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History is said to repeat itself, and senior insurance leaders could be forgiven for thinking the dictum applies in particular to the industry’s technology hype. Many familiar concepts seem to reappear in a different guise, bringing incremental rather than breakthrough advances. It may be that in some respects nothing’s new under the insurance technology sun, but the insurance industry is on the verge of genuine transformation. It is an occasion for a creative re-imagination of the industry: carriers face an urgent mandate to adapt to a new digital paradigm, but they also face an unprecedented opportunity to break through previous constraints and reinvent themselves.
Insurers will have important decisions to make as they invest in their digital future, but the general direction of technology is not in doubt. Nor are insurers alone in their journey; solution providers have taken on more of the burden in creating and assembling the capabilities insurers need, and their role is expanding as the industry moves into the digital, platform-based era of commerce. In this essay, we’ll discuss how digital is changing the insurance industry, and how Majesco has responded by providing its insurance partners a cloud based platform for Digital Insurance 2.0.
The Emergence of Digital Insurance 2.0
It may seem unlikely that, having experienced the disruption of the Internet, the insurance industry now faces a greater disruptive force. In fact, it doesn’t; what confronts the industry today is the further realization of the Internet’s potential. In its earlier stages, the Internet simply made possible buying products electronically, including insurance. What we are on the verge of seeing the transition from possibility to perfection, with electronic commerce emerging as consumers’ default mode of doing business. The set of capabilities now emerging has been dubbed Internet 2.0. With it will come Insurance 2.0, with a sea change in customer expectations.
The digital die was cast with the release of the first iPhone. With the proliferation of competing smart phones, practically every consumer now walks around—as the saying goes—with a supercomputer in their pocket. It’s not hyperbole; it means that the anytime/anywhere commerce is real, and that has far reaching consequences for all businesses, personal, commercial, specialty life, voluntary benefits and group lines insurers not excepted. The smart phone is everybody’s constant companion, reshaping their lives, and with it their expectations and conduct as business people, employees and consumers.
If a customer can demand something anytime/anywhere, insurers have no alternative but to provide it, because if they don’t their competitor will—whether that’s an incumbent that has developed the necessary capabilities or a non-traditional competitor applying their learnings to the insurance sphere. What is crucial to understand is that Digital Insurance 2.0 isn’t just about round-the-clock digital engagement and service for customers; the world of digital consumption means that customers will expect new categories of products and services from their insurers that align to new needs, expectations and lifestyle.
Age of the Platform: Expanding Customer Experience and Market Boundaries
A certain fast food restaurant boasted superior service by letting the customer “have it your way,” at a time when many businesses—and certainly insurers—had the luxury of adopting an ethos more resembling “you’ll eat it and you’ll like it.” What real-time e-commerce does is put the customer in the position to demand only what they want, at the time and in the manner that they want it.
Traditional insurance products reflect the assembly line, siloed approach to product creation and distribution embraced in the industrial age. Within a given risk class, a product is “one-size-fits-all,” as a vehicle of the industry’s particular expertise, and structured with reference to the nature of product, not the individual buying it. At the same time, insurers have focused on better ways to serve customers over the last couple of decades. They have made significant investments in portals and other front-end capabilities to make insurance transactions for these “one-size-fits-all products” easier. While this approach optimized the traditional business of insurance of the last few decades, it does not meet the demands and expectations of a new era of insurance because it leaves unchanged the nature of the business model and products insurers sell.
This legacy approach cannot survive in an on-demand world. Customers who live in the moment through their devices respond to offers that cater precisely to their wants and needs. The emerging paradigm to serve these customer expectations is the platform, which can be defined briefly as a medium built to solve a customer’s immediate need (we offer a more comprehensive, insurance-specific definition later) and shifts from a selling to buying focus.
Platforms connect buyers to suppliers, delivering what the customer seeks as conveniently as possible. For example, Uber connects drivers and riders, AirBnB connects hosts and guests, and Amazon is a massive catalogue-style platform for connecting consumers with a vast range of suppliers of goods. The point is not the means of production, but the means of connection, and the result is not merely an increase in customer expectations but rather an expansion of market boundaries.
