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Platform business models are poised to radically change insurance

What is a Platform? Expert Opinions and Insurer Actions

In 1765, Philadelphia physician John Morgan announced that he would no longer practice surgery or drug dispensing, choosing instead to focus on “physic,” another word for practicing general medicine.[i] Prior to this time in the colonies, specialization in medicine was nearly unheard of. A doctor was a doctor. A team of doctors might gather to share opinions, but nearly all of them were considered generalists. Compare this to today, when one knee surgery can place a patient into contact with several doctors, an anesthesiologist, a surgical team and a physical therapist.

There was a day when insurance was also a “general” practice and even the technologies within insurance were pursued as the general programming within each insurance company. Hardware was mostly owned. Systems were home-grown or they were purchased and customized. Specialization and componentization grew up out of necessity. Specialization and expert technologies are now key precepts within today’s InsurTech movement and they are an enabler within the rise of insurance technology platforms. Modern platforms are broad umbrellas including a number of technologies and processes, many of them originating with revolutionary InsurTech ideas.

Because platforms are so crucial and relevant to today’s insurance business, Majesco has devoted its forthcoming thought-leadership report to painting an accurate current picture of the modern insurance platform. Next week, we’ll release, Insurance Platforms – A Burning Platform for Market Leadership in the Digital Era of Insurance. In this preview blog, we focus specifically on the foundational aspect of platform development — understanding what it is and why it is necessary.

If we can assume that companies are out to do more with less, then the platform model is a business, technology and service imperative. In fact, as we look at platforms and specialization closely, it will be helpful to keep this one question in mind, “Would your organization prefer to do less with more or would it prefer to do more with less?” However we end up defining platforms, we need to keep in mind that they will provide us with the capability to do far more with far less than traditional system and process models, and they will allow future capabilities, networks and data streams to be inserted and utilized ad infinitum, whenever the needs and technologies arise.

But what is a platform and how does it involve specialization?

In our 2019 Strategic Priorities report, we found that platform technologies – cloud, APIs, AI, and microservices – were the top priority for insurers. From big tech companies, like Amazon and Uber, to new insurance start-ups like Lemonade, Ladder and ZhongAn, which are creating new business models and online structures, platform technologies are opening up the possibilities to how we work, create value, engage with customers, and more.  Platforms enable innovative companies to create speed to value, unique customer engagement, a “test and learn” platform for minimal viable products, and value-aligned, optimized costs. They also allow us to use only those components that fit best for our purposes. That’s the specialization aspect at work to increase outcomes, expertise and breadth of capability — more with less.

With so many using the “platform” word, it is important to note what a platform is not. A platform is not taking “modern core systems” and implementing them in a hosted environment and calling it “cloud,” lacking all the benefits of an architected solution that leverages cloud capabilities. It is not having a time-consuming, costly upgrade process. It is not creating a marketplace of partners using “accelerators” or point-to-point integrations. It is not having a handful of APIs and stating that you are API-enabled. And a platform does not use a “portal out-of-the-box.”

Defining the word “platform” — varied points of view

Majesco defines a platform as an architected, networked system that provides access to a broad set of services, data and other capabilities; is continuously and seamlessly upgraded with newer technology, content and functionality; is accessed via APIs that are part of a robust, extensive API catalog; enables personalized customer engagement; is cloud-based with a designed-to-scale, pay-per-use pricing model; leverages AI and machine learning through embedded capabilities; is flexible to aggregate heterogeneous services from multiple providers (technology, data, InsurTech); and it enables rapid “test and learn” for new business models and products while supporting current operational business models.

Industry Analyst View

Many of the prominent insurance industry analyst firms have been studying the rise of platform technologies and platform-based business models over the last two years. They have published varied viewpoints on just what an “insurance platform” is, and they have offered advice on how both insurers and insurance technology companies can use them to create the future of insurance. Interestingly, these views have some strong areas of consistency with Majesco’s view.

Celent

In Celent’s June 2018 report, The Year of the Insurance Platform, they defined an insurance platform as “a group of sites which provide insurers and other organizations access via APIs to a broad set of services, data, capabilities, and organizations, which are typically cloud based, designed to achieve scale through network effects, and monetized by the platform sponsor in various ways.”[ii]  The report further defines two different insurance platforms:

  • Designed to Scale (DTS) platforms and
  • Core System Based (CSB) platforms

Gartner

Gartner uses the term “digital business platform” and describes it as “a business-driven framework that enables a community of partners, providers and customers to share and enhance digital processes and capabilities or to extend them for mutual benefit.”[iii]  The larger platform consists of 5 sub-platforms:

  • Information systems platform
  • Customer experience platform
  • Data and analytics platform
  • Internet of Things (IoT) platform
  • Ecosystems platform

SMA

While SMA does not define a platform per se, they do define the foundational technologies (all which are platform-oriented) which are crucial to make this paradigm shift. These technologies and the critical capabilities they possess include:[iv]

