Let’s Get Rolling: Part Two

In part one of this series, we wondered why the seeming infatuation with insurtech continues apace as if software that’s already on the market were inadequate to overcome reliance on legacy technology. And we asked this question: “Since many of those new [insurtech] wheels are unproven (hence, the risk), why wouldn’t we work with the ones that already roll?”

We have no desire to appear defensive. But we’re compelled to say we’ve worked — and continue to work — hard to provide the best of both worlds. Here’s why we say that:

First, we’re not peddling legacy technology. (Why in the world would we do that?) On the contrary, we developed our software and our business model to take the pain out of replacing legacy technology. Second, we developed our software to enable the integration of whatever aspects of insurtech demonstrate productive, business-improving value to our customers.

20/20 Foresight

“Hindsight is 20/20” is a very common expression. We can’t help but wonder why people wouldn’t want their foresight to be a little more acute. Case in point: In part one of this series, we also excerpted some text from an article we’d read. Some of that text said this:

Successful companies often struggle to anticipate and adapt to competition from new entrants … until it’s too late.

We’re not sure what constitutes successful in that sentence. It seems to us companies that struggle to anticipate and adapt to competition from new entrants until it’s too late might be a lot of things — like unsuccessful or gone — but not successful. But setting that aside, it seems to us that if companies choose to work with vendors that keep their eyes open, that take advantage of the investments being made in insurtech, that recognize the winners, and that make their software flexible and configurable enough to integrate and employ those winners, they’d be much more likely to be successful. And they’d significantly mitigate their risks of being too late.

It’s a good thing developers and investors aren’t willing to settle for the status quo. But neither are we. That’s why we work hard to ensure our customers don’t have to settle for anything, especially legacy technology.

Remember: The software you choose may define your legacy.

Let’s Get Rolling

We saw an article in the September edition of Best’s Review. It’s called, “The Billion-Dollar Question: What’s the Allure of Investing in Insurtechs?” The author starts by explaining what he calls VC math:

As a venture-stage investor, the goal is to deliver five times the returns on the money entrusted to me, within 10 years or so. That’s five times overall, not five times on each investment. Success in venture capital hinges on asymmetric risk. When I write a check, I expect one-third of the investments will crater—a total write-off. Another one-third will be mediocre, returning the principal or a bit more. Success of the fund will depend on a handful of winners in the portfolio. The operative question is not how many losers I have; rather, it’s all a function of the magnitude of my winners. If I have a few investments that deliver 50 times, my losing bets will be forgiven and forgotten.

So far. so good. The VC takes calculated risks in hopes of rich rewards. But this part seemed a bit confusing at first:

Many in the venture community do see insurance as an industry full of vulnerable incumbents. Much of that arises from the lack of widespread technology adoption … and an over-reliance on legacy technology. Many see an even bigger opening as the natural result of legacy culture: Successful companies often struggle to anticipate and adapt to competition from new entrants … until it’s too late. Consider the current environment—a huge market plus pent-up technology plus a belief that incumbents will be slow to respond. Taken together, these create the conditions to support the 50 times outcomes required by VC math.

At first we wondered why, analogously speaking, a VC would back a new producer of wheels for an industry reluctant to buy them? To clarify the analogy, the author’s statement might have read like this:

How Much Do We Need to Worry?

In a rather random Google search, we came across a paper published last year by the global IT consulting firm, Coforge. The title of the paper is “8 Challenges Threatening the Insurance Industry in 2020”. Since threatening sounded rather ominous (we might have gone with facing), we decided to give it a read. Lo and behold, we found almost all of the challenges listed by Coforge to be interrelated.

