"Creating value, finding focus: Global Insurance Report 2022" by McKinsey describes 9 key strategic policies to pursue with one being 'Modernise Core Technology Platforms'. Insurers may well be highly constrained in achieving the other eight policies without the right core systems."

  • Modernize core technology platforms. From 2012 to 2020, technology’s average share of operating costs rose by 36 percent (for P&C) and 10 percent (for life). The key driver is increasing digitalization—at both the front end, where technology enhances the customer experience, and the back end, where digital drives productivity gains and operational performance. Digitalization is straining legacy systems, some of which are decades old, and many insurers are considering a replacement of core systems with tech platforms that support the requirements of the digital age.

Many insurers have invested very large amounts in what I have described as "new legacy core systems". Guidewire was formed in 2000 and now is the core platform for circa 450 insurers globally. Core platforms like Duck Creek and Majesco adding to these deployments but many insurers still have old legacy core systems and large numbers of technology stacks inherited over many M&As. 

Despite the investment in replacement core systems the actual digital transformation outcomes are patchy and have been focussed on Quote & Buy, Marketing and Distribution.

The Altus DigitalBar measures the digital maturity of UK insurers across 19 criteria every year showing how much digital transformation is still required. Whilst North American and Continental European insurers are not tracked you would not expect them to do better. 

If that's the top imagine the others!

Home, property and contents does not fare too well either.

You can see the detail by insurer across all 19 criteria at the DigitalBar and similar analysis for other classes of business.

The top insurers have generally invested heavily in Guidewire, Duck Creek, Majesco, Sapiens, ICE and other core platforms so are the complexity and limitations of these a constraining factor? Why are insurers lagging as in the past few years we have frequently read about active insurers digitally transforming. Are they held back by even the "newer legacy" core technology platforms.

One theme of this article asks and answers that question. Just as Salesforce disrupted the status quo of comfortable gorillas like Oracle and SAP in the CRM and ERP markets have the gorillas in the insurance core systems market grown too comfortable on large Capex and Opex revenues, profitable upgrades every 4/5 years and "stickiness"?  

Behind these top insurers the large majority is still chained by legacy core systems as Guidewire itself illustrated in its current Financial Analysts Briefing.


These insurers will ask themselves the same question but today a new breed of native cloud core systems featuring micro-services, no-code customisation, low-code API integration and scalability from pilot POCs to full enterprise deployments. EIS for large Tier 1/2 and 3  insurers and Genasys for Tiers 3/4/5 are shining examples.

70% of an insurer's cashflow is focussed on claims and that is where customer satisfaction and loyalty is really tested. The second part of this article reviews the same issues with many legacy systems, some gorillas in the market and a new generation of native cloud, micro-services, API driven, low-code integration and scalability from POCs to deployment across complete lines of business. 

The content follows these key topics

  1. Avoid the digital transformation paradox that blights innovation strategies
  2. Choose between scalable but turgid new legacy technology partners and agile yet potentially unscalable new entrants to market
  3. Choose insurance core systems
    1. Legacy core systems
    2. New legacy cores
    3. Modern CoreTech
  4. Choose digital claims management platforms
    1. Ecosystem ClaimsTech
    2. Modern ClaimsTech
  5. Vital Third-Party point solutions to integrate
  6. Access key data sources especially for data and AI/ML driven insurers
  7. Why RFPs are a doomed way to innovate and how to replace them
  8. Navigating the Insurtech journey for insurers


First let’s open a paradox facing innovators in the insurance industry from Geoffrey Moore author of the iconic book for start-ups titled “Crossing the Chasm”. Many Insurtechs will fall into the chasm so wise to bear that in mind when choosing technology partners. Mind you, both Tesla and Amazon were start-ups once.

 Digital Transformation Paradox. 

"The paradox is simple to state, involving as it does two seemingly contradictory statements:

  • You cannot digitally transform your enterprise without software.
  • Software cannot digitally transform your enterprise.

Everybody gets the first one, but a whole lot of people have missed the second. Why? Why would we ever think that simply by installing new software our enterprise would be transformed?

The answer is interesting. For the first two decades of widescale deployment of enterprise software, we did get what appeared to be transformative returns simply by installing new software. But here’s the thing. The returns came from automation, not transformation.

