The revolution that is coming to the insurance world is in part based on technology. But there is an increasing focus on the development of middleware solutions to reduce dependence upon legacy systems and improve access to data. These are expected to be aimed at driving growth, internal efficiencies and the internal view of how a company works. In addition - an important element of the change is the focus on improving the customer experience.
Another important component of this revolution is for insurers to shift their focus away from manufacturing, marketing and selling of products to keeping the customer satisfied. This requires the industry to abandon the legacy mind-set of hundreds of years of culture.
Both are going to be difficult to achieve and doing the two at the same time will likely cause a degree of angst and identity crisis.
Outsourcing to third parties is a sensible way to overcome legacy constraints and to bypass internal gaps in capability. Partnering itself also creates opportunities - opens the corporate mind - to cultural change and new ways of thinking.
Adopting new ways of working might include deployment of an agile start-up methodology that is continuous without monolithic milestones and accessing relevant expertise about customers, business, products, analytics and IT.
Implementing a new approach to product development with a high frequency of testing prevents an organization from becoming overly attached to a project that isn't working and for which success seems unlikely or excessively costly.
Implementing these systems requires work. Insurtechs' systems are not fully aligned to the value chain - they weren't developed to be dedicated to one insurer - and require aggregation and integration.
This cannot be achieved without reference to legacy and core systems; they remain essential - for now. Though some businesses may decide to draw a line under their old ways of business and sell off back books, others may persevere until such time as any legacy systems must be overhauled or allowed to die.
For runoff business, legacy will always be part of the value chain and insurers must overcome the inflexibility of legacy when acting on a platform or in an ecosystem.
But even new systems will, in time, become legacy and the motivation to move away from legacy already exists. Old systems have less resistance to cyberattack once a hacker is inside. Data breaches are fast becoming the largest reputational and regulatory headache for corporates.
Underlying infrastructure providers enables insurers to move off legacy technology and launch new products to market quickly, and there has already been something of a shift towards cloud-based services for insurers.
Process improvements are expected to focus on underwriting, sales and claims, and customer engagement in the spaces between the points of transaction. This is where the data will likely be acquired that allows the automation of bespoke and on-demand coverage, improving access and reducing complexity, and thereby reducing the cost of writing such business.
These new systems have the ability to segment customers largely on their behavior - how they interact with the insurer and influence the risk within their policy - rather than traditional categories of age, sex, location, ethnicity, etc.There is a need to integrate multiple solutions and partners. APIs and microservices are essential components in this process, as existing technology stacks simply don't cut it.
Blockchain has become something of a buzzword, but it isn't a future innovation, as it is already deployed in some flight delay and lost baggage claims systems, and offers a bright future for highly complex risks such as shipping.
One of the most important elements of customer engagement is likely to be claims settlement. Removing the manual claims process can satisfy consumers and create repeat business. This is not about the size of claims, but the speed of the settlement, creating an experience that customers may prefer and appreciate.
Legacy systems have a role to play as a system of record, but incumbents will increasingly find that the functionality they require already exists on the platforms that are launching and that their legacy systems will become redundant at an accelerated pace.
Element - insurtech company helping insurance companies build digital services
FinLeap - fintech company building technology companies for the banking, insurance and asset management industries
Instanda - cloud-based platform for building and releasing insurance products
Kasko - API-powered agile insurance product and distribution platform operating between digital customer touchpoints and legacy IT systems.
Lemonade - property and casualty insurer that returns a portion of premium in a no-claim period
RightIndem - digital self-service claims platforms
Slice - insurance cloud services platform that offers on-demand home share, cyber and rideshare insurance.
Socotra - innovative insurance platform
TravelerBuddy - fully integrated travel app
Trōv - on-demand insurance platform for electronic products
360Globalnet - online risk and claims settlement platform