Drones, bots, blockchain, AI and machine learning are what everybody is suddenly talking about. Start-ups with cool names like Trov, Slice, Goji and WeSavvy are the talk of the insurance town, yet just a year or two ago core transformation toward becoming a digital insurer was all the rage, and the names of core vendors filled the headlines. Now, it seems like all the cool stuff is happening peripherally to the core and some great examples peppered the lively discussion of Insurtech and next-gen insurance at the recent SMA Summit.
My favorite example, an idea that will strike a tender note for all animal owners who hear it, is new pet insurer FIGO’s very LoSoMo and customer-friendly focus of enabling customers to create pet profiles and contact other local customers with similar breeds (with permission) to arrange play dates.
Another innovative thinker is Vitality. Via a partnership with Walmart, John Hancock Vitality policyholders can receive a discount of up to 25% on designated “healthy” food products and up to a 15% premium discount. The Vitality app can also scan a barcode of any product to deliver a “health score” and even show alternative “healthier” products. Hancock reports that Vitality touchpoints with its customers an average of 21 times per month! Now, that is cool and cost-saving and customer-friendly and offers a brand bounce for a partner not necessarily associated with wellness.
Some Insurers Are Going to the Cool School
The bell has rung and class is in session. Will the new Insurtech kids move to the head of the class? In this era of disruption eruption, traditional insurers are facing a whole new breed of competitors on the playing field. Innovative start-ups who aren’t burdened with legacy systems and have put a new, faster and better digital spin on new business, billing, claims or customer engagement processes. Their digital orientation also makes it easy for them to play with Insurtechs that are offering advanced UBI, data analytics, sensors and other risk mitigation and value add services.
Economical, for example, an old line Canadian brand has launched a digital company called Sonnet, claiming “We set out to create a modern, easy insurance buying process. We re-imagined the entire insurance experience—from removing the complicated jargon to eliminating unnecessary service fees—all supported by first-rate customer service and a streamlined claims process.”
The key advantage that these “digital-first” companies have over traditional, analog insurance companies is fewer people and less paper. The new digital companies with streamlined new business processes may only have one or two underwriters. For some of these that are spin-offs of traditional insurers, the guiding thought is that they could offer the same products at the same loss ratio but several points cheaper—that’s a straight A result from the cool school. Part of the threat here—and irony—is that traditionals are competing with well-capitalized digital companies that have low operational costs, all courtesy of other traditionals.
Is Core Still Cool?
I spoke on the “Connecting Core Systems to the Ecosystems of the Future” panel at the SMA Summit. When asked by SMA’s Karen Furtado about the impact on core vendors, I replied that I thought all the work of the past as core vendors has been an internal focus to improve underwriting, claims, and billing processes. Helping a claims adjuster find or attach a document, for example. Now the market at large is assuming—correctly or incorrectly—that this is all in place. The focus is now on enabling external customer capabilities by streamlining and exposing policy, billing, claims and customer functions to bring a new differentiating level and quality of customer engagement. So, now the “cool in the core” comes from the ability to integrate with these new external tools and applications and enable the delivery of new digital capabilities and connectivity within our growing ecosystem. To hang with the cool kids, you need to speak their language.
Newer, faster, and better digital solutions will abound, but the stability of the digital insurance enterprise and the quality of digital engagement will owe much to the underlying core platform. A few of the important questions insurers on the next gen path can ask core vendors are:
- How open is the core system to connecting externally? In particular, how extensive are the set of APIs and API toolset available? How open source and non-proprietary is it?
- How does it handle data? Is it structured to both scale and handle an ever growing increase in data and transactions in real-time?
- How cloud-capable is it? Is it designed to take advantage of the speed, cost and integration advantages of cloud delivery? Can it take advantage of native cloud?
Notwithstanding my many years of following insurance technology and core systems, in particular, it was still an eye-opener to fully appreciate at SMA Summit how dramatic the shift in emphasis is. It made me realize—with some satisfaction—that EIS has indeed been on the right track building fully open core systems.