That is, if all you are doing is automating an existing process, then software alone can do the trick. Robotic Process Automation (RPA) is a good current example. Buy some UIPath or BluePrism, target some bit of workflow, engage an expert in that process to help, and zip, bang, boom—the process can run by itself! Now, if it is a complicated process, you will need a more robust tool for this, so you might buy some WorkFusion software to take that on. The point is, in neither case are you transforming anything. You are just automating it."

Geoffrey Moore

Most innovation deployed by insurers has been a case of automation.

Digital transformation has a much bigger brief.

 Because of the new digital economy, because of changing customer expectations, because of aggressive competitors coming at you with advanced technologies in tow, you have seen you are going to adapt, and fast. Specifically, you must change the way you operate, decommissioning the old methods to implement the new ones.

To begin that journey, you need to build clear representations of your current state and your desired future state. Capturing your current state involves an act of description.

Capturing your desired future state requires an act of design. If you do not have a clear design for your future state, you have no north star by which to navigate your digital transformation, and it cannot possibly succeed.

So, let us assume we have a clear design for our desired future state. It won’t take you long to realize there is little chance that a single intervention can get you from here to there. So, the next major deliverable must be a roadmap organized around a maturity model. What Moore describes as a stairway to heaven. Each step up the stairway should be designed to deliver value upon completion, thereby allowing the organization to pace its change management, funding things as it goes, building its confidence, and reassuring its various stakeholders. 

With such a roadmap in place, now you have a current-state/future-state accountability mechanism that can govern each stage of the transformation—the software and systems, the systems integrators, the process owners insider your enterprise, and the people responsible for executing the processes. As we have noted elsewhere, digital transformation is not a restaurant. You cannot simply pay for it and have it delivered to your table. It is a gymnasium. You still must pay for it, but to get any value out, you have to actually do the transformational work yourself. Transformational software, in other words, is like a Peloton—it’s cool, but only if you engage.

Is that a key reason I constantly come insurers still talking with potential technology partners even though they issued RFPs 18-24 months ago and are still mired in delay and indecision? Too often these projects are single interventions rather than a step on a carefully planned “stairway to heaven” strategy. See Death to the RFP at the end if this article.

Let’s say the stairway to heaven has been agreed, is viable and leaders support the strategy. How do you find the optimal technology partners to help you achieve each step? This leads us to another paradox facing incumbent insurers and brokers that require scalable technology fast.


  • New legacy technology partners have scale, can automate but often cannot deliver agile transformational capability quickly
  • Many transformational innovative start-ups are agile but will fail the scalability test

Scalable Technology Partners

The first point is an evolution of the infamous ““nobody ever got fired for buying IBM”. Please feel free to replace IBM with the “safe” brand of your choice: -

  • Guidewire, Duck Creek, Majesco, CoreLogic, Verisk….

They have proved able to deploy at volume across an insurer’s business and cope with the necessary integration with multiple core systems, third-party apps, and enterprise strength data models. They have the capabilities and resources to deal with multiple lines of business and all sizes of insurer from Tier One to Tier 4.

The downside to that benefit is that they take a long time to deploy, may become ossified in hard coding and inflexible integrations and can cost the earth.

How many insurers have deployed Guidewire for the auto line of business but run out of steam, resources, and money to deploy for home and contents? Never mind pet, travel, gadget, speciality or commercial?

IBM and SAP ruled ERP and CRM software once, but agile SaaS companies ate their lunch before they knew it. Any corporate worth their salt would rely for MI and BI on Hyperion, Business Objects, Informix et al. Then business unit leaders became impatient waiting for central IT to deliver new reporting and dashboards vital to manage the business. The business unit leadership used revenue budgets to license Tableau, Qlik and new SaaS products and the gorillas in the market were outflanked.

Gorillas with big ticket annual licensing and three/five-year lucrative upgrade cycles were reluctant to give up high margin licensing and by the time they offered that business model it was too late.

What happened to king of the castle Seibel for salesforce automation and CRM?  Salesforce.com stole the market and today has expanded that initial offer to deliver complete ecosystems for all industries including insurance.  Software vendors use the Salesforce platform and tools to develop software (SaaS) and platforms as a service (PaaS).

