"Seven years ago, Adobe became the first traditional software company to jettison its old way of doing business — shipping discs loaded in return for an upfront licence fee — and make the switch completely to the cloud. Today it has overtaken Oracle in valuation which has its feet straddling both its back-office on-prem software and front-office cloud solutions." 

Richard Waters

  in FT 5th Feb 2020

Adobe made a complete switch to cloud solutions and Salesforce.com ever was thus. Will the insurance solution companies, epitomised by Guidewire and Duck Creek, suffer like Oracle and SAP from straddling the old ERP on-prem approach and cloud solutions?

Oxbow Partners recent report "The rise of the insurance technology ecosystem" points to the issue.

"In the last 10 to 15 years full stack PAS vendors, such as Guidewire, Duck Creek and Sapiens, have dominated the insurance technology market. These types of vendor promise to meet the full range of insurance technology needs but sometimes struggle to deliver new requirements. Updating them often requires significant effort and investment and they are not built to easily integrate with emerging service providers" 

I recently saw this class of solution provider described as "Digital PAS Monoliths". That would be why Oxbow Partners continue-

"For this reason, insurers are starting to reconsider their technology approach. Rather than depend on one platform to provide full PAS functionality, IT teams are experimenting with technology ecosystem models. Technology ecosystem models connect together cutting-edge, often niche, systems that specialise in specific functions to create a ‘perfect’ PAS. To build a true ecosystem model, insurers need to replace legacy platforms with a suite of interconnected systems."

Looking across the ever-increasing number of insurtechs you can see patterns emerging. ranging from solutions  looking for problems to solve to fully evolved platforms offering complete solutions like those below.

The challenge for insurers is being unable to throw away incumbent core systems whether fifteen year, or older, legacy systems or newer "Digital PAS Monoliths". They need newer cloud hosted solutions that do not add yet more technology stacks and that integrate practically with core systems.

Many do not whilst those listed above do. Yet there are more questions  insurers should ask before shortlisting  PAS vendors.

  1. Can they help us deliver the overarching strategy we need to plan, implement, deploy and continuously  improve? 
  2. Or are they just point solutions that add to integration complexity?
  3. Are they as cost-effective for travel, pet, warranty, speciality, commercial as they are for home and/or motor, life & protection?
  4. Do we have to relicense every time we roll-out to a new country or insurance class?
  5. Or is this expansion just a simple matter of adding to transaction based pricing?
  6. Can we iterate, improve, customise and make innovative leaps without being dependent on vendors developers/consultants? 
  7. In other words is it a "Low Code" or preferably "No Code" solution we can customise inhouse?
  8. Are there reference sites that prove scalability, security and reliability?
  9. Will the shortlist I chose integrate effectively together and with my curent core system?
  10. Will we be able to escape if they fail to keep up with best-of-breed alternatives?

Overall- can I evolve through the stages that Oxbow Partners describe? From the full-stack(s) core systems of today, through hybrid systems to an optimised technology ecosystem?

The answer will probably determine if you are a top quintile insurer or in the lower four quintiles. Why is that important?

Only the top quintile makes an economic profit as McKinsey vividly shows in  “Why your next transformation should be ‘all in’” especially Exhibit 1 The Power Curve.

The good news is that you have the means and technology partners available to implement the right technology strategy.