Is This Really Where InsurTech is Going?
In his recent LinkedIn Pulse article, “It’s Time for InsureTech to Fund a Radically New Back Office,” Paul Tyler of Fidelity & Guaranty Life threw down a challenge to startups, to develop “a new cloud-based insurance administration platform.”
It’s an interesting point, and one which might have been more pressing in terms of importance a couple of years ago. It’s been a bit of a slow process, but in fact, today there are many insurance administration platforms which provide policy, billing and claims or “core” in the cloud, and at least a large handful more which offer a SaaS model for policy, billing and claims solutions. That said, the number of insurers actually using cloud for core is still relatively small, and perhaps this speaks to the feasibility of Paul Tyler’s challenge. If the established, incumbent insurance technology providers in the space haven’t been able to gain widespread traction for core in the cloud, how can startups hope to be successful here? Better yet, it seems prudent to ask, “Is this really where insurtech is going?”
Personal auto was an easy first mark for innovation in the insurance industry, but with transformation creeping past those original boundaries into other lines of business, even the baseline insurance business model is now threatened. With on-demand access to data via social networks and third-party providers becoming more prolific, insurers have less need to store massive amounts of data in-house or on-site. Consumer behavior patterns and preferences have changed to reflect technology-fueled lifestyles and the policies sold or coverages provided have to change with them. Digital wallets eliminate the need for insurers to store credit card information and should have a rather immediate impact on the way policies are billed and payments collected. E-signature capabilities mean executing an insurance contract on a paper form is an almost obsolete process, and the ability for insurers to gather, accept and integrate real-time photographs and video from claimants and drones is putting claim adjusters under pressure as self-service enters this arena as well.
The “back office” as referred to in Tyler’s article is under a full scale, frontal assault, and I don’t believe the idea that a cloud-based insurance administration platform can be a simple panacea is going to be popular. Unfortunately, many insurers still have business models and infrastructure which not only do not support digital, but actually prevent it. Simply moving to a cloud-based insurance administration platform does not solve this fundamental problem.
Is it perhaps possible instead that insurers will make a quantum leap from the Dark Ages to an entirely cloud-based business model where not just insurance administration is handled remotely, but where the entire business is decentralized and functions are decoupled from desks in headquarter buildings? Or, can rip and replace of a legacy system in favor of a cloud-based insurance administration platform be avoided all together by using a business process management (BPM) solution as a digital overlay (on premise or in the cloud) to integrate across core systems and span to new business models and channels?