What if someone Kickstarted an insurance company

As analysts in the insurance industry, Celent spends considerable time and effort considering new and improved ways to do business. Much of this emphasis is on technology and where our customers, and the industry, are in their efforts to improve and what still needs to be done.

Our industry is evolving and implementing new innovations, particularly focusing on the customer experience, including the web and mobile. Many, if not most, companies are hampered by aging technology in their back-end systems. This is certainly true in the P&C and Health industries and particularly true in the Life industry. Life insurance is inherently a contract that extends over a significant period of time. Therefore, many insurers are using systems that are 20, 30 or even 40 years old. Let’s assume that a system installed in the 1960s does not play well in an Internet connected world.

So the question for this post is about disruption. While Kickstarter or other crowdfunding methods are unlikely, it is interesting to think about how an insurance company would be formed and implemented if it was a new company formed today.

What would we need to start this mythical company?

1) Would you need any employees?

This is the first fundamental question. Many insurers are large employers with a significant investment in people and facilities. If you were starting from scratch, would you hire industry veterans, trying new employees and open up a big office?

Possibly not. Once you have capital, virtually every other function could be outsourced. There are solid Sales and Marketing companies with licensed agents to service both web applications and call centers. Reputable Third Party Administrators exist that can handle every operations functions. Good actuarial firms can be contracted to design the product. Reinsurers can not only take risk, but in many cases provide Underwriting guidelines (and technology). Financial management requires a solid accounting firm. The list goes on, but it is an intriguing question.

Building a virtual company has never been easier.

2) Would you need any agents?

Again, possibly not. Starting from scratch, the company could be entirely on-line, backed up by a call center. As mentioned above, there are many companies that can provide this service. Of course, they’re still agents, just not the traditional independent or captive that sells locally.

3) What about capital?

This might be the biggest barrier for entry. Money isn’t as available as it once was and, notwithstanding the title of the post, crowd funding isn’t designed to raise the amount of money required for an insurer.

The purpose of this post is not to suggest that the reader run out and start a company, although let us know if you do. It is more for the existing insurers that are not able to be as nimble and change with the marketplace as quickly as they might need. Even the largest brick and mortar insurer can innovate.

There are companies, large and small, in our industry that are truly innovating. If this post intrigued you, or even if it didn’t, but you do not have any formal innovation process, then perhaps you should. Your competitors are staffing dedicated innovation labs to stretch themselves, and the industry. They’re trying new things and failing fast.

What new idea will be born in your company today?

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For Halloween: The Tricks to Get Innovation Treats

Innovation is not witchcraft but, when done successfully, there is a touch of magic. The magic happens when innovation becomes “part of the way we do things around here” (read: corporate culture). When people across the firm approach their jobs constantly through the lens of “how do I change my job so that I deliver more value to my customers?”, magic can happen.

We discussed this in a webinar this week (Innovation in Insurance: Differences across Continents). The point was made that there are specific actions (tricks!) that prepare a corporate environment for magic. Specifically:

• Establish a common language around innovation; what is it? what is it not?


• Revise reward systems, especially around encouraging “fail fast” behaviors


• Develop a communication plan around innovation – leverage Corporate Communication expertise to sustain a messaging effort around innovation


• Tune existing governance structures to handle innovation initiatives differently than run-the-business projects

The message coming through in Celent research is that innovation is more process, sweat, and political capital than black art. So, try these tricks in your organization so that you (and your customers and teammates) can enjoy some innovation treats!

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Watch out. Apple with Mayo is heading your way

Hmmm . . . That combination is pretty tasty in a Waldorf salad, but it’s a bit hard to think of other recipes that do appeal.

The Apple Watch is very attractive—one analyst hoped it would be stylish enough to wear to the Oscars. (I’ll let everyone know what I decide to do next year).

But from a healthcare and health insurance Internet of Things perspective, questions still remain. Early information is that the Apple Watch’s biomonitoring functions are pretty modest: pulse and movement (and distance?). Did anyone say fitness band?

Somehow “killer app” doesn’t sound quite right in this context, but that is the real question in terms of making people with serious medical conditions (or serious medical vulnerabilities) want to buy the Apple Watch. In roughly ascending order of technical and ergonomic challenges—temperature, blood pressure, glucose levels, blood chemistry of all different types, urine analysis, and (why not?) genome-driven personalized medicine—are off in the future, in some cases well beyond the horizon for a wearable (time telling, messaging, location-revealing) device.

Meanwhile there is always next year’s Oscars.

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$100million — Follow the Money: Investment in Innovation Ventures

The announcement yesterday that MassMutual has set up its own fund to invest in innovations that may/will affect life insurers is another move demonstrating how real money is being bet on disruption.

