Insurance firms around the world are united by the notion that it’s time to upgrade legacy systems and embrace innovation. The idea is for incumbent insurers to adopt and adapt the nimbler, customer-centric processes of the fast-emerging insurtechs – but moving beyond legacy is often quite challenging.
Many large insurance organizations have decades-worth of historical data and systems. This issue is only amplified as firms get stuck into the hot global mergers and acquisitions (M&A) market and take on more and more business. The temptation is to simply add more data and systems to the heap. It’s just like washing the dishes. What’s one more dirty plate to the pile?
The first thing insurers need to do when thinking about upgrading their legacy systems is to move beyond the heap, according to Bart Patrick, managing director of Europe at Duck Creek Technologies, a North American-headquartered property & casualty technology provider with a global footprint.
“People talk about systems architecture and technology stacks, but what many organizations end up with is a technological heap,” Patrick told Insurance Business. “As companies buy other companies, the temptation is to add to that heap, but it’s really important to find new ways of doing things. This is where on-demand software-as-a-service (SaaS) solutions present new opportunities. Insurers can park their heap and start again properly with configurable and upgradable technology.”
The ability to upgrade with ease is one of the core benefits of SaaS platforms, according to Patrick. While all companies start with the latest version of a piece of software, they don’t necessarily keep it up-to-date. Furthermore, they often start fiddling with it and wiring in new pieces of kit until making the necessary upgrades becomes a major headache. New solutions, like Duck Creek OnDemand, are built around configurability and connectivity. They can ensure upgrades are continuous, which means customers gain the benefits of the latest technological and functional advances.
Gaining those advantages would help an incumbent insurer move beyond legacy solutions, but it would also require the insurer to think about insurance technology and platform ownership in a fundamentally different way. As Patrick explained in a Duck Creek blog: “In the UK, the history of insurance dates back to the seventeenth century at the Lloyd’s coffee house. Underwriting philosophies, tools, and processes at UK firms are deeply established, posing formidable mental and technical obstacles to the incorporation of insurtech methods and philosophies into existing businesses.” Embracing innovation requires a psychological and cultural shift.
On-demand solutions also provide the answer to the expansive geographic nature of the insurance business. The current M&A boom is not only presenting legacy challenges but is also forcing insurers to adapt how they conduct international business.
Duck Creek Technologies was founded in Boston, Massachusetts, in 2000, but has since grown a global footprint. The firm has developed from being an on-premise lender of administration (policy, billing, claims, rating etc.) to focusing primarily on SaaS and on-demand solutions. These solutions are being requested by insurers around the world, regardless of rules, regulations and philosophies.
“I’ve worked with Duck Creek in the US and here in Europe. There are huge similarities and fundamental differences between the two markets, but insurance technology today is able to deal with that,” Patrick commented. “A lot of the differences are actually psychological. Insurance is insurance. It’s the transfer of risk into capital. Of course, there are differences in regulation, currency, taxes, languages and so on, but that’s all around the edges.
“A number of our US customers are asking us about global platforms. We’ve seen a lot of M&A activity, with US firms buying European companies and Lloyd’s syndicates. Now they want to extend their home platform into a global solution. There are challenges that come with that, but the differences between international insurance markets aren’t as extreme as they’re often made out to be. There’s no technological reason why on-demand solutions couldn’t be global in nature.”