Here they are, in order, in bold, followed by our own thoughts on the matters:

  1. The increasing demand gap between the multi-generation customer bases. This point is well taken. But there are gaps between all generations — social, cultural, intellectual, musical, expectational, etc. That’s life. Some of those gaps, particularly as they pertain to dashed expectations about job security and the desire to be one’s own boss, led to …
  2. The untapped gig economy. No generation thinks the preceding generation got it right. It’s no wonder the gig economy blossomed.
  3. The fast changing digital space, systems, and technologies. The reality of this point is attributable to changes in technological capabilities, of course. But it’s also attributable to #1 and #2 — bridging the demand gap and tapping the untapped gig economy. The decentralization wrought by #1, #2, and #3, makes #4 inevitable.
  4. The growing concern over the privacy of customer data. Well, yeah. Decentralization and broader distribution of work, transactions, and the data associated with them yield liabilities in security. And them comes …
  5. The added strain of COVID-19. Add the decentralized, distributed chaos of COVID-19 into the challenges posed by #1, #2, #3, and #4, and Coforge’s notion of threatening might be correct after all.
  6. The risks associated with the ever-evolving socio-political and economic landscape. And while the concerns of our customers aren’t necessarily socio-political, we’re certain the ever-evolving economic landscape is a direct contributor to #1, #2, #3, #4, and #5.
  7. The competitor threats. We don’t mean to be dismissive. But competitor threats are like generational gaps. They’re a part of life in 2020, 2021, and every other year.
  8. The effect of global-level changes on the insurance sector. The biggest concerns for our customers are the constantly changing regulation policies. And we agree with Coforge here:

The only way to be prepared and cope with such issues is to have an agile team with a robust digital infrastructure and a standardized code of conduct. 

While we surely have to be aware of all the changing conditions in our environments, our first priority should be the work at hand. Whether you’re in the insurance industry or any other industry, we might all be better off following the advice of Thomas Carlyle (1795-1881).

Know what thou canst work at, and work at it like a Hercules.

It still pertains. So, don’t worry so much.

Software Is a Service

No. That’s not a typo in the title. Yes. It’s a play on Software As a Service (SaaS). Yes. Our software is available in the cloud. But it’s also something we think about frequently when we’re asked, “What do you do?”

The Obvious

We provide an administration suite for property/casualty insurance. That means our suite does everything a comprehensive administration suite should do:

  • It accepts applications.
  • It has workflows.
  • It applies business rules.
  • It rates and quotes applications.
  • It binds coverages and issues policies.
  • It processes renewals and declinations.
  • It integrates with other systems and data sources.
  • It contains a forms library.
  • It enables analytics and reporting.
  • It feeds billing and claim modules (or systems).
  • It processes the necessary transactions.
  • It makes information and transactions accessible to policyholders and agents.

Along the way, the Finys Suite also lets insurers make all necessary policy changes, audit premiums, cancel and reinstate policies and endorsements, track coverage histories, and other cool stuff.

[Yawn …] Well, yes. Those things and more are what the Finys Suite does. But it’s not what we do.

The Not So Obvious

Our Software As a Service offering is actually a Software Is a Service offering. Here’s why we believe that: We develop software that provides processing and transactional services to our customers. The Finys Suite’s digitalization, centralization, automation, and configuration make it easier for our customers to do the business they need to do, the way they want to do it. It also makes it easier for people (policyholders, agents, and other parties) to do business with them.

By making it easier for people to do business with them, the services our software provides also enables our customers to provide better service to all of their constituents. Policy service, claims service, self-service, billing, a variety of payment methods — all of those things and more help our customers cultivate and retain the relationships through which their products are sold and by which their businesses are sustained.

Could Software Is a Service be considered a stretch? Sure it could. But we don’t think of it that way. We think of it as a service that makes providing service easier for our customers.

If you don’t think software is a service, try processing or transacting something without it.

The End of What?

We happened to see a piece on the Gartner website the other day that said this, in part:

Policy administration systems [provide] full end-to-end life cycle management … vendors are increasingly offering a comprehensive range of products with vendors looking to alternative capabilities to differentiate their offerings; for instance, front-end portals with embedded engagement tools.