Here is the link to their press release site: http://ift.tt/1xc16qc

Celent is aware of several organizations which have set up similar funds. These are not 3rd party venture funds, but are managed, directed, and owned wholly by insurers.

These moves signal that innovation leaders are increasing investments to discover new ways of responding to customers’ needs. The difference from past behavior is that insurers want to own the technology, not just buy it once it is available on the market.

In these companies a first mover advantage strategy is replacing the age-old fast follower approach. The bet is that, as technology investments pay off, patents and expertise barriers will prevent others from even being able to follow. Insurers will gain advantage because they own a protected capability, or they will be able to license it and capture an alternative revenue stream.

Stay tuned. It’s going to be exciting!

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The Efficiency CIO vs the Agility CIO

Craig Beattie

I wanted to take a moment to discuss two CIO archetypes. I had the occasion to see a panel recently where CIOs from different ends of this scale were sat next to each other to discuss a common topic. Having grown up in application development and worked in Enterprise Architecture I found myself split on how to approach change and investment.

First with my EA hat on. For those who have talked to me about Enterprise Architecture you may have heard me espouse the view that it is frequently focused on efficiency. EA is a great tool for mapping out current state and understanding change. Two of the key outcomes of EA are highlighting gaps in change, infrastructure, applications and the organisation as well as highlighting duplication. Duplication obviously yields opportunities for rationalisation and efficiency with what is typically an easy business case to assemble.

As an EA it can be easy to become focused on making investments in IT highly efficient, keeping a simpler applications architecture and making the right large investments in IT.

With my EA hat on I align with the efficiency CIO. Making large, meaningful investments in IT change that has the best promise of return on that investment. The key is to have the big view of change and protect future change from complexity. Here, change is executed selectively, as reliably as possible using the right resources at the best possible cost.

Now with my application developer hat on. Here my interest is in how do create new software and grow software assets to better meet the customers needs. With this hat on I want more change, to create more software to satisfy the many diverse requirements of the customers in the organisation. As a software engineer or application developer I see where parts of the organisation are starved of simple change, starved of access to skills like mine to continuously improve their position.

Here I observed what I have called here the Agility CIO. The CIO who is the developers champion, who values the ability to create new software and is happy to have the IT landscape grow to assist the business in similarly growing. Why not throw some IT folks, either internal or with partners, at a business problem and create something new? There needs to be adoption of pre-built assets, re-use, re-factoring, replacement – but this is a natural result of engineering and something we trust developers to execute as part of their role. Of course this means having good developers who are well paid, rather than the cheapest resources available. Further, with new software and expensive developers complexity and cost base tends to increase over time as well.

There is a role for both types of CIO, each organisation has different priorities whether they’re an insurer, intermediary, vendor, start-up, etc. Further, these priorities change and the CIO needs to balance their approach to change along this continuum. Indeed there will be parts of the organisation where the Efficiency CIO is most appropriate in reigning in unproductive change, and other parts facing stiff growth challenges that need an Agility CIO.

Where is your IT organisation on this scale? Where should it be? What is a good balance? I’d love to hear your feedback.

Celent is looking to understand how fast is fast, as well as how investment can be protected or future-proofed in a survey live at the moment. We’d be happy to share the results to those who share their views…

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6.24.2014 Celent Insurance Webinar: BPO in Insurance

Mike Fitzgerald, Senior Insurance Analyst

This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chuck Smith at csmith@celent.com or at 617-262-3125.

Please click here for more information.

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Apple Takes a Bite at the Internet of Things—Where are Insurers?

Apple has just announced two new “robust frameworks” for developers that are aimed squarely at two of the hottest sectors in the Internet of Things (IoT): HealthKit and HomeKit (http://ift.tt/1pMLVBK).

The IoT connects people and non-human things. HealthKit facilitates communication between fitness apps (think fitness bands) and health apps (think doc in a box). HomeKit uses Siri to poll and control household appliances and systems (heating and cooling, lighting, security (and eventually entertainment?). Everyone who saw “Her” and wishes they could achieve a higher level of intimacy with an AI/Machine Learning avatar, can now (according to Apple’s PR) “tell Siri you are “going to bed” and it could dim the lights, lock your doors, close the garage door and set the thermostat.”

Apple also announced some initial partners: the Mayo Clinic for HealthKit; and Philips Lighting for HomeKit—both strategically good, and household names (so to speak).

What is missing from this announcement is any mention of how health insurers or homeowners insurers could participate in what Apple wants to be a foundational step for connecting networked sensors to data stores, and then using analyses of that data to better price, underwrite, and control losses.

The iPhone (and other smart phones) have changed parts of the claims process, and basic communication between consumers/patients and healthcare providers. Apple clearly hopes that HealthKit and HomeKit will begin to do the same for the IoT.

Will insurers jump on this wave—or stay on the beach?

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