5 key learnings from InsureTech Connect
Momentum around digital innovation is growing in the insurance industry, and it was quite evident at this year’s InsureTech Connect. The 2018 ITC in Las Vegas brought together more of everybody: startups, incumbent insurers, regulators, investors and technology partners. Insurity was proud to be a title sponsor of InsureTech Connect, and my colleagues and I learned a lot about where the insurance industry is heading.
Here are five industrywide trends that we observed at the ITC:
Innovation is no longer disruptive; it’s transformative. A commonly used adjective to describe the insurtech movement is “disruptive,” as in, “Insurtech startups are disruptors, introducing disruptive innovation that will disrupt the industry.” Disruption implies something that makes you stop whatever you’re doing, but perhaps eventually you go back to doing it. Therefore, we believe the right word for the digital innovation that’s occurring in the insurance industry is “transformation.”
If they want to remain competitive and grow, incumbent organizations need to begin to see the urgent need to transform their operations and they must embrace transformation.
Mindset change is the first step toward transformation. If the insurance industry is going to transform through technology, the first step is to change the mindset. Incumbents need to realize that replacing legacy systems with modern technology platforms is as equally important are becoming more customer-centric, accelerating speed to market and increasing the ease of doing business. Greater speed, efficiency and scalability on the inside are not going to yield the desired results if they don’t carry through to create better experiences on the outside.
There’s another critical component to changing the mindset: internal collaboration. As discussed in Insurity’s ITC panel on “Cultures that Succeed,” a conscious effort to implement engaging techniques and organization-wide innovative solutions can result in a sustainable cultural change and evolution. Panelist Marie Andel with CSAA Insurance Group, suggested simple, yet effective, collaborative exercises such as “Thinking Thursdays” and “Muck Up Nights” that help everyone in the organization to think about and contribute to innovation.
Being faster and nimbler are key goals. Most observers notice two things about insurtech startups: they’re quick at their basic insurance operations and they adapt easily to marketplace changes. Contrast that with traditional incumbent insurance organizations, which tend to be sluggish. For example, why does it take some companies days to quote and bind a policy, and even longer to issue one? Why do some struggle to innovate and enhance their product offerings, or make sense of data that show customer needs are changing? Conversations at ITC suggested that incumbents are finally realizing that they will get left behind if they cannot become faster and nimbler. Modern technology systems can enable both.
Better-performing core operations yield competitive advantage. Insurance is a difficult business, in which risk pricing is essentially a process of making educated guesses. The property and casualty industry has long struggled with this, as data from the Insurance Information Institute shows. In 2017, the P&C industry’s combined ratio of 103.7% was its worst since 2002. Net premiums written grew at the highest rate in a decade, yet net income fell for the third straight year. Clearly, P&C insurers have room to improve the performance of their core operations. Insurity believes that better performance in core business processes — such as underwriting, billing, claims and data analysis — is a sure way to gain an advantage in a competitive marketplace.
Incumbent insurers are starting to get it. We are beginning to see more incumbents adopt a platform approach to their business. Celent analyst Donald Light correctly called 2018 “the year of the platform” because many carriers are striving to unify disparate systems that can seamlessly share and process data across the enterprise. Similarly, more insurers are embracing cloud deployments, with 63% of insurers slated to expand the migration of their applications to the cloud in 2019, according to Novarica’s latest “Insurer IT Budgets and Projects” report. These trends affirm the increased focus more insurers are placing on speed to value, driven by a lighter, more iterative IT infrastructure that keeps technology continuously flexible as market needs change.
The insurance industry is facing unprecedented cultural and technological transformation, and there is always a lot to talk about after an event like InsureTech Connect. Whether you are an insurer or technology provider, the convergence between industry knowledge and innovative thinking is critical to seize this opportunity with competitive differentiation and transformational innovation.