(Mike Fitzgerald of Celent speaking at Duck Creek’s annual Partner Summit. Photo by author.)
At Duck Creek’s (Boston) annual Partner Summit on the theme of “Empowering an Ecosystem of Change” this week in Columbia, S.C., Celent Senior Analyst Mike Fitzgerald asked the core system/insurance platform vendor’s solution and delivery partner attendees, “Where do insurers struggle, and how can you as partners help them what you can do about it?”
Fitzgerald offered historical context, asserting that the “arm wrestling” between core system had yielded clear winners, Duck Creek among them. “The ‘So What?’ today is that we see an opportunity for providers that is still being sorted out about who can manage a delivery system, a network of partners more effectively,” he said. Fitzgerald added that question for core system/platform vendors’ partners was, “not how I can complement a core system, but rather how do I complement this emerging ecosystem thing.”
Insurers’ Emerging Market Challenges
The way partners can help core/platform vendors’ carrier customers corresponds to emerging market challenges, according to Fitzgerald. He described an emerging basis of competition with regard to customer, value and product. How insurers are interacting with customers is evolving from periodic contact to a model of continuous engagement.“It’s not, ‘I’ll send a bill’ or ‘I’ll handle a claim,’ but rather an opportunity to proactively contact and provide new kinds of services on a more continuous basis,” he said.
Insurers’ value proposition is moving away from simply indemnifying policyholders in the case of loss to taking a more active role in avoiding loss all together. “It’s been very common with high-deductible policies or in commercial lines, but not in some other areas of P&C, or at least not to the same extent,” he noted.
With regard to product, Fitzgerald commented that the industry was experimenting with a pay-as-you-use model. “We’re getting used to something more continuous,” he commented.
Fitzgerald shared data Celent had collected from a survey of 86 insurers spread evenly between North America and EMEA about their views of how various drivers were changing the industry. These included customer experience, increased availability of data, technology innovation, insurance product innovation, and regulatory influences.
So Much for the ‘Amazon Effect’
In reviewing the survey responses, Fitzgerald said Celent noted that customer experience was ranked highest as a driver affecting strategy, but lowest in terms of how the company was progressing. Insurers often speak to the “Amazon effect”—the notion that online retailers are shaping customer expectations and that insurers should benchmark themselves against such companies. However, the survey revealed that 60 percent of respondents were measuring themselves against other insurers, and only 9 percent against online retailers. “So when I hear about the “Amazon effect, my eyes roll back in my head,” Fitzgerald remarked.
“I’m not trying to deride my clients, but think there’s a degree of ignorance,” Fitzgerald added. “They’re thinking that policyholder want policies, bills or claim checks faster. And they do, but there’s a lack of imagination when it comes to customer experience.”
Fitzgerald reviewed a model of customer experience created by Celent colleague Karlyn Carnahan that depicted process considerations emanating from the customer. “The chart has the typical chevrons about rate, quote, issue, settle claim—those are all valuable, but this is more from a customer standpoint,” he explained. “The way [Carnahan] wrote this out is shows the customer’s perspective that ‘The insurer knows me, who I am, what I have, whom and what I want to protect, how much can I afford to protect, and where my priorities are.’ And also, ‘How do I protect myself, how do I prevent losses?’”
“They say things like, ‘Talk to me; engage me the way I want to be engaged. If I want text first, prioritize that. Finally, involve me,’” Fitzgerald continued. “And around the outside, you have to make it very fast and cheap and make it very, very easy.”
A Bar Too High
Adapting to this customer experience imperative is too high a bar for most insurers—underscoring the increasing importance of vendor partners today, Fitzgerald suggested. “Insurers don’t have a chance to step back and re-imagining their process, and they typically haven’t been asked to,” he observed. “So, the folks you have on your payroll, using new things like customer and human centered design—those are things that will help insurers reimagine their customer experience.”
The burden of re-imagining insurers’ overall value proposition resides not merely in the necessary insight and technological competence, but also in the development capacity required for rapidly changing demand. Fitzgerald related that Celent has calculated that working under “old rules”—legacy types of technology infrastructure, development methodology and other resources—will take four times the resources to get the necessary work done. “In other words, it ain’t gonna happen,” Fitzgerald remarked. “They can’t keep up.”
Some insurers do well in gathering the expertise they need for digital transformation. However, Fitzgerald cautioned, “they tend to be large, very energized and have engaged leadership. And then there are the other over 7,000 P&C carriers in the United States.”
Crossing Lanes to Share Skills
The insight and skills deficits of insurers represent a very large opportunity for vendor partners, but their marketing imperative is to offer the ability for insurers to tackle some small part of the overall customer engagement experience, according to Fitzgerald. “You’re not going to get an RFP for a new customer engagement experience.”
In comparing “old rules” to new approaches, Fitzgerald said that Celent had found that vendors could develop on average at a cost of 67 cents on the dollar, as compared to the rate at which insurers’ internal resources work. “Insurers are worried about how to move the cloud, to learn how to do DevOps—you all have different pieces that you can help them with,” he said. “That’s the type of ecosystem management that all of us have to start thinking about—not ‘everybody in their lanes’ but crossing lanes to share skills.”
In closing, Fitzgerald reiterated that the core administration system battle was over, and that a platform battle had commenced. “The core technology is still there, but as a baseline to provide a range of insurance technology,” he said.
The Coming Platform Battle
In the current market, core/platform vendors must be able to say, “‘If you come with us not only can we give you this platform, this functionality in the cloud environment at lower expense than you’re used to, but we can also give you access to all this talent, and functionality,’” Fitzgerald stressed. “‘We can help you spin up a new business.’”
“This is the reason is the partnership network is so fun,” he concluded. “That battle is really just beginning.”