Insurtech is now moving rapidly into commercial lines, where attention and intent are focused on impactful solutions.
Jawaharlal Nehru, the first prime minister of India, once famously said: "The policy of being too cautious is the greatest risk of all."
I am reminded of these words when I think about insurance companies, which tend to be meticulous, cautious, fantastic beasts that act and react in predictable ways. It follows that the technology that has always driven the insurance business at a foundational level generally plods along at a similarly thoughtful pace.
The intent behind Nehru's statement, while not originally spoken about insurance specifically, has been well taken by the industry, as evidenced by the relatively recent embrace of the InsurTech movement. With a solid start in the personal lines segment of the property & casualty (P&C) insurance space, InsurTech is moving rapidly now into commercial lines where the attention and intent is focused on solutions that will deliver a strategic and immediate return on investment (ROI) while still enabling risk mitigation at an enterprise level.
Integration is the name of the InsurTech game for 2018. At the end of the day, the most successful insurers will be those that know how to "play" with flexible yet sophisticated application programming interfaces (APIs).
|Maintaining a personal touch
With margins shrinking and a decline in net new customers becoming the norm, personal lines P&C insurers turned to technology for operational efficiencies and a competitive edge. Willing to break the traditional insurance business model wide open, these renegades threw caution to the wind and pushed (r)evolutionary changes — like the development of usage-based insurance (UBI) products — into the mainstream. This challenged commercial lines companies with bigger dollar figures at stake to do the same.
InsurTech entrepreneurs, needless to say, couldn't be happier about this "push" from personal lines. It got the proverbial ball rolling on the commercial side, where there is easier access to higher premiums and higher volume.
Theoretically, at least, the move to commercial lines gives InsurTech an opportunity to prove an ability to positively impact the bottom line at scale. This is most obvious today as commercial lines use cases expose results from initial attempts to transform traditional distribution channel networks, and incorporate artificial intelligence (AI) and robotic process automation (RPA) into the rating, underwriting and quoting process to gain deeper insights through investments in data science and analytics.
|Pie in the sky
As with any movement, propaganda is plentiful. Technologies that are inherently mismatched with insurers' ability to implement are giving all of InsurTech a bad name.
This fact has insurers taking a turn in 2018 toward technologies capable of delivering more concrete results. Insurers are moving away from bright, shiny, InsurTech objects, and toward service partners, emerging technologies, and solution providers with a return on investment more immediate than promised for five years down the road.
This is most obvious as insurers find solutions to existing problems and improvements for strategically important, but traditionally troubled, processes such as the digital enablement of collaboration between agents and underwriters, the sacrifice of manual processes to automation, and improvement of customer experience through advanced analytics.
|Strategic and ambitious
It is also important to keep a keen eye on APIs as insurers lean into tactical, practical InsurTech solutions that can deliver results in important functional areas such as underwriting and claims.
Integrations will make all the difference in the future. So, while immediate solutions must be strategic, there also must be room, and a planned path, for growth.
Despite a significant push by P&C insurers to complete enterprise legacy system replacement projects in the last 5 to 10 years, many are still collared by outdated, and now unsupported, core administration systems. Integrations with third-party data providers, InsurTech startups or partners, and emerging technologies can enhance the functionality and extend the life of aging legacy systems, allowing insurers to focus more on customer experience, new products, and true digital enablement of distribution channels.
This is most obvious in the sheer number of traditional insurance technology vendors signing partnership agreements with InsurTech startups, and in the pilot programs and proof-of-concept (PoC) projects through which InsurTech is creating more opportunities for insurers to engage segments of a changing customer base and to secure new business faster.
|The road ahead
There is enormous potential in the P&C insurance industry still waiting to be tapped, and InsurTech provides a path to prosperity for everyone involved. In 2018, the state of technology in the insurance industry is strong, and InsurTech is making the entire value chain stronger.
Ilya Bodner is the founder and CEO of Bold Penguin. He can be reached for further information or comment via email at [email protected].
The opinions expressed here are the writer's own.
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