7 Technology Mistakes Insurers Might Be Making

Santa Barbara, CA – May 20, 2020 – While so much progress has been made in insurance technology, there are still certain habits that are hard to break and lead many insurers into painful experiences with their systems and vendors time and time again. Unfortunately, these mistakes get overlooked or ignored because the common thread is that they don’t feel like mistakes. So don’t be surprised if one of these is happening at your company right now.

Mistake 1 – If It Ain’t Broke, Don’t Fix It

We have all heard this classic phrase before. Yet, for some mysterious reason, the insurance industry has not followed this modern proverb. In fact, insurers are very guilty of wasting a lot of time and money replacing systems that aren’t actually broken.

One major reason is because people and companies have convinced themselves that old technology automatically means bad technology and fail to recognize that technology is only bad if it actually prevents the company from pursuing top business needs. Just because your system is old, does not mean that it needs to be replaced, and just because you are installing a new system does not mean that all your problems will be solved. 

The reality is that in most cases, insurers are really trying to solve a single problem, but are inundated with vendors that either require them to purchase more than what they need, or cannot solve just that problem unless they buy the full package. Take rating for example. If an insurer needs a new rating engine and they are talking to suite-solution vendors, they realize quickly that they cannot just purchase the rating engine. Why? Because most, if not all, of the core-suite vendor’s products do not expose rating as a standalone component. So, instead of the insurer continuing their search, they get blindsided with a whole new policy admin system, multi-year implementation, and millions in cost. 

Just like the Gambler, you gotta know when to hold them, know when to fold them, and know when to walk away. Companies need to ensure they have a clear understanding of the business problems they are trying to solve, and solve just that problem. “Our system is too old” is not a business problem, and if your vendor is trying to sell you more than what you need, walk away – you probably got the wrong vendor.  

Mistake 2 – Ridiculously Failed Process

Ah, the infamous RFP (aka Request for Proposal). By far the most overdone and underthought process imaginable. So why does the industry continue to rely on such an inefficient process?

Typically, RFPs take a massive amount of time for all parties to complete, often adding months and months to a project at the onset, and never really qualifies the prospect solutions accurately. Just about every RFP focuses on a copious list of do you have this feature or not without regard to the quality of those features. The result is a shortlist of products that have the most checkmarks. We never buy any other products this way, so why would we treat software any differently? 

Imagine you are shopping for a car. A Porsche has an engine, doors, and two cup holders; while the Ford Fiesta has an engine, doors, but four cup holders. Using the RFP process and approach, the Ford Fiesta would score higher than the Porsche just because it has more cup holders. That obviously does not work.

Instead of spending months developing an RFP and more months reviewing responses, just meet with prospect vendors. Give them each an hour to make their pitch and demo their solution. Within a week you will know if you found the right vendor, and it may introduce you to solutions you never knew existed. 

Mistake 3 – The 5 Year Roadmap

“We are in year 3 of a 5 year implementation project.” Sound familiar? If it does, you are doing something wrong. First of all, what aspect of your business can afford to wait 5 years for anything? It is an immediate sign of a failing or an already failed project, and everyone on your team knows it. So why not stop and do a course correction?

Part of the reason insurance technology is so slow to change is people are making these unnecessarily huge, scary, multi-year technology bets. And then 2 years in, it’s already 1 year behind, but at that point everyone is too invested and too afraid to admit it was a mistake, so people keep pushing ahead. 

Meanwhile, the business can’t wait, so much more tactical and likely successful side projects spring up to actually address the business needs and move things forward. Eventually the behemoth project stumbles across the finish line, or gets declared a success, by which point it’s probably time to do it all again! 

You know what they say… “nothing good happens after 12…am”, well nothing good happens after 12 months either. That’s as long as any project should be, and most should be far shorter: if your vendors are not talking in weeks or months, or can’t even give you a definitive timeline, you’re either tackling too much at once or you need to find a new vendor.

That is the real problem here. Just about every vendor claims to be efficient, can improve your speed to market, and has implemented most lines of business; but they cannot tell you how long a project will take – even with all of that experience. So challenge your vendors, ask the tough questions, and don’t accept ambiguous timelines.

Mistake 4 – Business Before Buzzwords 

It should come as no surprise that the insurance industry is infatuated with buzzwords and has been for quite some time. However, in some ways you can’t blame them. As one of the major industries that uses technology, it is easy to get on the buzzword bandwagon. Unfortunately, it comes at pretty high cost – the business.  

Just about every ten years, new buzzwords emerge from the depths of who-knows-where, and completely disrupts every conversation in the insurance industry. Theories, meaningless claims, and newly self-appointed experts clamor the stages of every industry event, webinar, and newsletters talking about how this new buzzword is going to revolutionize the industry. 

