David M Brear CEO and Co-Founder of 11:FS published his regular newsletter today in which he describes being 20 minutes into a talk to a UK Bank's Board of Directors explaining his views on the industry and where he thinks it’s going.
A Non Exec Director stopped him addressing his colleagues:
“Our problem is quite simple. We don’t really understand anything that you’re talking about. Don’t get me wrong we hear the words and understand that it’s important and we get that we need to make change happen, real change, not the surface level things because we are a caterpillar that keeps going into a chrysalis and coming out again a caterpillar. We are not changing anything significant but we are making ourselves feel better through millions of spending and busying ourselves. But we are still a caterpillar after all is said and done.”
I got a sense of this at Insurtech Insights Europe last week where you often heard the words, felt the understanding and yet still came away with a sense of caterpillar into a chrysalis and back into a caterpillar. At best incremental change rather than transformational innovation. There were notable exceptions described later.
Brear goes on to say:
Firstly, most people are just trying to make themselves feel better rather than achieving the outcome that they really need to in order to make the outcomes different.
Sadly, unlike the butterflies, financial services organisations don’t transform just by waiting. It takes huge amounts of bravery, honesty, hard work and talent with a handful of luck thrown in to make that level of success happen.
It also requires holding yourself accountable for what is working and isn’t, and altering to create the impact you want.
Secondly, and a very sad thing to reflect on, despite investment in digital for well over a decade the ROI that could have been seen from that scale of investment is just not there. People’s transformations are being hitched to ROI metrics that no one is measuring well enough, in order to track the resulting change and whether or not it’s sufficient enough against the path needed.
These failures are just layering more and more operational costs into businesses rather than stripping and streamlining out superfluous costs. Not a great thing for the business as a whole.
As caterpillars, the banks are brimming with potential but I’m reminded of this amazing quote from American poet, Maya Angelou that I think encapsulates the point that the NED was making:
“We delight in the beauty of the butterfly, but rarely admit the changes it has gone through to achieve that beauty.”
At Insurtech Insights Europe we heard UK insurer esure's Chief Strategy and Transformation Officer Roy Jubray explain the massive amount of planning and hard work requited to become the “Insurer of the Future”. It's not the simple stairway to heaven seen on many a vendor's website.
Transformation involves much more than just technology and replacing the current legacy core of the business. esure plans to be the Netflix of insurance and create products and services that deliver highly personalised products, services, and pricing to customers with a digital and customer experience that beats customers’ demanding expectations.
Many insurers are, like esure, chasing the insurance ecosystem vision but technology has thus far let them down as the majority of solutions have been built around the design of platforms designed and built in the days when you could take years to build hard-coded and stable core platforms and just upgrade them every four to five years. They were insurance company focussed rather than customer focussed. They were suited to incremental improvement rather than rapid transformation.
But today competitors like wefox, Bought by Many, Simply Health are innovating at speed unhindered by these complex and slow to change core systems and key platforms. wefox is now the #1 full-stack insurtech in he world with a loss ratio to be proud of and growth in premiums and profitability leaving loss-making Lemonade, Hippo, Root etc in the shade.
Another area if competition is from Auto OEMs embedding insurance in their offers with Tesla in the lead with ts own insurance company. NeoBanks like Revolut adding embedded insurance for its large and growing customer base.
Niche insurers like Bought by Many and Simply Health are building out ecosystems offering more than just insurance mitigation and prevention of risk but also parallel services and products. They are able to do so because they combine ambition, vision, strategy, talent and resources combined with technology platforms and partners that enable fast and dramatic transformation.
Look at esure again that has turned its back on the traditional incumbent core platform vendors.
Forming the backbone of esure’s technology platform are
- cloud-based Amazon Web Services (AWS)
- omnichannel contact centre Amazon Connect
- US digital insurance Coretech platform EIS.
The new generation Coretech platforms have baked in all the primary principles of modern engineered software powered ecosystems like Amazon Connect. And when the ambition of insurance customers meets the power of Coretech, transformation happens. Better for customers, better for employees and better for their business. Enabling them to move at the speed of an insurtech."
EIS and Genasys are examples of this new generation of scalable CoreTech platforms and as the competition to incumbent carriers and brokers heats up even more the demand for such technology will increase.
Jubray of esure says it is going to be a year of tremendous hard and challenging work to achieve by the enterprise-wide esure teams and the technology partners. A successful transformation will point the way for other technology vendors and insurers noting these competitors e.g. esure, ageas and Liberty Mutual eschewing the incumbent CoreTech and ClaimsTech gorillas in the market.
I'll leave the last words to David Brear and suggest you follow the link below the quote at the end of this article and subscribe to his regular fintech newsletter.
"That course ( caterpillar to butterfly) is hard work, requires many to rethink what they hold true all in the name of progress and in order to be able to take flight.
Hope you enjoyed that. Now fly lovely butterflies. 🦋🦋🦋 "
Further Reading
Creating value, finding focus and choosing the right insurtech partners
This week I’m double-clicking on something I hear from the industry a lot when we are speaking to banks and insurer boards about what they want to be through their transformations: Everyone wants to be a beautiful butterfly.
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