"Vintage" is typically used to describe items that are at least 20 years old. There is no doubt that vintage clothes and cars have their charms. But vintage tech? Not quite so charming.
Twenty years ago, we'd just lived through a couple of years worth of Y2K hype. The iPhone didn't exist. The cloud? Still in the sky.... Client-server architecture was the state of the art 20-plus years ago, and laptops were just starting to replace desktop computers. Since then, we've seen a surge by smartphones, Google, Bluetooth and 5G to name but a few. We've also moved to more distributed computing environments, virtualization, software-as-a-service and mobile-first platforms.
Many legacy platform providers have repeatedly overhauled their platforms to keep pace with changes in technology and to integrate various acquisitions along the way. But legacy platforms that have evolved over longer periods can be bloated and far less efficient and cost-effective than more modern technologies.
Most of the companies that provide software platforms that currently power the industry were born in the 20th century, and the most recent Gartner Magic Quadrants (MQs) for core insurance platforms in life and P&C provides some interesting numbers:
- The average age of the top 11 companies listed in the MQ for life insurance policy administration systems in North America is 34.5 years old -- and none of these companies were founded in the 2000s.
- The average age of the top 10 companies listed in the MQ for P&C core platforms, North America, is 26.8 years old, with just three companies founded in the first decade of the 2000s.
This is not to say that these companies or technologies aren't the right platforms for insurance carriers, but, when it comes to evaluating new technologies for digital transformation, there is a strong case to be made for focusing on digital-native solutions.
With that in mind, here are some considerations to help guide your search:
#1 -- Business Model
Understanding how a potential insurtech partner sells its software can be instructive. Is it sold as an annual subscription or an enterprise license? Modern technology solutions are typically cloud- and subscription-based. Advantages include lower total cost of ownership, scalability/flexibility and security. Plus, software is automatically updated, including new features and fixes.
Consulting services required for deployment are another important factor to take into account. Is there a separate services engagement? How does the new technology integrate with existing platforms, e.g. is it API-driven or hard-wired? Is the new solution partner-friendly or intent on "going it alone"? What is the average timeline for projects of similar scope?
See also: 2021’s Key Technology Trends
Enterprise licenses, on-premises deployment, armies of consultants on-site for months, patch Tuesday...these are relics that predate today's modern technology. Moreover, legacy technologies can be monolithic and inflexible, so integrating partner technologies is difficult, time-consuming and expensive.
#2 -- Delivery
Flexibility is the name of the game, and there are a few things to consider, especially as we navigate the global coronavirus pandemic. The ability to remotely integrate and deploy new technologies is critical until a vaccine is widely available and adopted, and most insurance carriers aren't in a position to wait and see. Likewise, the ability to get to market quickly with new features is extremely important. Competitive pressures are coming from multiple fronts, and the insurance carriers that make it easiest for consumers to buy are the ones that will win.
You should also be on the lookout for flexible deployment options to ensure you are only deploying -- and paying for -- what you plan to use. It is not uncommon for legacy software packages to include lots of features you don't need along with the ones you do.
The best-case scenario is to find an insurtech partner that has the solutions you know you need today with the option of adding functionality as your needs evolve. This includes the ability to add existing platform features and to seamlessly integrate partner technologies as needed to build out the best solution for your business.
#3 -- User- and Data-Centricity
Netflix doesn't come with a three-inch-thick training manual or hours of "how-to" videos, and neither should your insurtech solution. Onboarding new users should take no more than a few hours; anything that takes longer, or that requires a specialized trainer, should be a big red flag.
Simply delivering a digital equivalent of analog processes doesn't take full advantage of the digital channel. Building a user-centric experience starts by re-imagining how users engage and collecting data that can be used to continuously improve the user experience.
Although data is the lifeblood of the insurance industry, actually putting existing data to work has been very difficult. Legacy platforms were not built to be data-centric, and pulling data from these systems is typically very difficult. But data needs to be at the center of any digital transformation initiative.
Netflix knows what people are watching and uses this data to develop more and stronger content for these audiences. Similarly, the insurance industry can use data to inform market and product development.
Other Red Flags
Another technology red flag that you should consider is offshore development. Insurance and other financial services businesses have specific security, privacy, regulatory and compliance needs based on geography. Partners that are developing solutions for your geography -- in your geographic region -- not only understand the requirements but are also bound by them.
Lastly, you should be able to get a solid demo that speaks to your company's specific needs in a timely manner. Vendors that need a lot of time to build a demo for you are likely working with inflexible technology. Just think: If they are having a hard time moving quickly with their own software, how are you going to? Modern technology solutions tend to be modular, so it's easier and faster to build demos -- and, ultimately, to deploy solutions.
Conclusion
In 2016, Klaus Schwab, founder and executive chairman of the World Economic Forum, introduced the idea that we're entering the Fourth Industrial Revolution. The pace of change and the sheer scope of disruption are having a profound impact across industries:
"The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century.... There are three reasons why today's transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope and systems impact."
See also: Technology Cannot Replace Brokers
Legacy technologies and approaches to modernization have a very short shelf-life these days. Extending dated solutions or replacing them is a business-critical decision that will affect your ability to innovate and compete today and into the future. A digital-native, data-centric foundation is critical to modernizing and future-proofing insurance operations.
Enjoy a glass of vintage wine from time to time, but don't be fooled by vintage technology -- it simply cannot have the transformative impact that the insurance industry needs to modernize and compete in the digital age.
