Global Business Intelligence

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Harnessing the Opportunities of Insurance Innovation

General insurance companies today face rapidly increasing demands both externally and internally. Externally, customers and agents alike expect a purchase process that used to be slow and complicated to now be fast and easy. Internally, there’s pressure to implement ever more sophisticated risk pricing and eligibility screening, augmenting the basic rate tables and human judgement of the past.

Technological innovation is typically heralded as the solution to these challenges, but insurance companies historically have struggled to adopt new technologies, says Michael DeGusta, CEO at ClarionDoor. As a result, many technology departments are being left further behind than ever. However, new solutions and new approaches can now make organisations faster, more efficient and successful.

Changing times

The dynamic of customer interaction is not what it used to be. DeGusta explains: “In the past If you were an insurance company, you used to have one person to do business with, such as a retail agent, and one or two ways to deal with them: phone, fax or whatever else.” However, today there is a higher demand for more diverse options to communicate and interact with each other.

“A customer may want a simplified app, a small retail agent might want a website they can visit to give them more flexibility, brokers may want to use their own systems and have web services to work with you”, he adds. Ideally, an insurer should be able to simultaneously serve all of the various ways of transacting business, as well as be ready for other ones that may arise. It’s also important to do so in a way that fully meets the diverse needs and wants of customers, partners, and staff.

Similar challenges

Looking across the market sectors and regions, DeGusta suggests that they all have very much the same innovation challenges: “They often have a different set of resources to deal with. A large US personal auto insurer can justify having a huge team, spending lavishly on external software and on consulting to make some of these changes, but that requires a big bank account as well as the willingness to wait years. If you are dealing with a tighter timeline or a smaller line of business – a niche commercial business – you might not be able to justify that level of spending or afford to wait that long, but you still have to meet the same expectations and the same needs.”

Therefore, he argues, the challenge is to quickly innovate without having to spend so much. Expenditure on innovation will nevertheless differ across sectors and regions. Some insurance companies may have access to satellite maps that may graphically enable analysis about customer demographics, risks, and so on. Yet there will be other firms that may not be able to afford innovations such as this, so there is a need to prioritise which innovations are truly essential for growth and survival.

Change is possible

DeGusta thinks that it has become increasingly possible to change the traditional ways in which insurance companies have worked in the past. “If you’re still working with the fax machine, you are probably going to go the way of the fax machine. So insurers realise they need to change, and from our perspective as a partner it’s important for us to understand why they haven’t adopted these technologies in the past, and to provide a solution that addresses those problems while moving them forward”, he says.

There are varied reasons why certain technologies and innovations haven’t been adopted, and so ClarionDoor works with its customers to find out what they are, and how to resolve the issues affecting their ability to use them to innovate. He claims this represents an “exciting opportunity” to assist companies that have historically struggled with technology projects to work with a partner that understands that technology is only part of the solution. People and processes often matter just as much, if not more, than the technology itself.

Automating insurance

He then approaches the subject of how artificial intelligence; machine learning; and automation can help insurance companies to innovate: “The potential is amazing, and it’s very exciting that people are thinking about it, but one of the things we’re thinking about is about how to help insurance companies to easily try these new techniques and see the potential impact, for instance on the prices existing customers would pay, or the decisions underwriters make?”

Today there isn’t enough focus on automating innovation; every new idea or data source that an insurance company wants to use, first has to go through a lengthy sequence of emails, meetings and IT projects. “We are trying to focus on how we automate that process to enable companies to get from where they are today to that promised land of automated, intelligent underwriting and selling”, he explains.

Data opportunities

It goes without saying that data has been the epicentre of modern insurance. Data is everything to an insurer. Insurance companies traditionally compared their polices against their claims to consider how they relate to each other. Now, with the abundance of external data available, they have the ability to go further, analysing why customers didn’t buy their policies or why they didn’t sell to certain people. The cause may be pricing: was it too high? By using this data, you can find out more about customer profiles to find out what they look like, and what motivates them.

DeGusta explains: “The real opportunity here is that insurers now have the ability to create more innovative pricing models based on a larger data set, rather than just relying on their own data. Building models, based on their own data, only captures the profiles of consumers or businesses that have already purchased their products. Often insurers don’t even capture or study the customers they quoted who didn’t buy – we make sure all of that is available for analysis.”

To create innovative products, and to attract new customers while retaining existing ones, insurers need this extension of data to avoid limiting their outreach. By avoiding such limitations, they can connect with the broader market. “So, with the influx of data that extends beyond just what the insurer holds, they enable more innovation in their products”, he adds.

"We are trying to focus on how we automate that process to enable companies to get from where they are today to that promised land of automated, intelligent underwriting and selling."
Michael DeGusta, CEO at ClarionDoor

Success story

So why and how has ClarionDoor been successful in attracting so much interest in such as short amount of time? How long has that ‘short amount of time’ been? DeGusta responds by revealing that in just 5 years the company has gained customers across the United States, Australia, New Zealand, the United Kingdom, and “…we have large insurance companies – some of the biggest in the world – as well as “hip” start-up insurance firms.”

“Our team has been able to very quickly get people live, out there from a time and cost perspective using a very efficient process. When people see that it works, word gets around”, he says. In other words, he explains, ClarionDoor’s reputation is being built on being able to help others to innovate fast, without having to wait years and without spending millions of dollars to see if it works for them.

Accelerated implementation

To achieve accelerated implementation times, he says ClarionDoor tries to take the load off insurance companies. He explains: “We will try to get you [as a client] something to look at as quickly as possible; it’s so much easier for people to see something in front of them to then say, “Ah, this is what’s right and this is what we’d like to do differently!””

From there his team tries to iterate weekly until customers are ready to go live. He says many people talk about agile processes, but everything needs to actually be fast for it to be agile to ClarionDoor. Beyond processes, cloud computing is often described as being agile. So, why is a cloud SaaS model the answer to allow the industry to meet market demand?

He responds: “The simplest answer is that everyone is already too busy. Insurance companies need to focus on their product, their market, their innovation – not on managing servers and technical deployments. They need to make business decisions and get live quickly without worrying about the underlying technology. They just need to worry about the business.”

In conclusion DeGusta discusses the future of ClarionDoor, and about how its values will shape the company well into the future: “ClarionDoor is 100% committed to being the best partner for insurance companies to get their products out into the world; the prices and the policy contracts, across every channel, every market, for any line of business in any region.” He says his company also wants to continue to improve itself in what he describes as an exciting time to help insurance companies, aiding them to address the wide range of challenges and opportunities that confront them.