A Call to Arms

We don’t consider the insurance industry or insurance technology to be particularly militant. But we suppose it’s possible for martial metaphors to sneak in almost anywhere. At least that’s what we thought when we saw this headline in Carrier Management: “Tech Arms Race Favors Giant Commercial Carriers“.

In an interview cited in the article, Mo Tooker, head of Middle Market and Large Commercial business at The Hartford said this:

You get to a place of scale that really allows [larger insurers] to outperform—to take advantage of data and data science and help your underwriters and claims adjusters in a way that changes the game altogether in the future. This is a place where we will feel a bifurcation in the marketplace. There are only a handful of carriers that can make the investments that we’re describing here … There aren’t many that can keep up that level of investment year after year after year—and that creates a gap that grows larger year after year after year … a “nuclear arms race” in the industry.

Call us sensitive, but that seems like an alarmist characterization in any context. And in the context of escalating geopolitical conflict, it’s some combination of inappropriate and overkill. Most important, it’s inaccurate.

Let’s Take a Deep Breath

Yes. Insurance companies can spend millions of dollars on technology. Yes. They can throw good money after bad in efforts to remediate failing implementations. Yes. The larger the company, the more expenses — foreseen and unforeseen — they can absorb without going out of business. But that doesn’t mean they have to.

The fact is technology is one of the few things that gets less expensive as it gets better. Modern core-processing technology is much less expensive — and much more sophisticatedly capable — than it was 20, 10, or even five years ago. And with numerous well-funded insurtechs entering the market, smaller carriers with modern systems will have the option to choose the proven winners without risking large capital expenditures.

Are we biased? Sure, we are. But we’ve earned the right to be. We’ve demonstrated the truth of our convictions with more than 30 insurance companies of varying sizes.

Large insurance companies don’t need to be in an arms race.

And they don’t have to shoot themselves in the foot.