Wherever we go in the insurance world today, we seem to hear the same story. ‘Our policy administration platform is holding us back. It limits how we do business. It costs too much to operate. It’s slow to change, we’re doing too much off-system, and we’re relying on out-of-date data’.
Issued within the Broker Supplement of Issue 67 of Modern Insurance Magazine
It’s a surprising state of affairs when we consider the fact that the industry sells fundamentally information-based products, with such a strong reliance on interactions between parties. However, perhaps the current state of things isn’t so difficult to understand when you look back over the history and evolution of insurance technology, particularly since inter-party communications became possible with the arrival of the Internet in the mid-nineties. It’s probably fair to say that the industry’s first opportunistic lunge into building broker-to-insurer connections is still defining how it works today.
EDI mailboxes are a great example. A technology that became popular almost 30 years ago to exchange quote and policy information between parties was moved onto the internet in the mid-1990’s, and this is still with us now. EDI mechanisms are slow and expensive compared to our modern means of achieving the same goal, yet the cost/benefit equation for moving away from this technology has not yet been sufficient to bring about widespread change.
It’s a similar story with those proprietary broking platforms with their roots firmly lodged in the 1990s or earlier. They achieved a degree of rudimentary connectivity that enabled simple broker/insurer interactions, but these are now looking very cumbersome when viewed from the vantage point of collaborative real-time underwriting, instant market-wide product updates, immediate data access and artificial intelligence – all of which are enabled by today’s unlimited cloud-based computing over high-speed networks.
Recently, ParaCode has been shining a light on how today’s most common distribution platforms are causing a drag on the industry, particularly because they require prior knowledge of insurance products before parties can fully interact with each other electronically. Essentially, getting a product out to brokers needs all the parties and their platforms to be preconfigured in order to exchange product information with each other. This is either achieved with baked-in, proprietary platform-to-platform connections, or via shared standards-between platforms. Consequently, getting a whole new product line or a simple question set change to market can take months, costing tens (or even hundreds) of thousands of pounds. Primarily, this is because there are so many parties that need to be coordinated to achieve just one simple change.
Making matters worse, innovation that could be expected from new platforms entering the market has been stifled. There seems to be a large barrier to entry in the form of a ‘chicken-and-egg’ situation between insurers and brokers. One side won’t adopt a new platform unless the other is already present, and hence this makes it near enough impossible to get started in the first place. New broker platforms are rare, while new insurer platforms aren’t integrated with existing broker distribution platforms, leading to a myriad of insurer-specific portals that brokers are expected to interact with individually in order to access the products they need.
Platform suppliers themselves have also demonstrated an inability to evolve their own offerings in order to gain access to modern technologies, whilst at the same time being protected from competitive pressures when new platforms are unable to gain a foothold in the market. All together, these factors create a technological impasse that forms the root of most issues in play today.
Denying access to advanced technological capabilities results in the insurance industry appearing to seem rather backwards. Business innovation is stifled by the high costs associated with change, while basic operations are mired in operational inefficiencies, all too often reverting to paper, email and other off-platform mechanisms. Inevitably, this situation has to end. With the pressure of available new technological capabilities mounting – like rising water behind a dam – ParaCode is at the vanguard of change, one that is very quickly going to burst across the market and upend the status quo.
ParaCode’s broker and insurer platforms implement radical concepts, including an open and unified marketplace where all parties have equal access to trade freely over any insurance product. There is also the capacity for dynamic distribution, where any product can be published or updated across the entire marketplace via any channel, on demand.
Truly self-service, totally unlimited, rich product definitions, coupled with tools like flexible form builders, allow any kind of insurance product to be built and launched quickly, easily and cheaply.
These products can also be exposed to brokers, affiliates and websites without external vendor involvement, and hence without cost or delay. The only considerations will be the commercial ones, which is exactly how it should be in the first place!
You will likely be wondering how such a revolution could be possible after so many failed attempts in the past. The answer is almost entirely a result of the proper applications of today’s vastly superior technological capabilities, when compared to the archaic platforms in use today. The advantages of these technologies have become so great that the challenges of effecting change are now easily surmountable, and the benefits in terms of competitive advantage are entirely irresistible. Niche products are already starting to appear on these new platforms, available for any broker to access. These are being joined by more mainstream products, and the competitive benefits will soon be realised too. Low-cost agility and consistent, equitable marketplace access will become a significant factor in user profitability, creating a driver for wider adoption as a consequence. Once the ‘chicken-and-egg’ barrier to entry has been removed, the incumbent players will no longer be protected from competitive pressures, and will be forced to reckon with their inability to evolve and innovate.
Low expectations have become endemic among consumers. On a daily basis, we bear witness first-hand to how shocked people are when they see what is now possible, and they begin to grasp the scale and implications of the revolution that is gathering pace as this sort of technology becomes commonplace.
It’s time to stop believing that the status quo is a permanent state. Let’s raise expectations and dare to imagine what could be possible in an unshackled marketplace!