Gorillas in the market face the danger of becoming dinosaurs outwitted by agile and scalable competition delivering transformation and anticipating potential disruption.  

Innovative start-ups

The level of investment in Fintechs and Insurtechs has spawned thousands of solutions looking for problems to solve around the globe. Just as Salesforce was once a twinkle in a founder’s eye so a minority of these will ascend the stairway to heaven and become gorillas of the future. A look at the first days of Salesforce is revealing (the bold highlighting is mine). It shows that it takes longer to deliver major innovation than is often realised but that in in the longer term the outcome tends to be more disruptive and beneficial than originally planned. In this case the old ERP incumbents which sold expensive, high-ticket licensing with huge CAPEX costs and profitable version upgrades every 4/5 years supplanted by new, cloud-native platforms that started with low-cost small user deployments but scaled up to the requirements of the largest corporations and government operations. A lesson for today’s incumbent technology companies.

  • In February 1999, the Salesforce journey begins with a clear vision to be “A World-Class Internet Company for Sales Force Automation.”
  • On March 8, Salesforce incorporates, and Marc Benioff, Parker Harris, Frank Dominguez, and Dave Moellenhoff begin working on the first version of Salesforce’s CRM. Their base is a rented one-bedroom apartment at 1449 Montgomery Street, on San Francisco’s Telegraph Hill.
  • As the four develop their prototype, they also build a distinctive start-up culture. They only work on what they believe is important and necessary, to do it “fast, simple, and right the first time.” “No fluff” is their mantra. They wear Hawaiian print shirts, brunch at Mama’s, appoint Marc’s dog Koa as Chief Love Officer, and constantly ask for feedback.
  • The company also writes its first V2MOM (Vision, Values, Methods, Obstacles, and Measures) strategic plan, aiming to provide employees with a clear vision and align the organization around common goals. In true start-up fashion, the original draft is written on the back of an envelope. V2MOM remains at the core of how Salesforce runs its business and continues to guide every decision the company makes.
  • By the end of its first year, the company has expanded to 40 employees and an 8,000-square-foot office at the Rincon Center.
  • Like many other tech companies, Salesforce endured challenges brought on by the dot-com bubble bursting, and 20% of the company’s workforce was laid off.
  • On February 7 2000, salesforce.com officially launches at an event themed around “The End of Software” at San Francisco’s Regency Theater with 1,500 attendees and a concert with ‘The B-52s’.
  • In March, Salesforce gets a boost from its first piece of major press coverage, in The Wall Street Journal, when it hires actors to stage a mock protest outside a Siebel Systems conference. The “protestors” carry signs with anti-software messages to drive home Salesforce’s “The End of Software” marketing tagline.

Salesforce continues to grow whilst still being a gorilla, depended upon by enterprises, government organisations and software companies to deliver viable solutions to real problems. It created the business model of transaction-based licensing, being able to scale up and down at notice and offering low-code customisation by a customer’s own non-developer staff.

Of course, for every Salesforce there are many start-ups that do not make it beyond the early adopter market and “fall in the chasm”.

Let’s recap

Play it safe with a successful incumbent technology partner and face the danger of being left behind as your competitor chooses a Salesforce type alternative? Or pick an up-and-coming technology vendor who demonstrates a working model product that fits your future roadmap but may fall by the wayside? 

It is not easy- I have faced that process knowing that I had to get sign-off from the Chairman and CEO who had their own ideas about technology rooted in ideas a decade old. Mind you they have also been promised transformational innovation from slick demonstrations by ‘A’ team members of large technology vendors only to have projects run by the ‘B’ Team and fail to deliver the promised heaven.

You get references, how did they pick those, and short-list two or three vendors to deliver a minimum viable product (MVP) or proof-of-concept (POC). But invariably that is with a small part of the business and low volumes of transactions. It is not until you deploy at volume do you really know if the technology is scalable, and the vendor has the resources and capabilities to scale-up at your speed of deployment.

It is not just a case of the next couple of years- will they still be with you when you offer a mix of embedded, UBI, Insurance-as-a-Service (IaaS) products from mainstream auto insurance ranging from global roll-outs meeting regulatory compliance to a single country launch of rental or short-term auto insurance?

