You Don’t Need to be a “Platform” to be a Leader

You can build a lot of jet fighters for the cost of an air craft carrier

I mentioned in a LinkedIn post about recent insurtech conferences I attended that I was happy to see some insurtech companies delivering on a focused, useful business service and that not everyone has to be a “platform vendor” to be successful. Since then, I have talked to a few industry people that wanted me to clarify that position since there is still a perceived need to be a platform to win the land grab going on in the industry as to who is at the center of the insurtech (and insurance) ecosystem.

While I do believe there will eventually be a few leading providers of insurance business application platforms in the larger insurance segments, they will be few, they will be expensive, and they will need to maintain a large partner ecosystem to meet all the needs of their customers. Those ecosystems will contain a large number of focused higher-level business services at a better price and with deeper capability in their narrow domain, which you see today in general ERP and large insurance players like Guidewire.

For insurtechs, the common wisdom is you must be a platform that supports all the business domains in the insurance business lifecycle (distribution; new business & underwriting; policy, billing, and claims management; reinsurance; renewal) to be a successful and scalable business. There is a natural desire for tech vendors to increase their addressable market and appear more competitive by staking more ground but if taken too far they run the risk of hurting their credibility.

Focused Business Services

 I am seeing more insurtechs that are bringing business services to market that perform a discrete business task, that can stand alone but is often a step in a larger process. Fraud detection (fraudgraph), data translation(scrub.ai), chatbots (float.ai), and AI summary(Kay.aiI) are all examples of business services I saw at Insurtech Hartford Symposium that might be used stand-alone but again are more likely a step in a larger process. These are not micro services delivered in serverless architecture, these higher-level business services available in the ecosystem often taking a more generic technology capability like chatbots or AI, and creating a focused, useful insurance value prop that can be delivered in a cost effective manner that support gaps in a system replacement initiative as well as in-place system upgrade and enhancement initiatives.

Digging Into Platforms

The definition of a platform varies from a raised level surface on which people or things may stand; the declared policy of a political party or group; to a shoe with very thick soles.

In the technology sector, my favorite definition comes from SAP: “A technology platform is the foundation for building and running business applications. The platform allows users to run their applications smoothly without worrying about the technology that supports them.”

I think this is important because it creates a differentiator between the technology platform and the business applications it supports. This distinction has blurred a bit as Enterprise Resource Planning (ERP) solutions which include cross business domain enterprise workflow are business application platforms as long as they manage ALL the processes needed to run their company. In insurance, I’d argue we have rightly split insurance lifecycle management from classic ERP applications since they are very different. This begs the question can we create the insurance life cycle equivalent without recreating the monolithic systems of the last century. And should we?

Insurtechs, new and incumbent will have a very heavy lift if they set out to build insurance business application platforms in part because they must cover several business domains within the insurance business lifecycle, and they must meet vague market expectations for what an “insurance platform” must be.

SaaS, which is really a licensing and distribution model only, is a great example where the market expects multi-tenant systems in the cloud with 7/24 availability, with automatic upgrades at a lower cost than their old systems. Business application platforms have similar market expectations.

Many insurtechs, both new and incumbent, provide applications that support a complete business domain and process that may stand alone or be part of an ecosystem of peer applications. The insurtechs that support multiple business domains like new business, policy admin, billing, and/or claims can attempt to become a platform and do have the advantage of significant business IP in the box. It can become a problem if the lines blur in the market between these platforms and more generic business process platforms that do application orchestration (Oracle Fusion Middleware, MuleSoft) or do enterprise workflow (Pega, Unqork).

Generic business process platforms have much greater tooling, connectivity, and scope for building large scale process lifecycles but usually have less actual insurance business intellectual property. Especially in insurance, business process platforms often require a heavy lift insurance knowledge infusion from the customer that can greatly increase overall cost/effort, even with low code tools.

 Insurance domain applications that grow into platforms often lack the investment in tooling, scalability and the open architecture needed to meet all the customer needs expected in a business process platform leading to custom development.

This kind of confusion can create a gap between what the customer thinks they bought and what the vendor is willing to deliver.

Another things to consider if an insurtech really want to be an end-to-end platform, it’s a much more difficult sale to a smaller audience than domain application or business services offerings. Comprehensive digital transformation and core system replacement initiatives are happening, however a recent Deloitte study shows that “the percentage of L&A carriers intending to upgrade or enhance rather than replace their existing legacy core systems has doubled from 36% in 2017 to 73% in 2022.”  This leaves a lot of opportunity for applications and business services to help with enhancements to the insurance lifecycle.

Understanding who we are is a difficult journey for people and businesses, that changes over time, but that understanding and ability to communicate it is critical to success.