Changing the DNA of insurers


Changing the DNA of insurers

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All insurers are on a journey to use more technology—but as some move faster than others, the very definition of what constitutes an insurance company could be starting to change. Intelligent Insurer investigates.

When is an insurer not an insurer? Perhaps when it makes a conscious decision to redefine itself as a digital company instead. In the context of the insurtech revolution, such an occurrence could become commonplace—redefining the very nature of the industry from within.

It is perhaps ironic that, for several years, insurers have worried that one of the big digital companies would enter and revolutionise the industry. The fear has been that a company such as Google, rather than sell products to or partner with insurers, might simply enter the industry itself—on its own terms. With its unique influence and intellectual capital, who could compete with Google?

It could still happen. Most recently, Amazon has been rumoured to be considering a launch in the insurance price comparison space. With its global reach and access to data, this would make many insurers sit up and think twice.

Yet despite such fears, many insurers are making great headway themselves in transforming the way they do things and define themselves—maybe they are even getting closer to the likes of Google in the process.

One company that has completely embraced this philosophy is insurer/managing general agent (MGA) Markerstudy, which now defines itself as a digital company since embarking on a road of innovation and ultimately transformation five years ago—a journey that continues to reshape the company and which often yields some surprising results.

That is how Lou Lwin, chief technology officer of Markerstudy, now describes the company he has had a central role in reshaping and reinventing as it has embraced many forms of insurtech and put technology at the heart of its business model.

A good example of how the company has benefited from insurtech occurred earlier this year when it applied machine learning to the way it quotes renewal business.

“Transparency rules mean we must show how we ensure our customers get a fair deal, so setting a competitive price by use of machine learning allows both the customer and the company to benefit,” Lwin says.

The technology establishes at what pricing point a customer is happy simply to renew, as opposed to shopping around for a different deal. Its renewal rates on one book of business improved by 40 percent shortly after the company started using this.

“The ethos behind this is that our customers want the renewal process to be easy and reflect good value; it ensures that our customers are happy simply to renew,” Lwin says.

“We of course have a threshold for the rate we want but we can now work much more accurately within this. It has been made possible because of machine learning.”

Digital Transformation 

Lwin has almost 30 years of experience in technology, covering everything from infrastructure to security, data centre to cloud, IT operations to enterprise architecture and digital transformation to innovation. He has spent the last six years at Markerstudy, leading numerous digital transformation initiatives. He is currently focusing on legacy modernisation and robotic process automation.

He explains that the company took the strategic decision to invest in its IT department and allow it the space to grow and develop into a function that would be at the heart of the company’s offering.

As part of Group transformation, Markerstudy has become what is now the largest MGA in the UK, which it has branded as Markerstudy Insurance Services.

Lwin started by standardising the firm’s technology, simplifying its supply chain and dropping any activity that did not add value. By removing the complexity, the company’s IT department could focus properly on digital transformation, which it then approached on a project-by-project basis.

“Some of these things were small changes but they were operations-affecting and started to have a big impact on the efficiency of the workforce,” he says. “We could then focus on some of the bigger items.”

Lwin notes that historically, Markerstudy makes high numbers of acquisitions and the company understood that this would not be sustainable without very high quality centralised systems and a back office with a strategy and vision that could help the entire Group.

“Without this, we knew we would fall behind,” he says.

This put the company on the front foot and the IT department suddenly had the bandwidth and motivation to start to implement more fundamental change.

“There was resistance at first in some quarters but then people started to see the results,” he says.

“Intelligent automation and machine learning are huge on our agenda at the moment. We are applying these to processes across the business. There can be resistance at first, but people are increasingly realising this technology does not replace their jobs, but rather helps them work smarter and more efficiently.”

In the pipeline 

Lwin admits that so many ideas have now been put forward for the application of these technologies that the company is having to prioritise.

One of its latest implementations is the creation of a new data lake—a central bank of information drawing on many parts of the company that can be treated separately.

“One of our mottos as an IT department is that we base decisions on data rather than gut feelings,” he says.

Markerstudy has not done everything internally: it has announced a partnership with Nexthink that aims to accurately measure the end-user experience to provide a more proactive level of support to achieve business outcomes.

“Our business is transactional and fast-paced, so having visibility into all the systems that support our different business units is absolutely essential to ensure continuity of service,” says Lwin.

“In a highly regulated industry such as ours, Nexthink’s unique analytics and visualisations provide new insight, enabling us to adopt proactive operations, reduce costs and ultimately enhance end-user business productivity.”

Summing up some of the lessons he has learned in recent years, Lwin suggests that other chief technology officers start small and simply, and use the vast amounts of data they have to achieve a very specific objective in the business, rather than trying to do too much too soon.

“Seek forgiveness, not permission,” he concludes. “Not everyone will buy in, so just get on with it and prove what is possible.”

Different Road, Same Destination

While Markerstudy is coming at transformation from one direction, there are plenty of insurtech startups that are defining themselves in this way from the get-go.

