“When in the Course of financial operations it becomes necessary for people to disrupt the legacy bonds which have connected them with insurance and to assume among the powers of the industry, the separate and equal station to which the technology and innovation entitle them, a decent respect to the opinions of mankind requires that they should declare the cause(s) which impel them to the separation.”
No, Thomas Jefferson and his peers did not declare insurance innovation as a cause in 1776, and his well-known version of the United States Declaration of Independence is far more articulate than the paraphrased paragraph noted above. But it’s July 4th, the U.S. Independence Day, and it seemed fitting to have a topic that tips its tricorn hat to the day.
It’s easy to declare a need for separation from the bonds of a multi trillion-dollar legacy industry, but as with any long-standing governance or tradition the declaring is much easier to accomplish than the doing.
Insurance innovation is a heavy lift of a heavy industry. Insurance is many things, many covers, many types of service, many jurisdictions, many carriers, and of course- billions of customers. As the Insurance Elephant has previously noted in “The Blind Men and the Elephant, InsurTech and its Many Perspectives” , insurance innovation is comprised of many disparate parts that make the whole beast, yet each person who has motive to adopt a ‘separate and equal insurance station’ perceives the beast as the activity in which the respective ‘each’ is involved.
The industry functions and provides the foundation upon which ownership and finance can rely, yet in its entirety the industry is held captive by the tyranny of technical, organizational and process fealty. Process inertia and associated data management are ingrained within every aspect of the insurance system with which all are required to comply, and innovation must expend valuable energy in convincing incumbent management hierarchies of its worth.
And there are plenty of data that need to be processed- one by one, by ten, by one hundred, by one thousand, million, billion, trillion forms. The industry employs millions globally to handle the volume of paperwork/data/forms. Customers (for the most part), vendors, providers, service persons, agencies, and regulators are accustomed to the paper chase- but will that ensure an enduring, effective industry going forward?
These truths are self-evident- insurance must free itself from the shackles of legacy complacency.
There are many ‘patriots’ resisting the tyranny- companies that have developed clever methods to structure data that exists in native unstructured form, e.g. ExB Labs whose Cognitive Workbench can “search texts and images for content,…also classify, interpret, summarize and evaluate” unstructured data. Or RhinoDox, whose document management innovations make captured, unstructured data easier to find and use (yes, it’s clear that for now that firm’s focus is on manufacturing innovation, but their heart remains available for insurers). And insurance process management platforms that have developed- These are, however, just tools to mitigate the overburden of legacy systems, not the inertia-busting change that is suggested for the long-term health of the industry and its participants.
Consider- there are a whole lot of persons employed in the legacy insurance industry, persons who understand what customers need, how processes function (or don’t), how to workaround systems that are obsolete, ensure customers have the appropriate cover, adjust claims within a patchwork of old and new systems, are subject to operating priorities that vary by the quarter, and are witness to the loss of intellectual capital due to attrition and retirement of tenured colleagues.
Yet despite those self-evident factors these millions are not encouraged to participate in the active dialog of innovation and InsurTech. Not only is that wealth of staff knowledge generally unavailable, outside of participation in conferences most of those who are putative industry leaders are reluctant to be or missing in the discourse. The drum beat of innovation is heard in the town square but remains surprisingly mute in many parts of the industry. In the absence of the light of discourse, the tyranny of legacy insurance prevails!
As with established global governance two hundred and forty some years ago and the onset of the nascent United States, there is optimism for change. Perhaps it is time to examine if the current indemnity model that exists for many covers has been outpaced by data availability and alternate means of claim reimbursement, e.g., modified parametric plans. There are plenty of vested interests holding indemnity contracts near, but is a rebellion in the offing?
There are markets that have avoided the need to innovate- those are the digital native markets such as China, or India, or South America, where insurance products have taken hold for hundreds of millions of customers by working from innovation backwards- what does the product need to be to serve the delivery channel the customers expect. There are niche customer segments that have been found and are being served by new products and new players, but these unique markets are an insignificant (statistically speaking) part of the whole.
So let’s talk about the incumbent markets that have the technical, organizational, and process debt that innovation has yet figured out how to amortize, but that is fodder for a declaration of insurance innovation independence. A need to cast off the yoke of what has been and find the what can be.
A very heavy lift, indeed.
A Happy Fourth of July to my U.S. colleagues. And apologies to Thomas Jefferson, et al.
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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