We have to admit that every time we see something described as end-to-end, we think of two things: The first is a short story by Ernest Hemingway called, “The End of Something”. It was written during what some scholars refer to as Hemingway’s suggestive period, in which he was trying to say something without saying anything. The other is The End of It, a beautiful novel in which a young American artillery officer is driven nearly insane by the barbarity of World War II but is saved by the beauty, the people, and the culture of Italy.

But as you might guess, this isn’t supposed to be a post about literature. So, we’ll get back to our Gartner reading.

Vanishing Point

We have to admit to being perpetually perplexed by the phrase, end to end, for two reasons. First, regardless of the business you’re in, why would you want to suggest the end of anything? We completely understand that nothing lasts forever. But no matter what you’re creating or selling, why invoke even philosophical curiosity about when it might cease to be created or sold?

Policy Lifecycle

Bill: Well, ya know, everything has to end sometime.
Will: I know. But we just started.

Second, maybe we’re being too literal. But if we’re talking about a lifecycle — in this case, a policy lifecycle — where could we say it ends? Isn’t a lifecycle self-perpetuating? Shouldn’t it sustain itself by the fulfillment of commitments, responsive service, and operational transparency? And where or why would it end? When the policyholder stops paying premium? When the insurer refuses to pay a claim and the policyholder takes his business elsewhere? Are we too conservative? We don’t know. But setting aside the argument that the insurance industry is and should be conservative, why even flirt with any of that?

We get the idea that end-to-end is supposed to connote comprehensiveness, a set of processes from policy application to claims adjudication, with billing and a few other things in the bargain. But why not say comprehensive instead of suggesting some point of termination?

Why take it to the vanishing point?

DIY Means Design It Yourself

When most people think about designing something — a car, a software program, a rocket, the perfect in-laws, an insurance product — they usually think about something difficult and pretty messy. It doesn’t have to be that way, at least not always.

Our customers were asking us for a toolset to give them maximal flexibility and maximal independence with minimal complexity. As we listened to their requests and took them to heart, we decided we had two options:

  1. We could make them completely dependent on us to do all of the things they wanted to do by themselves.
  2. We could give them access to exactly the same toolset our designers and developers use, which would enable them to do all the things they wanted to do by themselves.

After careful deliberation, a few sleepless nights, and a seance or two, we chose Option 2.

How Do We Define Success?

“What do our customers want us to do?” We could answer that question in a multitude of ways: They want us to process their insurance transactions. They want us to manage their claims. They want us to bill their policyholders. They want us to give them the best software we can develop to do those things. The list of answers goes on. All of them are only partly correct. What our customers really want us to do is to enable them to do more business more easily, more efficiently, more accurately, and less laboriously. That’s just what our Design Studio does.

We gave our Design Studio an intuitive user interface. We created pre-built line of business templates. We provided drag-and-drop, WYSIWYG fields and process aspects. We enabled real-time collaboration. We included report wizards. We developed automated regression testing. And we made sure users could administer security administration down to the level of individual fields.

It gives our customers exactly as much self-sufficiency as they want. We meet them online in our Design Lab. In joint design sessions, we work with them to establish functional objectives. We teach them how to configure the Suite, their products, their states, and their lines of business. We show them how to do those things simply and efficiently. We tell them they can have all the autonomy they want, but we’ll always be there to help them out and to back them up. That’s why we define our success by the success of our customers.

But help with your in-laws? Not so much.

What’s Up?

Now that we’re more than halfway through 2021, we were thinking about the de rigueur predictions that will soon be coming our way for 2022. For some reason, that put us in mind of the classic Budweiser commercial from 1999. After that, we decided to get serious; although, we really didn’t feel like it.

