recent report, “Insurtech: Buzzword, Emerging Challenge or
Long-Term Opportunity?” found insurtech firms are playing an
almost forced complementary role to the more traditional side
of the insurance business.
Reports of Disruption
The panic so far has been provoked by talk of disruption, and
an assumption that the intent of insurtech is to “break” things
in the insurance industry, even the things that currently work.
A couple of years into the movement, and talk of disruption
aside, the business of insurance has not yet changed at a
foundational level. In fact, one could argue that insurance still
centers around the buying and selling of policies. The technology being used to facilitate those basic processes remains
largely unchanged as well.
Considering the long history of the industry, it seems
unreasonable to expect that change would, or should, happen
overnight. Business model evolution and course corrections to
the insurance product roadmap are happening slowly. In the
meantime, it makes sense that over 30 percent of the startup
activity in the insurtech space is focused on distribution channel disruption. Having been neglected for so long in terms of
technology and process re-engineering, quick hit improvements
are possible in distribution channels without waiting for an
alteration of the business model.
Investment dollars appear to bear out that insurtech can
fundamentally change the direction of the industry conversation as it begins to drive real change, in an evolutionary or
incremental way. However, until these changes begin to impact
the industry’s typical business model—and the fundamental
structure of insurance products—there is little opportunity for
true disruption. It is also what marginalizes many insurtech
startups right out of the gate, and what keeps these companies
playing on the third string instead of the first.
For now, the unaltered baseline of the insurance business
means traditional core administration systems are still king
of the insurtech hill. Startup or greenfield insurers need core
admin systems to run the business, and insurtech startups need
the ability to integrate with core admin systems on the back
end to enable data transfer and the exchange of meaningful,
relevant, and actionable information.
The More Things Change…
In insurtech, no decision is unassailable, especially when it
comes to system selection, but, second guessing the could-haves
and would-haves without firsthand perspective seems unfair.
Next to the hurdles involved in figuring out financing, determining the initial line of business (LOB) and geographies supported, and making facilities or operational decisions, selection
of enabling technologies, such as core administration systems,
is one of the biggest make-or-break decisions involved in the
launch of a new insurance company.
In the past, larger, traditional insurers often landed on the
build side of the build versus buy debate. Today, it is far more
common for startup insurers to decide against the build option,
preferring instead to focus on differentiation through unique
product features, service levels, accessibility, personalization or
even delivery, while leaving technology to the experts.
Startup or greenfield insurers are turning to incumbent
providers in the space for core administration, delivered with
a healthy dose of industry-domain expertise. By starting from
scratch, greenfield insurers may have dodged the legacy bullet,
but not just any old core administration system will do.
Nationwide Private Client, Nationwide’s greenfield subsidi-
ary targeting the affluent market, provides a clear look at what
kind of technology is actually empowering insurtech. Instead of
adopting or licensing solutions already within the parent com-
pany’s IT portfolio, Nationwide Private Client chose ISCS and
the company’s SurePower Innovation enterprise suite to handle
“Whether we are talking about startup insurers, greenfield
subsidiaries or traditional, incumbent insurance companies,
to be able to compete in today’s insurtech world, they must be
ready to integrate into a complex ecosystem that is the new
insurance marketplace,” says Andy Scurto, president of ISCS.
“They need modern technology with a comprehensive API
strategy and the flexibility this new insurtech market demands.”
It makes sense that over 30
percent of the startup activity
in the insurtech space is
focused on distribution
Source: SMA & St. Nick Media Services Research