Guy Farley, founder and chief technology officer of Bought By Many, an insurtech platform that designs and sells niche insurance products, sees the key to the industry’s transformation as being the growing importance of the so-called application programming interface (API) economy—a general term that describes the way APIs can enable diverse platforms, apps, and systems to connect and share data with each other.

For Farley, the rise of the API economy will define the business models of many insurers going forward in terms of the way they sell and distribute their products. He foresees far more consumers buying insurance at the point of use or point of sale and various platforms interacting to enable this.

He offers two good examples of where this could become mainstream. The use of telematics in a vehicle could allow insurance to apply only while it is being driven, for example. Equally, the option of insurance could be made available at the point of sale of large electronic items. He notes that this latter example would suddenly leverage thousands of retailers as distribution partners for the industry.

“It is a fast-changing landscape which senior executives, the decision-makers in insurers, need to be aware of and understand,” Farley says. “It is easy to assume that it is easier for smaller, nimble, companies to embrace this, and assume larger players will be cumbersome and slow-moving.

“But there are pros and cons for each. Smaller companies can embrace technology faster but may not have the product or distribution; larger companies have these things but have the dilemma of how they bolt on new platforms to their incumbent technology.”

He says Bought By Many is closer to a startup than it is an established player, allowing it to add to its product suite and distribution channels easily. “Our future growth will be through finding new distribution partners—consumers will be more and more directed by the journey you can build for them,” he says. “But I also see an opportunity to build a solid B2C brand as well.”

Bought By Many is unusual in that it offers a mix of its own products and acts as a distribution partner for some other products, directing customers to its partners. It was launched in 2012 when it started creating groups for people with specific insurance needs and negotiating deals and discounts with established insurers.

Rattling the cage

As the nature of what constitutes and defines an insurer changes rapidly, the one thing that could hold companies back is securing the right type of people capable of working in such a new, dynamic environment.

Gareth Eggle, principal, Eggle Consulting, works with insurance entities of all sizes, from two-person startups to global entities employing hundreds of thousands of people. He also works as a professional and business mentor supporting Startup Boot Camp, the Next Generation Insurance Network, and the Insurance Cultural Awareness Network, as well as working directly with school and university students.

Eggle believes that the key to transformation will be securing a more diverse workforce. Achieving this will give insurers the opportunity to create an environment in which the status quo is constantly challenged and a company will be better for that process in the long run.

“This should never be a box-ticking exercise, that will not get worthwhile results. Instead, it should be a case of getting people to change their beliefs; we all need them to be challenged to be assured they are robust and, in the process, you can create a culture of change,” he says.

“It is not about filling up the echo chamber talking about the topic, it is about creating an alternative mindset.”

He praises the approach some companies have taken in this regard. Some insurers and reinsurers have adopted robust policies designed to make their workforce more diverse in all ways. Some, such as Beazley, have appointed in-house entrepreneurs specifically with the remit of questioning how things are done and shaking things up.

“It is important to have people willing to rattle the cages and challenge beliefs. The customer base is changing, society is changing, and companies need to change quickly to keep up.”

Eggle stresses that the insurance industry is facing a whole raft of challenges at the moment from a more fluid and less loyal workforce, a poor image in the eyes of potential recruits and the wider political and economic uncertainties as a result of Brexit and the Trump administration. The risk landscape is also changing fast.

To better solve these problems, insurers need a more diverse workforce capable of thinking differently about problems, he believes.

“How do we attract those different people, ranging from real techies who want to work for Google to switched-on kids who never went to university but can solve problems in very different ways? How do we convince those people that insurance is a really exciting place to work?”

Eggle admits there are no easy wins and it might be a case of picking battles for now, but the image of the industry is something he is very passionate about.

“There is no Holy Grail but if we strive for diversity of perspective and diversity of thought it can only become an opportunity to solve some of the problems we face,” he says. “You have to take a risk with some of this stuff, but it is a risk we all need to take together.”

Not all insurers are as far down the road as Markerstudy and Eggle. But as Matt Poll, chief executive and founder of Neos, a company focused on prevention first, payouts second, says the pace of change is increasing.

“Few deny that insurance has been ripe for disruption for a number of years now, with growing distrust and apathy among consumers towards the industry. Insurtechs are only beginning to make inroads but over the next five years I think they’ll effect some really positive change industry-wide,” he says.

“According to McKinsey, currently 75 percent of insurtechs globally have focused their efforts on revolutionising distribution, so it stands to reason that there’ll be a lot of new, exciting developments made in this space.

“Through my work with Neos I think insurtech will also make significant gains towards improving customer engagement and retention, and creating new pricing models, as well as potentially improving claims and policy management processes.

Products like Neos have the potential to make communication with the customer less one-sided, while also more effectively meeting the needs of that customer through intelligent use of data.”

The executives quoted here are all speaking at the Intelligent InsurTECH Europe conference in London on October 15.

Markerstudy, Lou Lwin, MGA, UK, Guy Farley, Bought By Many, Gareth Eggle, Eggle Consulting, Insurance

Intelligent Insurer