It’s safe to assume that most of the 2022 predictions for insurance will have to do with technology. The list will, no doubt, include:

  • Artificial intelligence (AI). When more and more homes and cars contain voice-activated assistance, the insurance industry will continue to adopt AI as it can, particularly in the interests of personalizing the policyholder experience and the policyholder’s rates. How will AI do that? With …
  • Machine learning. Simply put, machine learning is stored data that constitutes acquired experience. Combined with AI, that acquired experience can be analyzed and translated into actionable information and automated processing. And where will all this stored data come from? From …
  • The Internet of Things (IoT). Given the connectivity of everything on the Web — including smart-homes gadgets, automobile sensors, wearables, online retail sites, referral-program software, and who knows what — insurers that don’t tap into IoT technology are going to miss the boat and then some.
  • Telematics. See AI, machine learning, and IoT.
  • Social media. Given the pace at which things evolve, it’s interesting to look at how quickly definitions of things like IoT seem to evolve. They used to focus on hardware devices. Now they include every social-media site imaginable, all of which are tracking us like bloodhounds in the woods or sharks in the water.

Sneak Peeks

Chances are pretty slim that we’ll end up in the fortune-telling business. We’ve been developing insurance technology for so long at this point that a career change might not be the most prudent decision we could make. But you really don’t need powers of prognostication to see what’s coming for the insurance industry, technologically speaking.

The industry will continue to follow its conservative nature, as it should. It’ll prudently adopt technologies as it can. It’ll wisely heed the needs of its policyholders. It’ll stay a few steps back from leading edges, which is a much safer place to be anyway. But in the end, it’ll come around, as it always does.

That’s what’s up.

Don’t Choke on Chokepoints

The June edition of Risk & Insurance ran an article about the blocking of the Suez Canal by the cargo ship, Ever Given. In the print edition, the article was entitled, “CHOKEPOINT!” In the print and digital editions, the article starts with this:

In March, a large container ship blocked the Suez Canal for six days, costing nearly $400 million an hour in global trade losses. Now, cargo and vessel owners are asking, “Who foots the bill?”

That got us thinking about other chokepoints in the insurance industry. And while those chokepoints may not be as obvious as the blocking of the Suez Canal, the short-term, long-term, and additive costs of those chokepoints may actually amount to considerably more than $400 million.

Let’s Go To the Replay

For the sake of argument, we’ll assume a small insurance company has 100,000 premiums in force. If one administrative chokepoint costs the company just a dollar in resources (time and/or money) and opportunity per policy, eliminating that chokepoint would save the company … well, you can do that math. Chances are that insurance company,  any insurance company, has more than one chokepoint. And if you consider a large insurance company — one with 80 million policies in force, let’s say — the ROI on eliminating the corresponding chokepoints is a stakeholder’s dream come true.

In the article we’ve cited here, Marcus Baker, global head of marine and cargo from Marsh, is quoted several times. If we take one of his quotes and abbreviate it slightly, his argument extends beyond the blockage of the Suez Canal. Here’s the quote abbreviated:

We saw this problem play out early in 2020 … One of the things that this pandemic has shown us and even an incident like the Ever Given has shown us is that … Rather than focusing on the efficiency and low cost, we really need to look at a resiliency model.

That’s a pretty powerful point. It suggests resilience is precipitated by readiness. And readiness can be precipitated by making sure your people, your processes, and the technology products you use are responsive, flexible, configurable, and scalable.

We might even go so far as to suggest it takes a good chokepoint now and then to help us be prepared for the next one.

Rates of Change

Figure A

We seem to have been writing and speaking a good deal lately about change — the changes undertaken during the COVID pandemic, the changes that could have and should have been considered before the COVID pandemic, and the changes we should be undertaking now in anticipation of the next pandemic or the next catastrophic business interruption. In particular, we’ve been writing and speaking about digitalization, the adoption and adaptation of digital technologies for business processes. In other words, the conversion of text, pictures, or sound into digital form for automated processing on computers, as opposed to the manual processing of analog media like paper or whiteboards.