As available data sources become less relevant for new customer behaviour needs how will they cope with proxy data sources to ensure that underwriting can price fast and accurately? How can claims data be leveraged for underwriting and selecting the best risk without falling foul of legislation requiring accountability of any decisions made by deep-learning models?

When choosing technology vendors, you will have a scoring model that rates and measures the abilities of the potential suppliers to meet current and future "stairway to heavan" needs.

Let’s fit some actual names to the models we are discussing. These are not exhaustive but rather to give flesh to the ideas expressed above.

Insurers must decide between going the safer, often more expensive route that can limit future innovation or the more dangerous, but potentially more rewarding, route with start-ups that have a solution to real problems. There are now an increasing number of potential partners that straddle the divide- so called scale-ups. They have several significant customers that have deployed at production volumes , often at least one major insurer to test and help them through the development of technology to a mature and yet innovative deployment.


Let’s fit some real technology companies into these scenarios by focussing on: -

  • Core Insurance Systems
  • Digital Claims Management
  • Data and Market Intelligence

The lists of technology companies are in alphabetic order and not in any way a rating.


Core Systems

These include the old legacy, mainframe driven systems still prevalent across incumbent insurers. Large insurers may have 15, 30, 50 or more technology stacks inherited over years of M&A around the globe. Then there are the more modern legacy core systems like Guidewire and new modern architecture CoreTech like EIS and Genasys.

These core systems are the central computing brain, heart and muscle of insurers.

Old Legacy

Old legacy systems show that mainframes are still relevant whilst at the same time the skills and people able to maintain and upgrade them shrinking. We all have seen cases of bank legacy core systems literally failing during upgrades as one or more links in the high number of workarounds, many times undocumented, fail. Customers without banking for days and even weeks at a time!

Technology partners can create ‘digital wrappers’ around them and integrate at various points of the system. But at the heart of matters you still have an old and vulnerable set of often incompatible mainframes, AS400s and UNIX servers chugging away like steam engines in our current digital worlds.

New Legacy

That gave the opportunity for Guidewire which formed in 2000 and went for IPO in 2012. It underpins over 450 insurers globally and is the gorilla in the market and Gartner Magic Quadrant Leader for North America and Europe. Duck Creek, Sapient, Majesco and others have established themselves in the market since 2000.

Why do I term them new legacy? Because they are rooted in a traditional server platform. They may have deployed to the cloud but no more than stuffing a large, inflexible, and traditional enterprise app which behaves the same. Like the on-premises model it is dependent on armies of Systems Integrators, Consultants and Developers to help scope, spec and deploy them. The result is hard-coded, complex, and generally inflexible platforms that involve expensive and long-winded upgrades every three to five years. There is no dynamic scaling up or down capability by specific products, markets or lines of business as demand changes. It’s an all or nothing deployment on the cloud.

But they work, are comprehensive, have international coverage and cope with high volume transactional models required by Tier One to Tier Three insurers and brokers.

They have partners and marketplaces to help insurers integrate best-of-breed point software like Shift, Tractable. All have cloud versions, but these vary in completeness and Gartner may, for example, warn that

“XYZ does not offer a true SaaS model. The application is not deployed multitenanted, and the vendor’s contract requires commitment to minimum terms and minimum volumes. Insurance CIOs will need to ensure they do not overcommit to volumes and capabilities to ensure they are not overpaying for the solution over the term of the agreement.”

Gartner may question the capabilities to execute well particularly the further from their core home markets e.g., North America.

Size has its advantages and I have included an indicator in the table below i.e., the number of deployments in North America and Europe. The data is supplied to Gartner by vendors for 2021 and where you see N/A the vendor does not appear in the 2022 Gartner Insurance Core Systems (P&C) reports for an insufficient volume of deployments.  

Tellingly, many insurers implement one line of business, e.g. auto, with these core systems but not another like home. The time, cost and shear resourcing requirements can drain ambition, budgets, and people. That’s not to say insurers cannot run all lines of business on them- just that the cost and effort is high.

