I was on a webinar panel earlier today discussing legacy systems and their role in innovation in the insurance industry.
We are #LIVE! Tune in to listen to @bradbox, @madgeni, @kateastall & @iangandy discuss how established and incumbent insurers can turn their legacy into an advantage. >> https://t.co/jaQ7kosRlP #webinar #insurance pic.twitter.com/wdQeYnDVFN
— Endava (@endava) June 20, 2019
The premise was simple. Given the hype around digital you might be excused for thinking that you need to re-platform everything, rip out what you currently have – and start again – to remain relevant in the modern insurance market.
Especially given the threat from fleet-of-feet start-ups operating with a clean piece of paper and no legacy technology.
But it should not be forgotten that as a legacy organisation you have a number of things that start-ups would love to have. Including data and customers, and that is just for starters.
Here are some of my notes from the webinar. You can also watch the full feature length video with your family tonight.
“Why legacy is an advantage”
My immediate answer: 1. data, and 2. cashflow!
- Legacy implies existing customers and business
- These are two parts of legacy that an insuretech start-up would love to have!
- Corporates are [usually] safe, with secure cashflow. Start ups are risky, usually without a customer base. How do we combine the advantages of both?
See this CB Insights report of why start-ups fail:
- After reading 298 goodbye letters and investigative takedowns, CB Insights created the list on the right.
- 97% of seed or crowdfunded companies eventually dying or becoming “zombies.”
- 70% of upstart tech companies fail — usually around 20 months after first raising financing (with around $1.3M in total funding closed)
- 8 of the top 10 reasons, are activities that traditional insurers have overcome. Here are some of them:
- No market need: traditional insurers can work to their own customers and use their current price proposition teams
- Cashflow – advantage traditional insurers
- The right team – there’s something to be said for bringing in external, non-insurance skills to traditional organisation. However, traditional insurers are likely to have ready-built teams for new products
- Pricing & cost issues – insurers have a wealth of experience with pricing and managing the loss ratio
- Product without a business model – we’ve seen some traditional insurers adopting newer techniques and tools such as canvases (e.g. Business Model and Lean Canvases)
Moving back to the data… insurance is a predictive-modelling industry. Other industries (e.g. cars) have had to adopt data science and AI. Insurance has had this for about 350 years. Tesla vs incumbent… (AIG Chief Scientist at AI Summit last week)
In summary… legacy is usually an advantage.
People, Process and Technology
It’s interesting that number three on the reasons why start-ups fail was Not the right team.
Today it’s people, using technology, that drives innovation.
Here are three initiatives to encourage innovation:
- Organise thought leadership sessions with both internal speakers and external companies. Your colleagues will rise to the challenge, and external speakers always provide a different viewpoint and ways of thinking. See your teams as positive SMEs (Subject Matter Experts).
- Run hackathons as part of your product lifecycle. Make them business as usual, as part of product development. Invite business managers to join hackathons. Some of our most successful hackathons have had chief underwriters at the event.
- Cultural changes. These are probably the hardest. Personally, I’m one for a clear and concise vision, either at company or division or even product level. I once asked one of our customers what the vision for his team was, and how his team was measured. He shrugged his shoulders. So I asked what the vision for his division was. Same response. I asked what made him come into the office in the morning to keep driving his (rather difficult) programme forward.
When we talk about people, process & technology we tend to think more insular, about our own organisations, we need to think externally too.
- Who are the users using our products?
- What are their expectations? How can we exceed them?
- How can we simplify their experience?
Enjoy the video!