The result is an entire industry being completely distracted from discussing and solving real business problems – and there are many to be solved. There are dozens of insurers out there that cannot rollout a cyber product, can’t have more than one vehicle on a policy, or still rate every quote manually in Excel; yet, they have an Innovation Team researching Artificial Intelligence, Machine Learning, and Blockchain – none of which will solve any of their problems.  

It is great to research new technologies and theories about how to make the industry better as a whole, but as an industry, innovation is better served when it arises out of business and customer needs, not just trying random technologies to make the company seem cool. And it should never come at the cost of your business. Let’s be honest. This research is really more for PR reasons than actually solving problems. 

So, get off the buzz and start focusing on what really matters – the business.

Mistake 5 – Face It, You’re Not a Tech Company

The industry has slowly been realizing this and making that transition; however, there is still a significant part of the industry that continues to have the build-versus-buy debate. Even with all of the available solutions on the market, companies are still considering building their own applications. The build option may have worked 20 or 30 years ago, but today, it is a death-march project. 

In many cases, companies try to build their own software because they had horrible experiences with past vendors – milestones were missed, the software didn’t do what we needed, the project took way too long and cost more than expected – driving many companies to build it themselves when what they really needed was a new vendor. 

There is a false perception here that “we can build software to work exactly how we want it to,” and that is a dangerous state of mind. The reality is that you cannot build a better spreadsheet application than Excel, or manage servers better than Amazon. 

We need to keep pushing that attitude further up the stack, enabling insurers to focus just on what makes them different, not on building technical infrastructure. Insurers with the best technology tend to be the ones that value technology deeply, but also understand that they are not a tech company. 

The purpose of an insurer is simple – to develop innovative products that consumers and businesses want or need, launch them to market, and manage risk. Technology obviously plays an important role in this, but it is not the insurer’s responsibility to manage that. Consumers don’t buy your insurance products because of the technology you have. They buy based on getting the best coverage, at the best price, and a great customer service experience. So focus on just that, the business.  

Mistake 6 – The Multi-Tool

Multi-tool implies that you are getting several great products all wrapped up in a single package. The problem is what you’re actually getting is a crappy screwdriver, a bad saw, and so on. Might be “ok” in a pinch, but it’s not what you use to build a house. If you need a screwdriver, get a good screwdriver.

Software is no different. We all wish the one perfect system could serve every need perfectly, but it’s impossible: technology is fundamentally about priorities. Try calculating table values in Word instead of Excel. It’s pretty bad. If your business insisted on using just Word or just Excel for everything, you’d be inefficient or outright non-competitive. Enterprise software is the same – one thing just can’t do it all well.

And this has been proven time and time again in the insurance industry. Companies invest millions of dollars implementing full suite solutions and in the end, they still have the same problems they had when they started. This goes back to Mistake 3 – The 5-Year Roadmap. If you need a new rating system, just buy a rating system and integrate it. 

The reality is that many of the suite solutions make it difficult to use anything outside of their applications. It is how they lock you into only using their system. There is also a perception that buying a suite solution makes doing business easier since you only have to deal with one vendor, but we know that is not true. Most suite solutions require the use of third-party integrators, so you not only have to deal with the supplier, but the implementor. 

This is where the power of APIs comes into play and leads into Mistake 7 – Avoiding the Sinkhole.

Mistake 7 – Avoiding the Sinkhole

When you build a house, the foundation has to come first. Yes, you could skip the foundation and try to shore up the sides later to keep it from collapsing, but it’s not a great solution. Software is the same way, and the foundation of modern software is APIs. 

So many times we hear about projects where they’re “adding an API layer” or a new version of software “now, with APIs.” It might sort of work, but it is never going to be the same as if the foundation had come first.

What enables the flexibility and longevity of great software is knowing that you can’t see the future, knowing you don’t know exactly how future users or systems will need to interact or integrate with you. The way to achieve that is to have every single thing in a software system be a clean well documented API first.

If there’s some things you can only do via the user interface, you should worry about the quality of that system’s foundation. In today’s world, APIs cannot be an afterthought. They need to be the first part of every software development plan.  

So, next time you talk with a vendor, ask if their solution is cloud-native and built with an API-First architecture. If they cannot provide a direct answer, walk away. That goes for any suite or standalone solutions.  

So, what should you do about it?

If your company is experiencing any or all of these mistakes, don’t panic! All is not lost and it is never too late for a course correction. Here are some simple steps that you can take:

1  If you are in the middle of an RFP process, or a multi-year implementation, stop what you are doing, take a step back, and re-evaluate. Pick ten solutions and schedule one hour sessions with each of them. In ten hours, you will find a solution that meets your needs.

2  Take time to really define and understand the problems you are trying to solve, prioritize them, and focus on just fixing those problems.  

3  Challenge your vendors on implementation timelines. If they are experienced in the industry, then they should be able to provide a confident proposal and estimate. 

4  Avoid any system that is not cloud and not built on an API-First architecture.  

5  Stay focused on innovating your products, managing risk, and keeping your customers happy.