  • Core systems that are “digitally-native”
  • Microservices can scale
  • Serverless computing
  • AI
  • Open APIs
  • Serverless computing

Novarica 

Novarica research has focused on cloud computing platforms, digital experience platforms and application platform-as-a-service. In their February 2019 Executive Brief, Cloud Computing Platforms in Insurance, they note: “An area of significant growth in insurance technology is the use of cloud computing platforms. Often referred to as cloud PaaS (Platform as a Service), cloud computing platforms are integrated development and deployment platforms that allow users to create custom applications to the cloud without the need to specify, manage, or control the underlying infrastructure (network, servers, virtual machines, and storage).”[v]

Platforms in Practice

Of course, one of the best ways to wrap our heads around platforms and their potential is to look at platforms in action. How are first-movers defining and constructing their own platform frameworks? Before there were fixed platform definitions, some “first mover” insurers developed platform-based business models to operate their businesses and they have subsequently evolved those models to work a broader ecosystem of partners in other industries or to launch insurance products for other insurers on their platform. While we have highlighted some of these before, they each continue to expand their platform capabilities.

It bears noting that there is a difference between a platform and a platform enabler, such as a component of a platform. But as we consider these examples, we see that the lines can be blurry. A platform, such as Lemonade, may be both a platform unto itself and a platform enabler for outside insurer platforms. If you are an insurance executive, it is likely that you’ll encounter many of these situations. But the more platforms and platform technologies you encounter, the greater your understanding of how platforms will allow for nearly unlimited creativity in the construction of new, customer-facing products and new methods for technology and data use.

AXA XL

In January 2019, AXA launched a digital platform, AXA Affiliates, which enables partner companies to integrate AXA’s insurance solutions into their website or apps.[vi] The AXA Insurance API allows quoting to travel, home, and car insurance policies.

Ladder

Realizing that the best time to promote life insurance to potential customers is when they are thinking about their overall health and financial wellness, Ladder introduced the Ladder API to allow companies with complementary services to embed their app into their websites.[vii]

Lemonade

Following its initial launch, Lemonade offered its API to embed the purchase of Lemonade insurance in other business sites, including commerce, real estate marketplaces, financial services, smart home security, and insurance as a service.[viii]

Slice Labs

Slice Labs extended the success of its on-demand insurance platform as an MGA for homesharing hosts by making it available to insurance carriers and other businesses, enabling them to offer their own on-demand insurance products or to embed insurance in their other products. The API-accessible Insurance Cloud Services platform (ICS) covers pricing, rating, licensing, real-time and automated underwriting, and servicing.[ix]

These are some insurance industry-specific examples, but platforms are proving to be fruitful in many industries, and like Amazon, platforms are proving to cross many industries. In our next blog, we’ll examine the prioritization of platform technologies. Are they a “burning platform” or are they sitting on the back burner? Be sure to tune into next week’s blog, and don’t forget to download Insurance Platforms – A Burning Platform for Market Leadership in the Digital Era of Insurance next week.

Is your organization interested in beginning your platform journey? Majesco’s multi-tenant, cloud-based platform may be your best first step. Contact us today to find out more.

[i] Weisz, George, “The History of Medicine: Early Specialization in America,” Oxford University Press, February 11, 2008

[ii] Light, Donald, “The Year of the Insurance Platform: Property/Casualty Edition,” Celent, June 2018

[iii] Harris-Ferrante, Kimberly and Weiss, Juergen, “Why Insurance CIOs Need a Digital Business Platform Roadmap,” Gartner, December 5, 2018,

[iv] Furtado, Karen, “The New World of Core Systems: How New Computing Trends Will Transform the Core Systems Paradigm,” Strategy Meets Action, May 2018

[v] Higgins, Martin, “Cloud Computing Platforms in Insurance,” Novarica, February 2019

[vi] “AXA Insurance Transforms Partner Engagement with Launch of Digital Affiliation Platform,” AXA company website, January 15, 2019, https://www.axa.com.sg/latest-news/axa-insurance-transforms-partner-engagement-with-launch-of-digital-affiliation-platform

[vii] McGill, Callie, “Insurance Expert Q&A with Ladder CEO and founder, Jamie Hale,” ValuePenguin, May 1, 2019, https://www.valuepenguin.com/insurance-expert/ladder-life-jamie-hale

[viii] Simpson, Andrew G., “Digital Insurer Lemonade Says No License Needed by Adopters of Its API Sales Platform,” Insurance Journal, December 11, 2017, https://www.insurancejournal.com/news/national/2017/12/11/473629.htm

[ix] Hollmer, Mark, “Slice Labs’ On-Demand Digital Insurance Platform Now Available to Carriers Via the Cloud,” Insurance Journal, January 25, 2018, https://www.carriermanagement.com/news/2018/01/25/174942.htm

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