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In his best-selling book, “Scaling Up: How a Few Companies Make It…and Why the Rest Don’t,” author and entrepreneur Verne Harnish brands complexity as one of the biggest factors preventing businesses from scaling up successfully.
Let’s face it, complexity isn’t an issue at the beginning, but it becomes more important as the organization, and its corresponding data, grows. As companies expand, it’s natural to invest more in more sophisticated technology. Not unexpectedly, all of the additional (and different solutions) generate data, and it becomes increasingly difficult to manage and integrate data between disparate applications. (Enter complexity.)
Insurers often handle this complexity by purchasing even more technology and hiring even more employees, but these solutions are typically far from well thought out or successful. Keep in mind, the introduction of complexity into the equation doesn’t mean that scaling up should be handled haphazardly or avoided. In the case of large insurance brands, McKinsey & Company believes scale can be a strong competitive advantage if the insurer in question recognizes that harnessing the benefits of scale means effectively managing data complexity, not just buying more tech or hiring more employees.
“Insurance operating models are on the verge of a fundamental change,” wrote McKinsey in a 2021 article called “Tech-Driven Insurers: How to Thrive in 2030.” “To thrive in 2030, insurers must commit to a specific role and take action now to secure the tech capabilities they need.”
A Hindrance and a Help
All that said, new insurance startups often can’t afford the best solutions due either to simple math, or to the fact that the size of the business doesn’t yet justify the expense. It’s the literal definition of a “Catch-22.” Most startups, therefore, default to the easy way out and end up using solutions matching only the current business requirements, point-in-time solutions. Even in insurance, maybe especially in insurance, this works well enough until the business starts growing.
As insurers begin to scale up, data gets integrated into evermore advanced solutions, the challenge of getting new IT solutions to work with data siloed in existing tools and technologies (purchased during the days when cost was an issue) becomes a significant challenge. Faced with this scenario and the reality that integrating data between applications can be an extremely time-consuming, risky, and resource-intensive task, many insurers avoid making any changes to current solution stacks at all.
Repairing and maintaining existing tech (that is swiftly becoming legacy tech) often costs more than investing in modern solutions at the end of the day. Total cost of ownership (TCO) must be considered eventually, right? In addition, this fear of investing in new technologies reduces the company’s ability to compete with newer and more innovative InsurTech brands using the most sophisticated IT solutions to meet the market’s increased need for digital offerings. This puts additional pressure on insurers, agents, and brokers to change and to leverage automation, analytics, and digitization to boost the level of service offered to customers.
Once the initial hesitation has been overcome, transforming operating models and investing in technology that enables quick, easy, and secure cross-pollination of data is the intuitive starting point. This will allow insurance players to bring diverse types of information together in harmony and remove the complexity around data integration.
The Business Case for Hybrid Integration Platforms
At this point, it’s a given that insurance organizations use a range of different applications to innovate and drive digital transformation, but before insights can be gained from these tools, data must be aggregated and standardized across party lines, so to speak. Once upon a time this was accomplished by months (sometimes even years) of detailed integration work and the development of a highly complex enterprise service bus (ESB). Today, hybrid integration platforms (HIPs) bridge the gaps between on premise (on-prem) and cloud applications, making it possible for data to move across environments and enabling the business to connect everything into one cohesive unit.
According to Gartner, around 65 percent of large organizations across industries will implement an HIP to power digital transformation this year. These platforms eliminate complexity by drastically reducing the amount of time it takes to get applications to work together—making it possible for the old tech to speak with the new and freeing up development time to focus on more important work. By turning to an HIP, insurance organizations can dynamically and iteratively adjust to changing business requirements and customer demands.
Whether the business is an InsurTech startup or a well-established enterprise with thousands of employees, an HIP can help modernize existing tech to meet the ever-changing demands of a growing business. It’s how modern insurers scale up successfully.