A given platform solves a customer’s demand, but collectively, the platform paradigm changes how customers think about commerce. In the past customers were content to purchase albums of music, without expecting that they’d love every track. Today, they can buy only the tracks they love—and they do. The lesson for insurers is that customers will inevitably ask, “If we can break up albums, why can’t we break up coverages?”
The Threat of Digital Operating Models
This is already happening, with platforms such as Zhong An, Slice or Trov providing coverage for just that moment when a private homeowner becomes a host, or when a car owner becomes a commercial vehicle operator; or when a valuable piece of property, such as a piece of jewelry or a musical instrument, is taken out of the home and exposed to the risk of loss, theft or damage.
The emerging paradigm presents insurers with a range of challenges, threats and, of course, opportunities. The new customer expectations arising from the Internet have become exponentially more demanding in the platform age, and bad customer experience is more costly as “word of mouth” travels at the speed of light—potentially virally. New digital models of InsurTech MGAs and carriers operate unconstrained by legacy business processes and technology, and on extremely competitive cost structures because they are cloud and SaaS based. The Internet of Things (IoT) has opened up the possibility of insurers to monitor policyholders’ assets in real time, and insurers have begun shifting—as Chubb recently announced—from the traditional indemnity model of “repair-and-replace” to one of “predict-and-prevent.”
The broader InsurTech movement demonstrates where insurers are, and it points to the insurance platform model. Prior to 2015, insurers typically had some kind of internal innovation organization or lab dedicated to studying and experimenting with emerging technologies that was focused on internal insurance process pressure points. By 2016, the industry had adopted the pattern of FinTech and began participating in or founding accelerators and investing in startups. The InsurTech movement was an acknowledgement that the industry simply could not keep up with the accelerating pace of changing customer demand on its own. And in contrast, InsurTech startups focused on external customer pressure points across the value chain through product innovation. These markedly different areas of focus reflect the greatest threat and challenge that insurer’s face—focusing on internal needs rather than market needs—and an acknowledgement that the industry is on the verge of transformation through a period of experimentation, with those who learn its lessons emerging as winners.
The Lessons of InsurTech
However, the case can also be made that the InsurTech movement is also a way of paying lip service to changes insurers don’t really understand, a way of throwing money at a problem and hoping for the best. Many remain committed to legacy business thinking, focused on internal operating pressure points rather than external customer pressure points. It’s not that they aren’t committed to going down the road of innovation—and in fact insurers have come a long way since the dawn of the Internet. The problem is that they think they’re moving faster than they are. And even when insurers have a sense of their destination, there’s a gap between what they know and what they actually do.
As with the dot-com era, insurers too often think of InsurTech as a means toward making existing internal processes more efficient. But as discussed above, the current technological moment is a matter of differences of kind, not just of degree. The era of Digital Insurance 2.0 requires us to erase the idea that we can ease our organizations into the new era with minor adjustments because the market is changing so rapidly and opportunities can quickly be gone. The demands of agility, speed and innovation are dramatically different at the end of this decade as compared to many before it. Insurers are right to continue to optimize existing business processes, but they urgently need to embrace the imperative to create new business models, new products and value-added services.
The Next Step for Core Insurance Systems
During the 2000s, insurers moved away from home-grown core processing systems. They adopted configurable rules-based systems with the goal of simplifying their technology environments, reducing maintenance costs and achieving greater speed-to-market and business agility. In the middle of the decade insurers often took a best-of-breed approach, mixing and matching policy administration, claims, and billing systems.
During the 2010s, insurers favored the “integrated suite,” featuring core system components from a single vendor, on the rationale of simplified integration and a single provider relationship to manage. Within only the last few years, insurers have begun to embrace core systems in the cloud, which is to say software not hosted on the insurer’s servers, but rather consumed as software-as-a-service (SaaS). Among the advantages of cloud-based core systems are reduced maintenance costs and ease of upgrades—as these are undertaken by the provider in a way that is transparent to the insurer.
As the 2010s proceeded, solution providers began to add a variety of digital, data/analytics and other capabilities to their core component offerings. This was typically referred to an “ecosystem” of partners or capabilities, but it can be seen as anticipating the insurance platform. What insurers had been buying were policy, claims and billing systems that meet the needs of the old business paradigm —not customer systems for a new era of insurance. While the modern, rules-based systems introduced vital flexibility and efficiency, they were still targeted to insurance siloes and insufficient in themselves for supporting radical new business models. Policy, claims and billing will always be core to insurance, but in the digital paradigm, insurers’ core system must be a customer system with traditional core plus additional capabilities.
