SaaS and the Survival of the Fittest
Survival is not about being better than your rivals, but being better at adapting – by Bart Patrick, Managing Director of Duck Creek Technologies Europe.
Adapting quickly to their environments allows successful creatures to survive and thrive in a changing world. Insurers are faced with an evolutionary survival test of their own – and need to embrace the current changes the industry is facing, many of which are being driven by technology. They must demonstrate some agility in their DNA to innovate and navigate their way to survival.
And yet, the current tech hype is in danger of looking overblown. How much real innovation is going on out there? How revolutionary are the changes to business models? Why haven’t the vaunted disruptors shown up and killed off the dinosaurs?
There is real innovation going on, but its scope has thus far been limited – focused on transforming or disrupting insurance sales and distribution channels, as well as bringing new areas of emerging risk into insurance, such as the sharing economy.
Insurance premiums generated by emerging insurtech services are forecast to exceed $400 billion by 2023, up from an estimated $187 billion in 2018. And yet, insurtech is expected to represent under 10% of the global insurance market by 2023, compared to approximately 4% in 2018. This is not an impressive adoption forecast, particularly compared to the value of the premiums.
The revolutionary changes to business models are mostly yet to come. The sector is ploughing more and more cash into tech projects, for sure. But what the innovative personal lines insurers have done, and increasingly their commercial lines cousins, is to partner with insurtech outsiders.
This has headed off the disruptors in the short to medium term. At the same time, tech-savvy millennials are a rising consumer demographic, but they are muted to some extent by the fact that better insurance is relatively low down on their priority lists.
One definition of innovation is the application of better solutions that meet new requirements. However, an innovative new product distribution limited by geography or line of business lacks the scale to be truly revolutionary.
Let’s take a step back. What are the new requirements of global insurers? Here are the four biggest ones, as I see them:
- Agility in bringing new products to market. (It’s all well and good having a great new product idea, but can the business administer it efficiently at scale?)
- Multi-channel capabilities that flow seamlessly, including direct and broker business.
- Automatic compliance with local regulations, in an ever-shifting regulatory landscape.
- Clear paths for cross-selling across lines and rewarding customer loyalty.
New sales tools and distribution channels only solve the front-end aspects of these needs. What is required for more meaningful, revolutionary innovation? Here are four more suggestions:
- Holistic technology that covers end-to-end requirements for insurers, from underwriting, billing, claims and customer service, to analytics and compliance.
- Localised autonomy – but centralised control – for technology that standardises products and processes across geographies.
- Future-ready technology that is scalable and offers architecture that can adapt quickly to new developments.
- Advanced analytics, offering perspective on trends globally and locally and pinpointing efficiency gaps and business opportunities.
The pace of change is the biggest challenge facing insurers. Solving this challenge is the innovation that global insurers need right now.
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