Insurers have spent a lot of time and energy in recent years trying to consider how they could revamp their core legacy systems to redefine and fit digital needs for the long-term. But these legacy (often monolith) systems have an Achille’s heel — every “capability” is too closely intertwined, making it difficult to address new products and customer needs. More importantly, this model doesn’t work for insurers wanting to innovate using rapid plug and play to connect with exciting new technologies and data streams into their products and processes. Distributed technologies, such as cloud solutions, are a large part of the reason that technological complexity can be re-fashioned into simplified systems. So, cloud-based technologies, platform-ready architectures and agile digital ecosystems are proving themselves to be more useful as the new tools of modern digital insurance. They underpin Digital Insurance 2.0.
If you have ever questioned why platforms are so crucial, it might help to consider how they open the insurer up to so many amazing possibilities through their ability to provide “flavor combinations.” Platform-based insurance is fueled not just by emerging technologies, but by the merging of emerging technologies. It is the combination of innovative concepts with applied emerging tech that is enabling today’s market growth opportunities by reaching unserved or underserved markets with new products and services through expanding channels. So many areas are touched by these new technologies and data sources that the only solution is to use them within new business models.
Steve Case, for example, has pointed out that we are entering a third wave of innovation, underpinned by a confluence of technologies that will cohesively work together to infuse innovative initiatives into the operational foundation of every business and the economy.[i] Our current wave involves the expansion of technologies that are creating sophisticated ecosystems and platform business models.
For insurers, this should be exciting and financially rewarding. We have the opportunity to capitalize on better data, greater automation, far lower risk, greater protective power, better customer experiences and ground-breaking ideas for innovative coverages to meet the needs of a new generation of insurance buyers, both consumers and business owners. To grasp the importance of digital models and platform development, we only need to examine the insurance industry in its current state.
Platforms are built for speed.
The insurance industry is moving so fast that at times it may seem risky. But the greater risk is to not move forward at a rapid pace of change, because the pace of change will continue to accelerate. There will be a point when it will be too late for change … particularly for platform change. In the immediate term, insurers need to optimize their existing business because it is supporting the existing customer base and will fund the future. But future growth will reside with a new generation of insurance customers who demand innovative insurance products and services and new business models that reflect a new marketplace, economy and an ecosystem of partners. That will require hopping on to platforms that are mandatory for Digital Insurance 2.0.
Players across the entire range of insurance industry segments are being confronted with permanent changes in customer behaviors, different employee expectations, rapidly evolving digital technology, emerging new industries driven by technology, and the growing Sharing and Gig economies, all of which lead to a quickening renaissance of the business environment. Our consumer and SMB research shows that customers are seeking improvements to the research, purchase and service aspects of insurance, while also seeking a personalized customer journey and offerings that use new sources of data, making it a relevant, valuable and engaging experience to them.
For example, emerging technologies are merging to make on-demand insurance work at the speed of life. Trov saw the consumer demand for pay-as-you-go insurance and fashioned technologies that would fit the groove. Coverage is selected through a mobile app, claims are made through text messages, data and service automation provide seamless experiences and P&C insurance is unbundled.
A rapidly-growing number of innovative startups and greenfields are rewriting the rules of business, and with it, redesigning organizational and business model structures, and how products and services are defined and delivered. They are using digital technology and data and analytics to better understand, underwrite and service their customers with tailored products and services.
While traditional insurers are tempted to stop and examine their options, new entrant startups and a small (but growing) number of innovative incumbent insurers with greenfields are rapidly introducing new products and services into the market, more personalized than ever, to meet the unmet or under-met needs of a rapidly changing market.
Platforms can drive value.
The platform shift is not technology modernization for technology’s sake. It fits with insurance’s craving for meaningful business changes that will drive value, such as:
- Customer experience, engagement and ownership
- Business innovation and efficiency
- Ecosystems that provide extended value via services or plug and play components
- Speed to value efforts that will make organizations more agile
The platform economy runs across all industries, including insurance. It is most prevalent in the companies we respect the most for their innovation. They are using big data, artificial intelligence, microservices and cloud computing to change the nature of work and the structure of the economy. This is where Digital Insurance 2.0 is rapidly emerging. This shift started with companies such as Apple, Amazon, Netflix, Facebook, Google, Salesforce, and Uber, which are creating online structures that enable a wide range of digital activities. They have opened the doors to radical changes in how we work, socialize, create value in the economy, and compete for profits. In Majesco’s Future Trends 2018 report, we look closely at how these companies have created a paradigm shift that in turn spawned a wave of platform-based insurance business models.
These models are reflected in new start-ups like Slice, Lemonade, Trov, Haven Life, Root, Ladder, Zhong An and others as we noted in our Greenfields report. They have created innovative business models based on the platform economy framework that leverages broad ecosystems and technology innovations such as digital, cloud computing, artificial intelligence, machine learning, and new data sources, to create a greatly enhanced customer experience and new sources of revenue.
Lemonade is a platform-based business model where the merging of emerging technologies explores the genius behind creative combinations. Late last year, Lemonade announced that it had developed an API that will allow online retailers to sell insurance via their own channels. Using data, partnership arrangements, an open platform and platform-based models, plus a chatbot (Maya), it can now be sold in pop-up fashion all over the web.
Digital Insurance 2.0 players like Lemonade are introducing simplicity, transparency and new engagement methods for required products, but are likewise applying the same strategies to tear down traditional purchase barriers for discretionary coverage, upending the competitive landscape.
Platforms can release new revenue.
A crucial technology underpinning digital insurance platforms is cloud computing.
Today, we are seeing a new generation of cloud insurance platform solutions emerge. These platforms are increasingly the option of choice for incumbent insurers looking to modernize their core systems and existing business models, helping them avoid the long, difficult, and expensive implementation process usually accompanying systems replacement and subsequent upgrade processes. These are coming to be known as digital-first platforms.
These kinds of platform-based options will help insurers that are looking for speed to value to also drive speed to market and speed to revenue, while ensuring their capital is allocated to business growth, not IT infrastructure. And with cloud platforms increasingly providing the foundation, a new generation of core solutions leveraging a micro-services architecture is rapidly emerging to enable innovative new insurance products like on-demand and micro-insurance offerings.
Platforms provide both creative freedom and the freedom to create.
What we are left with is the impression that ideas are now more important than the hurdles that insurers may envision. Like building tech toys with plug and play components, Digital Insurance 2.0 is allowing insurers to break out of traditional boundaries and mix and match technologies and concepts that will catapult them into greater realms. In fact, the only thing that may be missing in the future of insurance will be the traditional boxes that we had created over decades of development.
Insurers that tap into the pool of emerging technologies and platform-based architectures will find themselves riding the third wave into rapid change and growth in Digital Insurance 2.0.
Next week, we’ll dive deeper into the Platform and Open API economy shift by looking at the design secrets held within platform models. Insurers that wish to adopt digital technologies and offer completely integrated digital service, will want to explore how modern microservices, cloud-computing and APIs fit within a holistic digital ecosystem.
[i] Case, Steve, The Third Wave: An Entrepreneur’s Vision of the Future, Simon & Schuster, April 2017