This latest Opinion piece is by Richard Stewart, (pictured) CEO and co-founder of Untangl. Their insurtech, Untangler, promises to put the joy back into insurance roles dogged by formatting inconsistent spreadsheets. Untangler recognises customer or broker data in any format, transforms it into usable data, and returns it in seconds, so no human time is wasted manually converting inbound data sets.
Like a firework under a chair, the pandemic has sped up the pace of digital change and forced insurers to scramble to achieve operational efficiency, often with depleted teams.
More than eight in 10 (82%) insurers fast-tracked at least some digital transformation programmes in 2020, found Dell Technologies’ latest digital transformation index which, historically, has shown persistent barriers, such as data privacy and security.
This time though, it shows the impact of Covid-19 in the form of a dramatic and significant acceleration towards transformation, with the top three areas of change, globally, in strengthened cybersecurity, empowered remote work capabilities and reinvented digital experiences for customers and employees.
Insurance was one of the least mature industries, digitally speaking, in 2016 and 2018, but this year it accelerated out of the bottom three. However, the report also shows 35% of insurers are worried they won’t survive (vs. 32% across all industries globally) and that the insurance industry is lagging behind on future investment plans in data management tools (32% vs. 39% globally) and artificial intelligence algorithms (23% vs. 32% globally). McKinsey’s latest report (Insurance productivity 2030: Reimagining the insurer for the future) says insurance carriers will need to look more like modern tech companies and warns that “only a transformative approach will allow an insurer to survive and thrive in a post-coronavirus world”.
This creates real challenges for commercial insurers who not only have to change internally but are heavily dependent on third parties that often move at a different pace. And fearmongering using existential threats isn’t a great way to sell to an industry where digital transformation projects have high failure rates and where large scale transformation projects can take years to complete.
But there are alternatives to a “big bang” approach. Insurtechs offer a gentler, less risky route towards transformation. Between 2012 and 2016, 10 to 15 insurtech startups launched every month worldwide, reports Statista. And, some 2,500 insurance start-ups have entered the EMEA market in the past two years, says technology research and advisory firm Information ISG. Cloud-based tech companies can now boost operational efficiency without draining company time, or causing internal upheaval or upset. This includes tech that increases the capacity of existing teams, as the pandemic forces insurance companies to consider how they can remain competitive.
It seems nonsensical that, in 2020, insurers are still accepting scenarios like this:
“Even in large commercial lines today, anywhere from 30 to 40 percent of an underwriter’s time is spent on administrative tasks, such as rekeying data or manually executing analyses.” (McKinsey, 2020)
The technology to rectify that particular age-old industry problem – and numerous others – already exists. Companies selling ‘cohesive’ digital overhauls will always aim to convince that a piecemeal approach to digital transformation is inferior, even dangerous. But the high project failure rates in insurance – and the historically high proportion of laggards – would suggest a fresh approach to retrofitting big, shiny, new tech is required.
Competitive advantages of using insurtech
Using cloud-based insurtech has several competitive advantages. First, speed of implementation: many are designed to work ‘out of the box’ albeit with some level of customisation (e.g. switching off and hiding features that won’t be used, and making sure the aesthetics are in keeping with the firm’s brand). Secondly, with the vendor taking care of the infrastructure, product development, security etc, full time, business leaders can focus their time and efforts elsewhere. Insurtech companies can dedicate far more time to improvements and fixes than stretched internal IT teams.
But developing a good working relationship with vendors is crucial for success. Both parties need to understand the business problem, and the full extent of it. And good customer feedback can inform the way an insurtech product is developed, which features are prioritised, which bugs are fixed first. Thirdly, insurtech is normally designed by industry insiders, who have working knowledge of the problems that keep efficiency low, or that drive customers away, or that keep their staff doing menial, repetitive unfulfilling tasks. Insurtech was built to solve existing problems, and is already secure and compliant.
So, to maintain a competitive advantage, insurers must begin by identifying their unique business challenges, understand the extent of their problems, and then work from there, cherry picking and deploying valuable bits of tech that already solve their real-world pain points.
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