In the first part of this blog series we thought about how the future of claims still hinges on the people side of the business. While technology is playing an increasingly more prominent role, the engagement of your human resources around that technology will never be more critical in delivering the client experience. The key elements around where that engagement comes from, outside competitive reward structures, were:
- Purpose and values
- Social responsibility
- Growth and development
- The ‘user experience’ – tech enabled – making it easier for your team.
Our philosophy is driven by a recognition that no amount of tech will change us from being a people business. I honestly believe the best businesses protect and promote their existing people even when new tech transforms some of the functions.
Despite some people thinking we may revert, the world has clearly changed during Covid – the use of digital tools increased exponentially in a watershed moment. Customers now expect things faster, with enhanced digital channels of communication. Employees also expect their experience to be enhanced by technology – lower level tasks and red tape should be eliminated or reduced by new technology.
We are also seeing the continued emergence and evolution of the insurtech sector. Last year there was $7bn USD in funding of these companies that are bringing exciting new technology to the insurance sector. They may have not very insurancey names like Lemonade, Hippo, Buckle and Pie, but they have learned to not so much be in love with the technology as the problems they are trying to solve. So they are able to compete effectively with traditional insurers and in some cases work alongside them. It’s a marked change from the early days when the tech was interesting but lacked commercial application. Today it is less about disruption of the industry and more about opportunities and/ or finding solutions to friction or pain points in the customer experience. So less a threat to the industry, more an opportunity for those prepared to partner.
As this new and more functional technology emerges where does that leave those who are encumbered with existing and outdated legacy systems? Well there are plenty of examples where those who persist in trying to plug new and emerging technologies into antiquated platforms will be at a significant disadvantage. The new players or those who have invested in new platforms will have much greater flexibility and will be able to move at speed to take advantage of new digital tech or insurtech offerings, which are moving at pace.
So those who have invested or invest now in modern, low code platforms will be the winners. It is estimated 50- 70% of insurers are on antiquated legacy platforms. One would question their ability to keep adding overlay into existing systems, so how fast can they move to a modern platform? That’s not something that happens overnight – our understanding of transformative software development is between documenting requirements, building and testing and then data migration, if you can do that in less than 18 months you are doing well. So there is a significant time and cost barrier to development and it is why it is more common to see larger companies graduating to a buy rather than build strategy. There are many good choices available, but ‘off the shelf’ often requires significant modification and can create compromise. Add to that, buying a product isn’t an instant solution and still requires an investment of time – you can still expect 6- 12 months’ work in integration and migration.
So new players can have a significant advantage in not being encumbered by legacy systems and data migration issues. Hence some of the traditional barriers to entry in insurance around infrastructure and expertise are being removed to allow nimble new players to find niches they can exploit.
The future would seem to belong to those who have a modern claim platform that can be adapted, updated and connected to other apps and systems quickly and easily. And if you don’t have legacy issues you can see how much more easily it is to get ahead of the pack.
Current trends and what’s ahead
It’s fair to say that some of the most successful insurtech plays have been in distribution in the domestic/retail sector, pre
dominantly in home or tenant property and motor insurance. We have also seen some success in the small business sector, primarily in more efficient distribution models.
The most famous of the new breed of insurance businesses that is really a tech business is Lemonade, a US start up that has been listed at an eye watering multiple of revenue, but which has shown good growth in a short period.
Forbes describes them thus: Lemonade, a for-profit Benefit Corporation, is an insurance company powered by a unique combination of artificial intelligence and behavioral (sic) economics to disrupt the centuries-old insurance industry. It offers homeowners and renters insurance in the U.S., and gives underwriting profits to non-profits selected by its community during its annual Giveback.
So Lemonade really is a company of the future combining a strong social purpose with an efficient and transparent business model. They are currently expanding into motor and pet and have purchased fellow tech disruptor Metromile to propel their growth. And guess what? The founders of Lemonade are not insurance people – they are technology experts.
Likewise when I visited small business insurance specialist Simply Business in London – an online insurer that has grown to the point they aren’t far from one million customers – they stressed they were a tech company doing insurance.
Investment in Insurtechs continues to surge in 2021 as Covid ensures a new focus on the digital insurance experience. What we
are seeing is two things – first, there seems greater willingness to invest not only in distribution but in areas that have previously been largely ignored – namely the back end, being claims, payments, policy admin, analytics, just to name a few. So expect to see greater impact of insurtech in the claims space in the coming years. A second trend we are seeing is insurtech promoting a trend to a wider insurance ecosystem, where a series of specialist tech-enabled partners work together to provide a seamless and coordinated customer experience. What was previously the aspiration of larger companies – to do all parts of the customer journey – is now rapidly moving towards the connected ecosystem where tech brings together specialist providers and services. This is being promoted by many of the advanced tech services – from bots to AI and analytics – available when companies move to the Cloud.
So with all this change and the promise of insurtech moving more into claims in the future, what will claims management look like in 3 years’ time, and what do you need to keep up? We will come back with what we see as the trends and be more specific about the digital features you need to compete, in our Part 3 blog, coming in 2022.
It’s been a tough couple of years so we wish all our supporters a very happy Christmas season and we look forward to a new dawn in 2022.