That opens potential for the cloud-native, serverless, micro-services and API architecture platforms that can be scaled up from one line of business and across all lines. Subscription licensing removes cost as a barrier especially as you can say goodbye to expensive upgrades. Every customer will be on the latest version of the software and that being so can be assured of competent support by the vendor. Deployed on public cloud platforms like Amazon AWS and Azure they are infinitely scalable and their large API libraries make them ideal for integration with 3rd party applications and data sources

Many new legacy vendors will say they have SaaS versions, but they are rarely complete and often a mix of vendor or customer hosted rather than public cloud.

CoreTech

This is a term coined to describe 100% cloud-native core platforms that can deliver the functionality of ‘new legacy platforms’ from serverless platforms like Amazon AWS, Azure, Google.

They can scale up to millions of transactions whilst starting on the initial steps of the "stairway to heaven". They can license specific modules and offer subscription licensing for cost-effective means to transform and move away from legacy and new legacy platforms  at the speed insurers require.

The list below is not exhaustive whilst giving a good indication of the choices available. You can read detailed SWOT reviews in the Gartner Magic Quadrants:

  • Magic Quadrant for P&C Core Platforms, North America
  • Magic Quadrant for P&C Core Platforms, Europe


Vendor

Deployments* US/Canada

Deployments* Europe

New Legacy in Gartner MQ



Adacta

N/A

16

Britecore

54

N/A

DRC

20

N/A

Duck Creek

129

N/A

Fadata

N/A

30

Guidewire Insurance Suite

294

92

Guidewire Insurance Now

34

N/A

Insurity

98

N/A

Key Lane

N/A

22

Majesco

156

N/A

One Shield Enterprise

36

N/A

Prima

N/A

15

RGI

N/A

50

SAP

Information not submitted

Information not submitted

Sapiens

39

17

Cloud Native CoreTech



Duck Creek SaaS

Request from Vendor

Request from Vendor

EIS

8

5




Outside Gartner MQ



Genasys

Request from vendor

Request from Vendor

ICE

Ditto

Ditto

Instanda

Ditto

Ditto

iptiQ by Swiss Re

Ditto

Ditto

Salesforce

Ditto

Ditto

Socotra

Ditto

Ditto


 Digital Claims Management Platforms

It is telling that whilst all core technology platforms feature a claims module most customers license a separate digital claims platform. With circa 70% of an insurer’s cashflow tied up in claims operations and claims a key determinate of customer satisfaction and retention you can draw your own lesson.

Just as with core platforms you have a range of options including Claims Ecosystems Providers e.g. CoreLogic and Verisk and what you might term Claims CoreTech i.e., modern architecture, cloud native, public hosted, micro-services and API architected with low-code/zero-code standard. Examples include RightIndem and Snapsheet.

Some technology partners specialise e.g., CoreLogic and Synergy with property, home and contents whilst others cover multiple lines of business e.g. Verisk, 360Globalnet and RightIndem.

You have the same challenges and opportunities we examined looking at core platforms. Do you put all your trust in a cloud-native, micro-services and API driven platform that has a limited number of customers, scaled only to modest claims volumes and may have shown focus in only one or two lines of business?

Or do you choose a proven new legacy option that has scaled across many large Tier 1 and Tier 2 insurers but has an amount of technical debt hidden in the various modules and tends to be expensive, more complex to deploy and require major upgrades every three/four years?

Luckily a number of digital claim management platforms have scaled p and can offer proven ability to deal with millions of claims per annum. And scale up from just thousands to high volume at a rate to match your own capabilities. That make it easier to prove the technology in one line of business and one the technology and relationship is trusted expanded over the whole business. 

You will require assurance that each platform can integrate with core third party software to build out the functionality, digital UX and claims journey required for all lines of business. Many vendors talk of their API documentation and ability to integrate but some lack the stamina and inhouse resources to fulfil the promise. You will need these third-party applications, so it is best to validate the capabilities of the vendor before committing to trials or POCs.

There are pros and cons for either choice and key is the trust you feel you can place in the people involved and relationships with each vendor. Geoffrey Moore is an outstanding advisor on the technology adoption lifecycle and on technology start-ups achieving scale. He emphasises that founders and managers of start-ups are often not the ones suitable to take innovators beyond the first few customers.

