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London market players need to eradicate technology silos

January 14, 2020
As smart technology ecosystems becomes more of a mainstream reality, carriers dependent on closed-box technology infrastructure will be left even further behind

Embracing technology eco­systems is quite simply essential to the future success of property/casualty (P&C) re/insurers – and I do not say this lightly.

The recent Lloyd’s Blueprint One highlighted this in abundance – in fact, the report places the con­cept of the digital ecosystem with consistent technology standards and open architecture at the heart of its ambitious vision for a digital­ly transformed marketplace.

This is because a successful tech­nology ecosystem allows many different companies to bring inno­vation to the market – facilitating access to new tools, services, and data sources that are both tailored to specific business users and at the same time powered by a much broader collaborative effort.

The ecosystem approach cham­pioned by Lloyd’s Blueprint One is a step­change for insurance technology providers, because it is a recognition one single pro­vider cannot possibly control all the present and future functions of insurance and deliver the best functionality and value across such a broad spectrum.

This approach is a revolution, a giant leap away from the “all eggs in one basket” approach of closed­ architecture, on-premises systems towards an interconnect­ed, open­ architecture cloud net­work that combines the best the global tech market has to offer.

Interoperable application pro­gramming interfaces (APIs), open architecture and multi­-tenant software-as-a-service (SaaS) offer significant advantages not just for the Lloyd’s market but for the global re/insurance sector as a whole. They allow carriers to embrace the best of traditional in­ surer applications, as well as the latest emerging technologies and datasets, then integrate them into their environments with ease.

‘Regardless of lines of business, financial stability or established reputation, carriers that are unable to keep up
with the pace of change within and outside the insurance industry face an unprecedented challenge keeping up with intensifying customer expectations’

Examples of such plug­in tech­nologies include the SaaS pay­ments platform InsurPay, claims litigation defence cost mitigator Milliman Datalytics Defense, and telematics sensor and date pro­vider Roost – just three of the literally thousands of highly inno­vative, insurance-specific systems that deliver far above and beyond what traditional insurer techno­ logy can achieve.

At the same time, the nature of ecosystem­-friendly SaaS plat­form architecture means all users benefit from economies of scale, for instance benefitting from thousands of Microsoft security specialists with tens of millions of pounds of budget working on keeping your data safe and managing the task of upgrading your technology, as opposed to a
far smaller in­-house team with fewer resources at their fingertips. In fact, the eradication of the upgrade burden is possibly the biggest step forward in insurance operations since the first green- screen tech came online – giving insurers instant access to tech­nology that is always up to date, without the need for their direct intervention, time, effort and cost to keep it that way.

Cultural shift

What is holding P&C insurers back from this ecosystem utopia? It is not just about technology; there is a need for a psychological and cultural shift – a change in the mindset of a market that has been separated by in­-house technology silos for too long.

A recent Celent report, Navigat­ing the Pace of Change in General Insurance, highlights while some leading insurers are increasing­ly partnering and building eco­systems to gain a competitive edge in a crowded marketplace, too many carriers rely on creaking legacy on-­premises core systems for their most critical business functions, missing out on a key source of competitive advantage.

The report points out while the collaborative ecosystem approach is clearly the future direction of travel for P&C re/insurance, with the availability of more agile op­tions becoming more widespread and cost-efficient, the pace of change has simply been too slow in insurance. Instead, there is a reluctance to move away from traditional on-premises solutions; technology that is now out of date almost as soon as it is installed and represents in effect just another legacy layer.

In fact, legacy systems are like a noose for insurance carriers, strangling their ability to adapt and keep pace with the evolv­ing world around them, and yet many seem strangely attached to this familiar way of doing things. Perhaps it is because on­-premis­es technology occupies physical space in an insurer’s building; its bulkiness, blinking lights and noisy fans are reassuring in an in­dustry that has always taken the business of technological change at a creeping pace.

The historically slow pace of change is also the reason why Lloyd’s Blueprint One is ambitious – it is asking carriers in a partic­ularly traditional corner of the re/ insurance industry, which still rely on boxed­-in, on­-premises techno­logies, to open their minds and imaginations and move towards a completely new paradigm.

To win and keep business today and in the future, P&C carriers need to bring more specialty data, services and capabilities to bear on their processing and decision­ making than ever — and they need to access all of it quickly and seamlessly.

This Celent report sums it up neatly: “Regardless of lines of business, financial stability or established reputation, carriers that are unable to keep up with the pace of change within and outside the insurance industry face an unprecedented challenge keeping up with intensifying cus­tomer expectations.”

There will be naysayers and eye­rollers – there always are – but the facts will speak for them­ selves and re/insurers that think they will be able to hit the ground running in 2020 with a business powered by outdated, closed­box systems will find themselves on the wrong side of our industry’s history of success stories.

If you cannot use the latest data sources nor harness the most in­novative insurtech in the market and plug it into your own business, you now face an unprecedented struggle to remain relevant and up to date. In a highly competi­tive market, the winners will be those that have more knowledge and insight at their fingertips and make better decisions as a result. Technology ecosystems are the answer, not the question.

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Bart Patrick
Bart Patrick is Duck Creek's Managing Director for Europe. Specialising in digital insurance innovation, his prior roles include heading up insurance business strategy, technology, services and sales for companies such as TCS, SAP, Pega, and SAS – running P&Ls in excess of £25m and supporting staffing levels of more than 1000. In his most recent role as Director, Insurance EMEA at SAP, Patrick directed Insurance Innovation for the EMEA North region, helping insurers and insurtechs alike get the most from their investments in technology.