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While variety may be “the spice of life” in many areas of experience, when it comes to getting consensus on business terms and definitions, it can blur lines of responsibility and introduce unnecessary risk. This is a distinct issue when it comes to participating in the burgeoning InsurTech movement, and in particular with regard to undertaking partnerships with startups.
InsurTech, according to Investopedia, is all about “the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model.” As insurers strive to modernize traditional core administration processes and systems, InsurTech provides a wealth of opportunities to consider applying technology in new ways to improve, disrupt or otherwise transform the traditional insurance value chain.
It’s important to recognize that InsurTech happened for a reason. Technology change has accelerated, business partners’ and consumers’ expectations are constantly shifting, such that it is no longer possible to look at current IT initiatives as static, long-term, once-and-done projects or investments. Throughout many market cycles, the insurance industry has learned the hard lessons of trying to build systems in-house, with most companies eventually relying on technology partners in favor of concentrating on insurance core competencies. Remaining relevant in today’s marketplace involves continuous and evolving investment in IT systems with partners that bring significant experience and industry focus to the table. However, such partners must not only have compatible technology and culture, but organizational sustainability and long-term company or product viability as well.
Experience and Industry Focus
Insurance is a complex business. There are many new players bringing exciting new capabilities to the industry. While technology, properly applied, can add a tremendous boost to the operational efficiencies across the value chain, its implementation can be inefficient if delivered by partners without insurance industry specific experience. This is not to say that vendors without insurance expertise cannot provide a value, but working with partners with a vision on how to apply their technology to the insurance business specifically is a bonus. There is no substitute for experience.
The financial sustainability of the partner is another critical issue. Many IT vendors that deliver exciting new capabilities to the industry are not firmly established yet, still trying to gain traction, and prone to failure. Since no business can run for long without making money, the financial strength of the vendor is very important to their longevity and ability to serve you far into the future. Since the insurance industry is continuously evolving, successful IT partners are the ones who pay close attention to InsureTech trends, consistently improve on current offerings, and constantly innovate new capabilities.
The most important component of an IT organization’s sustainability is its people. It is important to understand the potential impact of the departure of key individuals from an organization, to have a sense of the depth of the talent and its ability quickly and effectively step in when needed, and to know whether the team has a succession plan to deal with the unexpected. IT vendors with motivated and engaged management, profitability, and modern/leading offerings are the best candidates for sustainable relationships.
The activity in an entrepreneurial field such as InsurTech is dynamic, with shifts occurring constantly through mergers, acquisitions, and venture capital investment. Anyone watching can see a virtual daily soap opera of activity. Since most organizations are looking for long-term partners, the introduction of new company ownership, even in the best, raises doubts about the attitude and goals of the new principals. It is safe to say that the good will, undocumented agreements, personal discussions, and relationships established with the original company you partnered with are all subject to reconsideration, as insurers can expect a high turnover of key personnel as the new owners take control. Other areas of concern inevitably arise around future product viability, importance of profitability vs. customer service, and the level of priority the product has with the new ownership. While no prospective vendor is going to tell you they are looking to sell or look for VC, this is a key consideration that can be destructive for any new long-term partnership.
A mentor once said, “The product is the product, but the company behind the product is also the product.” InsureTech provides the insurance industry with many exciting new options for optimizing processes, reinventing insurance companies, and disrupting the traditional way that things are done. Many, if not most, of the IT vendors that insurers engage with will be expected to provide some level of support or maintenance for years to come. However, insurance executives can spare themselves sleepless nights by selecting partners with insurance industry knowledge, strong and sustainable leadership, and predictable long-term ownership scenarios.