This departure implies a fundamental shift from on-premise systems to open, services-based technology architecture in the cloud. The set of capabilities necessary to serve on-demand business models is—unlike traditional insurance technology environments—not static in terms of its available functionality. These business models imply the decomposition and re-composition of capabilities to answer more granular demands of customers. The way the components may be assembled is conceptually unconstrained, and the menu itself is not fixed—other components may be accessed ad hoc according to demand.
The transition in insurance systems implied, then, is from integrated-suite-plus-ecosystem, to what would be thought of as a broader ecosystem including traditional core components (policy, claims, billing), that functions as a single locus of connection between the insurance customer and all the services that the customer may wish to consume—in other words, a platform.
In our interactions with analysts and other entities, we have used the following definition of “insurance platform”: a site or group of sites the provide insurers and other organizations access to a broad set of services, data and other capabilities, continuously upgraded, seamlessly, with newer technology and functionality, accessed via APIs, which are cloud-based and designed to scale through a pay-per-use pricing model, flexible to aggregate heterogeneous services from multiple providers, and suitable for a test-and-learn approach to new business models, while supporting existing business models.
Building the Majesco Digital1st Insurance™ Platform
We began realizing this vision of an insurance platform at Majesco two years ago. As the platform economy evolved, it became clear that the established approach of building portals and other front-end capabilities would not solve the needs of the future. This required making some big bets from a resource-and-planning perspective, but the direction of the industry was not in doubt. We approached the task not in the typical review-and-budget process, but as a startup experiment. We began executing in stealth mode, with a small team on a need-to-know basis within the company, to cut off any temptation to sell the offering before it was ready.
Majesco Digital1st Insurance™ was designed and built as a microservices-based, multitenant platform. It has the ability to subscribe to third-party services and real-time data sources that traditional core systems cannot effectively support, and it is configurable for different customer and user personas. It is built to support experimentation and launching of new business models, with the ability to rapidly scale. It is made to adapt to different cost structures which are often the difference between success and failure in the on-demand economy.
The suite of Majesco Digital1st Insurance™ portfolio of solutions includes the following:
Majesco Digital1st Platform™—the foundation of the offering, constructed as an insurance platform with pre-built insurance capabilities for both property/casualty and life and annuities. We offer the Platform as a 100 percent SaaS offering available with a 30-day trial period, with low entry costs and no/low commitment.
Majesco Digital1st EcoExchange™—the next generation of partner ecosystem hub, using third-party services with a standard semantic layer for easy integration and a true “plug-and-play” environment for both traditional and InsurTech partners. EcoExchange differs from other industry offerings in that it works as an app store with API-based services rather than as a code repository. Types of apps available through EcoExchange can range from a non-interactive service call all the way to a comprehensive solution that can orchestrate multiple provider services, including interactive conversations.
Majesco Digital1st Engagement™—a portfolio of integrated solutions specifically for the creation of an enhanced customer experience, including:
Majesco Digital1st Journey Designer™—next generation digital tools to design the customer journey, with embedded insurance-specific content for various personas.
Majesco Digital1st eConnect™—next generation of digital engagement beyond portal and mobile with insurance-specific content for personalized customer experience.
In summary, the Majesco Digital1st Insurance™ solution portfolio is presented as the next generation of solutions to enable the insurance industry to make its transition to the digital, on-demand era. It enables insurers to create rich customer experiences; innovate business models, products and services; leverage a vast ecosystem of third-party capabilities; capture market opportunities; compete in the digital age; and reinvent the insurance industry.
If that sounds ambitious, you need only look at the way the world’s most successful new companies function. The digital, on-demand model of commerce is not a fad, and insurers determined to succeed over the long term realize that they must disrupt themselves before someone else does it for them.
However, insurers should see that as an opportunity to re-invent their companies, offering products that fit how people live today, changing the insurer/customer relationship to a higher-trust, greater frequency type of engagement, and becoming a partner in preventing loss as well as making policyholders whole again. As Buckminster Fuller observed, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”