Insuranceciooutlook

Capitalizing on Commercial Insurtech Disruption

By Marcus Knuth, Vice President – Enterprise Technology, Acuity Insurance

Marcus Knuth, Vice President – Enterprise Technology, Acuity Insurance

Look back to insurance technology news from about 20 years ago, and you will find a lot of discussion about personal lines SEMCI. Over time, the original, modest goal of “single-entry” expanded to encompass the ability of insurers’ systems to seamlessly integrate with multiple types of third-party systems and services. Today, those third parties comprise what is now known as the insurtech sector, and the way that personal lines insurance is sold and serviced has been truly transformed.

The growth of the insurtech sector in recent years has been nothing short of explosive. According to research from McKinsey& Company, global investment in insurtechs grew nearly tenfold from 2011 to 2017— from $250 million to $2.3 billion. Although personal lines has seen the vast majority of this investment, commercial lines is gaining ground. And, just as in personal lines, commercial lines will see a disruptive impact from insurtech, including agency-to-carrier automation, direct-to-consumer quoting, online comparative rating, and more.

For growth-focused insurers, it’s not a matter of whether to integrate with commercial lines insurtechs, but how far they will be left behind if they delay. As happened in personal lines, commercial customers and agents will dictate how they want to interact with a company and will direct their business to the channels and carriers that support that interaction. Therefore, insurance CIOs need to maintain a sharp focus on their company’s ability to integrate with insurtechs. They must promote efforts to transform their commercial lines backend processes and extend them via APIs and microservices. Doing so not only ensures a company will be a viable player in the commercial insurance marketplace, but delivers several other benefits as well.

Increased efficiency. Regardless of the technology or method used, insurtech integration is about ensuring that back-end processes can be easily exposed for integration. The user interface for commercial data collection will continue to change, but processes for dealing with this data should be the same regardless of source. For instance, Acuity’s systems development is focused on creating and maintaining a headless architecture. Our goal is to develop capabilities that are processed the same way regardless of the channel in which the request originates (agency management system, third party website, our own online quoting system, etc.).

In addition, system transformation delivers many other efficiency benefits as well, including ease of maintenance through consistency and standardization and the ability to do more rapid development through component re-use, along with greater overall flexibility. The most effective and competitive carriers will be those that re-leverage the same services and APIs used with insurtechs within their own internal applications.

Risk management. McKinsey points out that, with a rapid proliferation of commercial insurtechs, many commercial insurers struggle with how to identify those with whom to invest and collaborate, and that some are “sitting on the sidelines.” This inaction shows a lack of awareness of forces shaping the commercial market. The goal should be making sure that systems are as flexible as possible so that they can easily integrate with the maximum number of different players with the least amount of effort. This helps manage risk that any particular insurtech with whom an insurer does business loses market share or fails altogether.

Improved data governance. In undertaking our own systems transformation, one of the biggest early revelations was the importance of addressing our data first. Like many insurers, Acuity had a history of data produced by and stored in multiple systems and, with that, some expected data quality issues. When we set out to extend our back-office systems, we first got our data in order, ensuring the integrity of data and creating data consolidation. There are other benefits to undertaking that exercise was well, including improved data governance, consistency, and standardization. It also improves data control and allows a company to achieve better data classification and security. For instance, if an insurer has personally identifiable information (PII) stored in a dozen systems, all 12 need to be secured. Having that data in only one central place simplifies that process.

Lastly, it’s important for insurance CIOs to recognize that supporting insurtech integration in commercial lines is only partly a technological issue, and that the other part is a business issue. Even when the benefits of transformation are recognized, there can be resistance to allocating the resources necessary for it because of the history of commercial lines processing, which often involves complex scenarios and human decision-making. CIOs must be able to articulate the benefits of extending backend processes, even if a company does not intend to immediately integrate those processes with external insurtechs.

The bottom line for insurers is that, just as in personal lines, customer expectations will drive disruption in commercial lines. You have the opportunity to position yourself and capitalize on change before you fall behind.

Weekly Brief

Top 10 Policy Administration Solution Companies - 2020
Top 10 Policy Administration Consulting/Service Companies - 2020

Read Also

Innovation Exposes Payment Vulnerabilities

Innovation Exposes Payment Vulnerabilities

Guy Berg, Vice President, Payments, Standards & Outreach Group, Federal Reserve Bank of Minneapolis
Strategies to Unleash the full Potential of your Intelligent Automation (IA) Initiative

Strategies to Unleash the full Potential of your Intelligent Automation (IA) Initiative

Adrian Iaiza, Formerly Head of Process Automation and Improvement, TAL Australia
Open Sources, Open Doors or How to Innovate in a Competitive Cloud Market

Open Sources, Open Doors or How to Innovate in a Competitive Cloud Market

Garrick Stavrovich, Lead Product Manager for Nasdaq’s Global Information Services
Working More Effectively with Enterprise Risk Management

Working More Effectively with Enterprise Risk Management

Eric Bonnell, SVP, Manager–Technology and Asset Risk, Atlantic Union Bank
Captives' Value Rising as Tools for Resilience

Captives' Value Rising as Tools for Resilience

Steven R. Bauman, Head of Global Programs and Captive Practice in North America, AXA XL
What the Heck is Going on Heading into 3Q20...

What the Heck is Going on Heading into 3Q20...

Michael A. Greeley, General Partner, Flare Capital Partners