A recent research project by Sonr in partnership with EY rates Insurtechs by a number of characteristics including the capabilities of the people involved. The result is the Insurtech 100 Report ( see Further Reading at end of the article).

What range of options do you have?

Ecosystem Claims Management Platforms

  • CoreLogic  for property
  • Verisk for property and auto

New Claimstech Management Platforms

  • 360SiteView
  • Claims Genius
  • Claim Technology
  • RightIndem
  • Salesforce Industries (Insurance)
  • Snapsheet
  • Synergy Cloud

No one platform will have everything an insurer, broker, MGA requires. You will need to add third-party solutions to deliver all the requirements an insurer, broker, MGA will demand.  Whilst all vendors claim to have large API libraries and integration capabilities many will lack the resources and commitment to be able to connect the required mix of third-party apps and data sources.

 

Point Solution Software

Policy Admin, Claims Validation and Triage

  • HUGHUB
  • Iotatach
  • Open GI
  • Sprout.ai

Claims Damage and Cost Estimation (often combinations of these)

  • Be Valued
  • CCC
  • Claims Genius
  • ClickIns
  • LexisNexis
  • Mitchell
  • SLVRCD
  • Solera/Audatex
  • Symbility (CoreLogic)
  • Tractable
  • Value Checker
  • Verisk
  • Xtract360

Property Repair & Restoration

  • Next Gear
  • Westhill

Liability Assessment

  • BAIL

Counter Fraud

  • 360Retrieve
  • BAE NetReveal
  • Shift
  • World Programming InClaim

Key Data Sources for claims management

Insurance was founded by leveraging the best of data to price risk, provide protection and manage business. “Data-driven” is a familiar refrain but the question is which data and intelligence is best and how can I integrate it into my systems?

Some platforms are positioned as key data providers e.g., CoreLogic for home and property from selling to protection and Verisk for auto and property. Their offerings are most complete in their home territory, North America, and expanding in Europe especially the UK and DACHS regions.

Claims platforms generate data in real-time and are a prime source of intelligence for decision making, fuelling AI,  machine learning and rules engines including counter-fraud.

In the New Legacy platforms AI and ML is generally “on the side” in different database silos as the operational database was not designed to support real-time analytics. Being separate the learnings from the AI/ML cannot be connected to the core claims platform. The newer ClaimsTech vendors deem data, data science and analytics central to their platforms.

There is a frightening amount (circa 80% of unstructured data hidden in data silos, web forms, emails, SMS messages, voice files) that insurers must be able to access, normalise and analyse. Yet that data too often lies hidden and the value unrealised.

By the time the data is presented in dashboards, reporting or alerts it is often too late to take timely action and the costs of that failure are high.

New ClaimsTech platforms address that issue and whilst New Legacy claims platforms will you must beware of the potential complexity, time and cost involved in connecting all those silos and especially delivering real-time insights. 

In addition, insurers need to license external data to feed the AI applications penetrating all parts of insurance with a selection listed below. Again, you will want to ensure that claims platforms and core technology can surface and leverage these.

  • CoreLogic- manage property data for selling, financing, and protecting property
  • Hazard Hub- property risk data
  • ICEEYE- global flood earthquake and CAT damage data in near real-time
  • KETTLE- house-by-house risk assessment across USA
  • LexisNexis- vehicle, ADAS and home data
  • McKenzie Intelligence Services Ltd wide range of data sources and data management
  • Mitchell- Auto data
  • SAFEHUB- building specific US earthquake damage
  • Synectics identity, financial and fraud data
  • Terrafirma property risk data
  • Verisk- auto and property data
  • WeatherNet- granular and near real-time weather data
  • WhenFresh- wide range UK property data

Let me repeat some earlier advice from Geoffrey Moore.

Let us assume we have a clear design for our desired future state. It won’t take you long to realize there is little chance that a single intervention can get you from here to there. So, the next major deliverable must be a roadmap organized around a maturity model, or what we like to call, a stairway to heaven. Each step up the stairway should be designed to deliver value upon completion, thereby allowing the organization to pace its change management, funding things as it goes, building its confidence, and reassuring its various stakeholders.

With such a roadmap in place, now you have a current-state/future-state accountability mechanism that can govern each stage of the transformation—the software and systems, the systems integrators, the process owners insider your enterprise, and the people responsible for executing the processes. As we have noted elsewhere, digital transformation is not a restaurant. You cannot simply pay for it and have it delivered to your table. It is a gymnasium. You still have to pay for it, but to get any value out, you have to actually do the transformational work yourself.

Geoffrey Moore

 Organisation and structure to innovate and  choose technology

Running a business is a challenge and everyday operational issues can take up 70%-80% of time and attention span.

In February 2022 Russia invades Ukraine, cyber activity increases, and Australia suffers CAT flooding. The West’s financial sanctions against Russia impact capital, financial and insurance markets. There are always events soaking up bandwidth and the ability to make and execute decisions.

Nevertheless, innovation, in general, must be a core strategy, but the approach to it must also change, and it must be viewed with a bit of a different lens. When times are challenging for insurers, innovation is usually the first thing to go due to bigger priorities or limited budgets and resources. Carriers may not be able to afford to focus as much as they’d like on innovation during those times.

To stay relevant, however, they must find ways to keep innovative pursuits going and part of their portfolio. Easier said than done, however!

One way is to establish a transformation unit staffed with a mix of staff from the insurer and digital transformation expertise bought in from outside to avoid tunnel vision. Reporting to the CEO directly the Chief Innovation Officer must be able to anticipate disruption, new products hitting the market, new entrants to the market like NeoBanks, and the viable emerging technologies that business and commerce will adopt and deploy.

This team must also work closely with business units, central and business IT, marketing and sales, finance and counter fraud, procurement and legal.  It must persuade, make sound business cases and ensure the insurer is not outflanked by competitors or disrupters.

This will help ensure a viable, world-class stairway to heaven plan that is bought in to by the whole company and driven by the digital transformation team. With that in place the insurer is better positioned and resourced to choose the right mix of technology partners


Gartner published a very useful illustration of the planning and evaluation to be undertaken when choosing technology partners. Combined with the advice above it will help find the right partners to ascend the "stairway to heaven".



Death to the RFP

RFPs are designed for enterprises that know exactly what they want to replace, have spent months detailing line by line the functionality they want and require the hundreds of detailed due diligence answers around security and performance.

But with technology like Coretech and Claimstech, built for the future of insurance, not the past, why in the world does a buyer think that a 2,000-line RFI with very detailed functionality on the way that they USED to run business is going to be fitting for the future? Furthermore, most of those people building those question sets at the carrier have known only one or two ways of doing things. They then also lock down conversations and communications as they "negotiate".


If a carrier is buying new entrant Coretech or ClaimsTech, that is because they are ready to innovate and transform their business. It should be viewed as a partnership with tons of open dialog and transparent. Everything opposite of a procurement process. They should do POCs and production level deployments of real processes, not RFPs. They should be curious to explore and learn about new technologies, new ways of doing things. Become enlightened on things that they have never considered or maybe even didn't realize existed. Be ready to test, iterate, experiment, optimise with real customers.


When the pandemic hit, and lockdowns were implemented some carriers suffered a meltdown in traditional Claimstech. They had to deploy eNOL/FNOL in just a few weeks and then build out the whole claims journey. They found this open, collaborative, transparent start with a clean sheet and work from the customer backwards approach works. Instead of asking scores of unnecessary questions they could implement open dialog and conditional branching evidence gathering saving time, money and actually increasing accuracy instead of a closed-ended series of very specific  and long-winded questions.


I don't know of any successful future looking partnership that started with an RFP and then an adversarial "negotiation". I have seen tons of those in commodity situations which is the exact opposite of the innovation and transformation process we need today.


If a technology partner cannot deliver a working process in weeks (not the whole system but specific workflows and process to prove capability and create trust) then what right has it to pretend to be innovative?


Once it has proved that the potential partner should be trusted to expand the project in stages each one can add progress to the eventual full deployment. Both parties put skin in the game, and both can early on decide if they can commit to the full deployment of the future required- the "stairway to heaven" we read about at the beginning.

 

Avoiding vendor hyperbole and red herrings.

Reading through the websites, social media, and slide presentations is often much of a muchness. Every technology solution can seem the same and some awful red herrings stand out e.g.

  • End-to-end
  • No-code/zero-code
  • Zero legacy technology
  • No upfront cost.