During all of that writing and speaking, it occurred to us that the lion’s share of the friction being experienced in the move toward digitalization is attributable to rates of change. In general terms, we’re referring to the technology-adoption curve that’s typically rendered like the image in Figure A. Somewhere between the so-called innovators and the early adopters, there’s a gap. Skepticism, fear of change, and fear of failure live in that gap. As people begin to creep across that gap, the early majority and the late majority adopt a given technology as it begins to succeed and make its adopters feel safe. By the time the laggards get around to adopting the new technology, it’s already being superseded by a newer technology. And on it goes.

Context, Please

In more specific, insurance-industry terms, the gap exists between policyholders (and prospective policyholders) and the insurance companies with which they choose to do business. And the insurance industry’s historically slow pace of technological adoption and adaptation is creating greater friction and lost opportunity. To be fair, individuals (like policyholders and prospective policyholders) can explore and embrace technological advancements — and change their behaviors and their expectations — more readily and easily than companies and entire industries can. But that reality notwithstanding, friction and lost opportunity exist.

We should bear in mind that there are numerous definitions of legacy. Two of them are:

  1. anything handed down from the past, as from an ancestor or predecessor
  2. a gift of property; a bequest

If we remain mindful of both of those definitions — and if we embrace the technological change that shapes the behaviors and expectations of our customers — we can transform #1 into #2.

That will bring our respective rates of change much closer to each other.

Have You Looked?

Everyone seems to be talking about 2020, the coronavirus pandemic, and the lessons they’ve learned from both. What lessons did you learn? Have you looked for them? We mean really looked. Are you sure?

Objectively speaking, it was a year of change. It had to be. As we were reminded constantly, the old normal was gone. It also was a year of opportunity, depending on they ways in which you viewed, accepted, and responded to the changes. As Sun Tzu said, “In the midst of chaos is also opportunity.” Now we’re almost halfway through 2021. If we learned anything in 2020, we should be well along in applying it now.

Here’s What We’re Doing

We’re investing heavily in research and development. And since we’re quoting people, we’ll point out that, while Malcolm X didn’t work in the insurance industry, he did say, “The future belongs to those who prepare for it today.” And if 2020 taught us nothing else, it taught us the best way to accommodate change is to always be anticipating it and preparing for it.

First and foremost, you want to try to get ahead of the curve. A lot of insurers were well-positioned for change. For those that were, 2020 paid dividends for them. Another of our favorite quotes is from Will Rogers, who said: “Even if you’re on the right track, you’ll get run over if you just sit there.” Case in point: One of our insurance carrier clients told us 2020 was their most profitable year ever.

Here’s What Insurers Should Be Doing

It’s important for insurers to put themselves in a position to take advantage of the turmoil. That may sound like a strange thing to say in a risk-averse business. But it’s true, nevertheless. If they employ the OODA loop — observe, orient, decide, act — they’ll be able to better identify their opportunities: Do they have the right systems in place? Are those systems modern enough to meet the growing demands of the 21st century — flexibility, configurability, responsiveness? Are they maximizing and optimizing their digital channels? Are they making sure they have the information they need to make the right decisions, to act quickly, decisively, and fruitfully in the face of uncertainty?

Are they giving their prospects and policyholders better digital experiences? Are their digital capabilities backed up by capable, well-staffed call centers to ensure service is accessible and well-managed if issues have to be escalated beyond digital channels? Are they offering their policyholders more and better opportunities for self-service? What about their agents? Are they looking out for them? Are they providing the fully functional portal to give them access to what they need? Are they providing mobile access? Do they have the tools to sell more and process less?

The Moral of the Story

The moral of this story is that 2021 will demonstrate what we learned in 2020. As long as we looked for those lessons, learned what they had the opportunity to teach us, and determined to take those lessons into the future, it’ll be harder to surprise us the next time.

The people who are exceptionally good in business are not so because of what they know but because of their insatiable need to know more.
(Michael Gerber, The E-Myth Revisited)