconnected at various stages of the policy lifecycle.

Autotrader makes a good hypothetical use case: picture picking a car that you want to buy, and then right there and then being able to embed insurance and understand the value of that vehicle, along with the risk, and being able to offer a price on the insurance policy immediately.

That’s the front-end part of insurance – embedded insurance – and it’s a really hot topic at the moment. Using data sourced from other service providers in the ecosystem, you already know who the buyer (potential client) is. Using this information, you can pre-populate questions, or not even ask them questions, thereby driving down the quote-buying journey, which translates to a great customer experience, eventually resulting in more sales.

You can plug into various other ecosystems like payment gateways. For example, we work with Imburse, and they plug into more than thirty other payment gateways. You can choose the gateway you want to use be it Stripe, WorldPay, HSBC… and that’s a separate ecosystem.

When you run through the policy lifecycle you can add ecosystem elements all over the place. Come claim time, if you have a telematics device or an IoT device, which is also part of the ecosystem, talking in to the call to notify your first notification of loss if there’s an incident, you can call out to these third parties and check the validity of that particular dataset.

Was the telematics device impacted in such a way that it is a claim? When was it happening and at what time? You can pull all of this together to drive down claims costs and premiums, and offer our customer a better experience.

There are hundreds of partners that you can pick and choose from. It’s about arranging them in such a way in the ecosystem that they can offer something unique.

FIA: What is your advice for insurers exploring enabler technologies?

Make sure you plan for the future and don’t set yourself up for becoming a legacy five years from now. Always be cognizant of unseen risks and know while that we can’t predict the next pandemic, we can architect in a modular manner to make it easier to pivot. The main takeaway is future proof yourself while ensuring that you can couple and decouple technologies. And ensure you are API-enabled!

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