On January 2nd, Insurance Thought Leadership published an article called, “Insurtech Trends for 2022”. We think it reflects the abiding confusion and uncertainty around insurtech. This excerpt seems to reflect that confusion and uncertainty:

While insurtech has been around for some time, the past year’s growth has been picking up substantially. We’re well past the days of simplistic disruptive thinking, where startups would present themselves as the Uber of X. Traditional insurers clearly understand the importance of becoming digital … The opportunity to transform traditional, legacy-driven processes remains massive, as is reflected in global investment transactions in insurtech – by the end of the third quarter of 2021, up another 23% from the year before and hitting $10 billion … Compared with overall fintech data, insurance actually still remains an underinvested sector.

If insurance represents an underinvested sector, where did the $10 billion go? If we’re well past the days of simplistic disruptive thinking — and if insurtechs have learned the underlying complexities of the insurance business model they aim to renew — why is insurance an underinvested sector? We may have an answer.

Value-Based Buying

In buying software or systems, insurers have to consider a number of factors:

• What are their needs, short-term and long?
• Who’s the vendor they’re buying from?
• What’s the track record of the vendor they’re buying from?
• Are they trading fresh ideas for a lack of experience?
• Are they trading experience for a lack of fresh ideas?
• Is it possible to get both?
• How long will implementation take, including business rules, integrations, and customizations?
• How good will the software of the system be once it’s up and running?
• Does the long-term value exceed the short-term price?

Private insurance companies and mutuals are responsible for the financial interests of their policyholders. Publicly traded insurance companies are responsible for the financial interests of their investors. Neither of those responsibilities leaves room for undue risk-taking and dice-rolling.

That’s why we look for long-term, mutually beneficial relationships. That’s why we offer a fixed-price engagement so there are no short-term prices or long-term surprises. And that’s why we focus on total cost of ownership over the long-term.

The Best of Both

We understand most people would prefer the newest, the fastest, the shiniest. Maybe the insurance sector is underinvested (we’d like to see that term clearly defined) because insurance isn’t new, fast, or shiny. Maybe the promise of new, ideas doesn’t offset the security and stability of experience. Or maybe it’s possible to strike a balance.

We believe it is. That’s why we’re here.

We’d been reading about folks who claim to be able to implement a core processing system in one day. Then we had a prospect ask us if we could do the same thing.

We said, “Sure. Anybody can do that.”

The prospect replied, “Can you do it for me?”

We said, “Yep. On one condition.”

“What’s that?” he asked.

“You have to take the system, out of the box, and don’t change anything.”

Enter Reality

The prospect started getting excited: “Well, yeah, but I have a dozen or so integration points.”

“That could take more than a day,” we said.

“I also need to produce customized bills,” he said.

“Ooh. It sounded like you said custom.”

“I did. And I have some other customizations, as well.”

“That sounds like more than a day’s work to us,” we said.

“And how about building in all my business rules?” he asked.

“You might want to be looking at a calendar, rather than a clock,” we suggested.

“And I also have to pull in reports from my legacy system.”

“We might be able to do all that in a day if we were on Venus,” we said. “One of its days lasts 243 Earth days. Have you considered relocating?”

Vive la Différence

Fans of Tim Burton’s 1989 film, Batman, will remember Michael Keaton (as Bruce Wayne) saying to Kim Basinger (as Vicki Vale), “It’s not exactly a normal world, is it?” Even if you haven’t seen Batman — but you have tried to implement a core processing system in a day — you know he’s right, perhaps especially in insurance.

Despite the fact that insurance is as regulated as it is, there’s precious little standardization in the industry. That makes normal a little tough to pin down. Company A does it this way. Company B does it that way. Both of them are happy and productive. But nothing is going to work for both of them out of the box. In fact, it’s highly unlikely they’d want it to. (Hello, differentiation.)

The next time somebody says you can get a core system implemented in a day, tell him to read the fine print and think outside the box.

To quote Robin Williams, “Reality. What a concept.”

We have no idea how many words we’ve written and spoken about the Finys Suite. We do know if all those words were published in one place, they’d make Tolstoy look like a piker. We also know we’d likely have a very difficult time finding an audience for such a tome.

So, since a picture is, after all, worth a thousand words — and since it’s much easier to show something than it is to explain something — we decided to put an image where are mouths (or keyboards) are. And so it is we have this graphic representation of the Suite:

First we thought, “Well, that’s a little big.” Then we thought, “It actually fits perfectly on this page. Maybe it’s okay.” After that, we thought, “It shows exactly what we want it to show. And it doesn’t show anything we don’t want it to show.” So, we decided to keep it.

If you ever want to know what’s in the Finys Suite and what the Suite does, we put it all right here in this graphic.

We call our user group the IAB — Innovation Advisory Board. We created the Board because we care about our customers. We care about their satisfaction. And because we care about them and their satisfaction, we care about their input.

We held this year’s annual meeting of the IAB October 12 and 13. While we told our customers we’d make the meeting in-person and virtual, more than 70 people chose to attend. Our customers got to spend an evening with their product teams. Our people got to get to know our customers better during an enjoyable outing at Topgolf. We used the Management Education Center at Michigan State University for our full conference meetings. And we used our offices in Troy for our breakout working sessions.

We learned much.

Perhaps because we held the IAB at a point at which the world may be finding (or fighting) its way out of a global pandemic, one of the most important things we learned is this: IAB also means it’s about belonging. People were obviously happy to be out, to be with other people, to share interests common and diverse, to engage in conversation and to be engaged, to compare notes on business in general and on the use of our software in particular, and to be the social animals we all are.

And this might sound corny, but we all reveled in the spirit of teamwork that characterized those two days. The best traveled streets accommodate two-way traffic. Similarly, the most conducive environments for learning are mutual. We learned from each other. We earned growing respect from each other. We were honest and transparent, and we were repaid in kind. The experience made us all the more sure that, while we built our business by developing and maintaining software,  we maintain our business by developing trusting relationships.

In the coming days and weeks, we’ll be sharing some videos we shot during the three days we were together. What struck us most about seeing the rough footage was how happy people are. We believe you’ll see in them what we do.

In the meantime, we’ll keep doing what we do.

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: