インシュアテックの原動力：クラウド

I need to get something off my chest. I am not a fan of the term insuretech. There, I said it. I can’t help it—lexical pedantry runs in my family.

It’s not that I am against the idea of putting technology to productive use in the insurance industry. Rather, it’s because insuretech seems like nothing new. Insurance and technology form a mix that’s over 70 years old. Insurance carriers were among the first companies to use computers when they became commercially available in the 1950s. For decades, insurers have been adopting technologies commonly associated with insuretech, including artificial intelligence, geospatial analytics, and telematics. Digital distribution of insurance has been around almost as long as the Web itself.

The etymology of insuretech was not originally about insurers using technology to improve their businesses. Rather, it was—and still is—the story of venture capitalists trying to put incumbent insurers out of business (or at least drink their milkshakes). Private equity firms have invested billions of dollars in startup insurers that promise transformative improvements in value delivery and efficiency through technology.

If there’s a tech in insuretech to emphasize, it’s probably cloud computing. Insuretech firms tend to be heavily reliant on the cloud. In many cases, their products would be impractical to deliver, and their value propositions would be irrelevant, without the cloud. This is true of insuretech insurers, distributors, and solution providers alike.

The increasing ubiquity and maturity of cloud paradigms, platforms, and providers is, in my opinion, the real engine of insuretech. The cloud has magnified the value of a host of other technologies and created synergies among them. The opportunity for startup insurers to disrupt incumbents is largely rooted in their willingness and ability to go “all in” on the cloud. It allows them to generate compelling advantages in scale, network effect, and process efficiency.

Carriers see the writing on the wall. They know they will eventually need to replace their old technology powerplants with cloud-based engines, but most are struggling to make progress. Some have barely started their journeys. With well-funded insuretech carriers trying to put them out of business, one would think that incumbent insurers would move faster, but there are major challenges.

Cost. The cloud is not always cheaper. In addition to implementation costs, carriers face potentially more expensive ongoing fee structures. Monthly service charges may seem like a raw deal compared to an upfront purchase price and modest monthly maintenance fees. Modeling the cloud’s return on investment and building a credible business case for the CFO can be tricky.

Capacity. IT departments are overburdened with other projects. It is hard to find time for cloud migrations when everyone is already busy trying to replace legacy core systems, modernize customer experiences, and implement better analytics. Ironically, insurers would find themselves better equipped to chip away at the innovation backlog if they could accelerate their migration to the cloud.

Complexity. With numerous cloud vendors, the largest of which have scores of product offerings, it is difficult to select the right mix of platforms and providers. Insurers are taking their time to get it right. No one wants to build a technology house atop a shaky foundation.

Capability. Fundamental differences in the cloud, compared to traditional technology architectures, require new processes for developing software, managing data, ensuring security, and more. New processes, in turn, require new roles, skillsets, and tools, as well as a greater reliance on vendor partnerships. These capabilities take time to develop.

Coherence. The full potential of the cloud cannot be realized by simply migrating or replacing existing systems. Rather, it requires that insurance companies reimagine how they do business to leverage the inherent advantages of the cloud. Coherence between business strategy and technology strategy can be difficult to achieve when for decades they have been developed separately.

Carriers that can overcome these challenges will be able to deliver better value to their customers while also realizing cost efficiencies. More importantly, these cloud-based carriers will improve their ability to adapt to changing conditions, making their competitive advantage more sustainable.

Perhaps one day, someone will invent a clever portmanteau for cloud-based insurers. (I’d suggest calling them insurecloud carriers, but a few solution providers have already adopted some variation of it for marketing purposes.) On second thought, why bother? Eventually, all insurers will be cloud insurers, eliminating the need for yet another term.