Love him or loathe him, there are few who would argue that Elon Musk has had a huge impact on the world. Only a decade ago electric cars for the masses seemed like a distant dream. Fast forward to today and Teslas are a common sight on our streets. As of 2023, the company is the world’s most valuable car brand, with a market capitalization of over 500 billion dollars. In fact, it’s one of the most valuable companies in any industry.
It’s easy now to take this for granted and underestimate how huge a change in consumer adoption this shift to Tesla electric represents. Since 1885, when Karl Benz invented the first internal combustion engine car, we’ve had 130 years of improvements and tinkering with the same legacy technology. It took someone with the vision of Elon Musk to look again at the past, look again at the future and deliver disruption to the motor industry and bring electric vehicles into the mainstream. Electric vehicles now look like the future of personal transportation when 20 years ago they were a curious footnote. The days of the old way of doing it, aka the fossil fuel powered internal combustion engine, are numbered.
The software is key
But electric vehicles are more than a new kind of hardware. Some of the biggest leaps forward in automotive technology have been in the software. With an electric car, regular updates are scheduled and carried out without the driver even having to think about it. In many cases, bugs or minor maintenance issues that in a combustion engine car would necessitate a trip to the garage can be fixed by software engineers far away, who don’t need to see the car, let alone touch it.
This is the same principle for cloud-based insurance software. Previously, updates and changes to legacy insurance platforms needed to be handled internally by IT departments. It took a long time and consumed valuable resources. With newer insurance software, releases, updates, bug fixes and enhancements can all be done instantly on the cloud. This means insurance companies can be confident they are using the most up-to-date version of their systems to help drive operational efficiency.
It’s just like using your smartphone, which regularly updates the operating system without you needing to do anything but click to accept. What’s more, electric vehicle updates are encrypted to protect against hacking and in the UK and EU at least, your personal data is also protected under GDPR regulations.
The convenience and efficiency of this new way of solving an age-old problem is astonishing. But these are just some of the benefits of a new hardware connected to a new and secure software platform. And so it is in our industry of insurance.
Why tinker with outdated tech?
Look, don’t get me wrong. The early years of insurance software systems were almost as much of an innovation to our industry as the internal combustion engine was to transport. With the first policy management systems in the 1970s evolving into end-to-end software systems by the 1990s, insurance companies gained hugely from the increased efficiencies of large-scale data management in an increasingly regulated business.
But that was then, and the story since has been one of small, incremental improvements to legacy technology that doesn’t allow for anything more. It certainly hasn’t been able to keep up with the huge explosion of growth in structured and unstructured data over the last twenty years – an explosion that the industry as a whole is still struggling to keep up with. Digital transformation has been a buzz phrase in insurance for well over a decade by this point, and still we’re having the same debates about where to invest and how to manage the change.
This is where our industry can benefit from following the Tesla playbook when it comes to technological innovation. Simply put, it’s no longer worth it to tinker with legacy technology.
Patching legacy systems with a plethora of point solutions is increasingly expensive and inefficient, with much of the experienced talent needed to work with those systems now ageing out of the industry. Replacing one legacy system with a newer version of the same thing? This too is costly and takes years to implement a solution that is obsolete by the time it becomes operational.
Creating a connected business is critical for insurance organizations in today’s market. There are more technology solutions than ever to help streamline and automate tasks that were once done manually. As insurance companies embrace technology, they find themselves with a disconnected technology stack that can be just as complicate, or more so, than the manual way they did things in the past. This is why it is critical when selecting technology vendors to chose ones that are built with an open architecture and API connectivity. This will enable all the solutions to connect, share data and drive efficiency.
It’s all about the platform
So, it’s time to break away from legacy thinking altogether – as Tesla did – and embrace the state-of-the-art end-to-end insurance platform. The value to policyholders, shareholders and employees is not in the curiously complicated processes that connect their disparate technology solutions together. It’s in the data. So as Musk did with the Tesla, let us get back to the value we are trying to create. For cars it is easy. Transportation with the minimum environmental impact. For the insurance industry it is making promises and distributing them effectively for money.
What the insurance industry needs is to reengage with the core platform, such that the industry can get the same benefits as electric vehicle and smartphone software. Where data is hosted in the cloud in a way that it can drive what we need as the main priority. This seems sensible given that we can now store almost limitless data that can be accessed at any time from any location with an internet connection.
Address the key issues
The real question is why this is so important? Simply put, it allows for seamless integration throughout the entire insurance distribution value chain, from insurers/MGAs to brokers and the policy holders. It means that all operations in the front, middle, and back office can be linked in real-time.
The most obvious benefit compared to now it that it makes all transactions smooth and instantaneous, from quoting to processing policies, accounting, and claims management. The more important but less obvious benefit is that companies who make the change are now data fit. They can see more and do more. The revolution comes from the data.
This data can help deliver one view of the entire business and help drive strategic, data-driven decisions. Access to data combines with robust reporting and analytics can help identify areas for growth or underperforming business segments. Being able to access and analyse all the data from an entire organisation in one place can give a holistic view of the entire company, and also drive growth.
A market-leading platform can go further into this data, offering a 360-degree view of all customers and stakeholders. This means a broker can see with a few clicks which policies a client has with which insurance partners, while an insurer can see not only customers, but which other stakeholders are in the chain.
This means giving the end customer the best advice and the products they need and want. In common terms we call this upselling and cross-selling, which is presently tricky but, with the right platform that has access to real-time management information it becomes a breeze. This allows companies to see where customers could benefit from extending their coverage, or switching to different policies, and so much more.
As customer expectations are changing, it is important to embrace technology that increases value to customers by making it easier for them to do business. Today’s technology can help customers by making it easier to access policy information, make changes, file claims, pay bills and more. Delivering a better customer experience is critical to help insurance organizations keep pace with customers who want instant access and little interactions.
Mastering integration
Another secret to a great insurance platform is the integration capabilities they offer. There are many methods, however the explosion in popularity of integrating via APIs has meant that firms can integrate other software tools with the platform, making for a smoother transition and the ability to continually upgrade their capabilities.
Just as with electric vehicles, the future of insurance technology lies with best-of-breed cloud-based platforms. Anything less is really the equivalent of tinkering with a dirty engine. Sure, it’s familiar and you may even find it fun. But it’s time consuming and expensive and it’s not the future. When a world leading insurance business creates the category “heritage” in addition to “legacy” for its IT estate, it really is the time to get interested in the future.
You can see the same happening in insurance, where most of the forward-looking market leaders are ditching legacy tech (even as it is upgraded) for cloud-based end-to-end platforms.
If you want to keep up, you should do the same. Otherwise, you’ll risk becoming the insurance equivalent of a knackered old diesel on the scrapheap of history – or riding the horse with the pacemaker.
About the author:
James Doe is the Sales Manager at Novidea. He is responsible for integrating the entire insurance distribution lifecycle from client onboarding, quotation and policy production, to claims and finance.