End-to-end

There is always a gap somewhere in the software or platform! Whether the gorilla in the market or the technology roadmap from a new entrant to the market. Here are some examples.

  • A claims platform without self-service eNOL (first notification of loss (FNOL) from a customer’s phone/tablet or telematics/eCall in a vehicle. 
  • No single sign-on
  • Quote and Buy application for insurer and its brokers/agents that cannot cope with mid-term adjustments capability.
  • A new AI powered, data-driven damage estimation solution leveraging photos, video streaming and remote inspections to deliver straight-through processing (STP) of claims but cannot connect to a Bodyshop management system so you need work-arounds
  • The gorillas in the market have marketplaces which whilst admirable show that there are gaps otherwise you wouldn’t need them.

Answer- the technology and teams must be able to demonstrate the willingness, capability, and resources to integrate other software and even platforms.

No-code/low-code

It is wise to remember that this is not a brand-new invention but a decades old capability. The benefit of allowing non-developer staff to customise and configure new functionality in their native language and/or drag and drop functionality into new digital workflow and processes is valuable. Insurers can iterate without relying on the vendor or central IT.

But if there is not a clear vision and strategy to achieve the future the danger is that such iteration is merely improvements to existing workflows and processes rather than real innovation to an end purpose. Business analysts, likely roles to leverage no-code/low-code, may not be outward facing, customer focussed people but rather internally “production” focussed. No-code cannot replace a realistic appreciation of what CoreTech and ClaimsTech must deliver in the future. It is not a panacea. 

For that reason no-code/low-code may be more useful for prototyping by a digital transformation skunk works to test and iterate before having a technology partner finish the production quality configuration.

CAVEAT-  a vendor’s no-code/low-code often does not extend outside boundaries of the software e.g. “I will want to add a complete collections and subrogation module for these perils”. “Ah – that will require some custom development costing $X and taking Y weeks.

And remember that unless the vision, strategy and resourcing is not detailed- the stairway to heaven- no-code/low-code benefits will not help. Lipstick on a pig is still a pig.

Answer: insist on low-code and no-code as a must-have and check out when dev work will be required e.g., subrogation and recoveries or creating a UBI product.  

Zero Legacy Technology

“This is a cloud-native, micro-services architecture, agile next-gen platform”. It might well be but such is the speed with which needs advance and new use cases spring up that there is inevitably some short-term bodges required to make the application work. Take integrations. Nearly every major integration for a specific insurer has hard-coded scripting to bridge the many technology stacks inherited over M&A history. It requires the capabilities and resources to achieve that. No amount of API libraries will overcome that.

Plus, obsolescence creeps in as soon as software is deployed, and you are dependent on very strict and precise development practices and standards to control that and keep software current without expanding the proportion of “new-legacy” software.

Answer- Detailed discussion with the heads of software development and CTO to give you confidence that legacy debt will not grow unduly over the years.

No Upfront Cost

There may not be a Capex element to the licensing nor a single implementation fee. But you will need to run a trial and commit/train a team to run the product. You will need to build clear representations of your current state and your desired future state. Capturing your current state involves an act of description. Capturing your desired future state requires an act of design. If you do not have a clear design for your future state, you have no north star by which to navigate your digital transformation, and it cannot possibly succeed. You need to share that with potential partners to allow them to deploy the trial. That requires upfront investment and commitment.

Answer: Really should be skin in the game from both customer and vendor to make sure both parties are committed to success and measurable outcomes. Free trials are risky for both parties as they imply too little commitment. Insurtechs need some contribution to build a production level of trial whilst at the same time being prepared to take the risk the POC might fail. That helps make sure they test they have the resources and capabilities to deliver measurable success .

Further Reading

"Creating value, finding focus: Global Insurance Report 2022" by McKinsey

"Five steps to improve innovation in the insurance industry" by McKinsey

The best insurance claims process for the digital world  by Mike Daly

How incumbent carriers can survive, thrive or will be disrupted. by Mike Daly


Sources of information about insuretchs

Recently published Insurtech 100 by Sonr in partnership with EY

Oxbow Parthners annual Insurtech Impact 25

Instech London a great reference source for global insurtachs