Journey Science Shatters Siloes for Insurers

Insurance is inextricably entwined with our well-being as individuals and as a society.  We insure our life, our health, our cars, our homes, and our businesses.  In the U.S. alone, the total aggregate premium of the insurance industry exceeds $1 trillion.

Despite that incredible scale and importance, insurance and its technology seem archaic when compared to the technology that drives Wall Street, Google or Amazon. Insurance companies have struggled to modernize and transform the legacy systems that handle their core business functions: policy administration systems to understand and price risk, billing and payments systems, claim processing systems, and tools to handle regulatory reporting.

Insurers are recognizing that current “business as usual” is not good enough.  In the last several  years, dissatisfaction has grown as policyholders, prospective policyholders, and anyone involved with insurance have had their expectations changed on how they interact with all businesses. It’s an “always on” digital world where a click or two brings Uber to your door or whisks a new TV from an Amazon to your living room. These experiences define the new “normal.”

The winds of change are upon us. In the last 36 months, well over $5 billion has been invested by Silicon Valley and other investors to fund InsurTech startups whose sole mission is to do what insurance companies have not done. Many of these startups are simply starting by defining a business model around a simplified policyholder experience. Unencumbered by the legacy infrastructure of insurance companies, these startups are focused on a customer-centric, digital first” approach and seek to engineer processes relevant to today’s wired world.

Lemonade is the poster child of this new batch of InsurTech startups. They tout their ability to approve a new policy in less than 90 seconds and to pay a claim in less than three minutes. Lemonade has raised over $60 million dollars in new funding. The company’s mantra? “Forget everything you’ve ever known about insurance.”

How Insurance Companies Compete

How can insurance companies compete in this new world, where it is exceedingly difficult to transform and re-engineer their businesses to become customer-centric?

Our view is that sophisticated insurance companies can learn from these InsurTech startups, and leapfrog them to essentially disrupt the disruptors. The starting point is to take an outside-in approach and look at the insurance company’s business from the point of view of someone on the outside interacting at any, and every, touchpoint.

This outside-in approach can easily be enabled through existing, proven capabilities that make up Journey Science. Our direct experience is that Journey Science will help insurance companies leverage their existing capabilities and assets, while simultaneously becoming the engine of a customer-centric transformation.

This is no small feat. Insurance companies, processes and products are complex. The technical infrastructure at many of these companies is antiquated because of the need to run custom software developed over 30 or more years. This is further complicated by insurers that have grown by acquisition in order to conduct business in other states, but have not consolidated acquired systems, leaving duplicate systems performing the same functions. Data about policyholders is siloed, making it nearly impossible to get a comprehensive perspective. No wonder it is difficult to enable a smooth, multi-channel experience as people move between mobile, desktop, and call center services.

Furthermore, the very vocabulary of customer-centricity is difficult. Ask an insurer, “Are you customer-centric?” and the most likely response is, “Who is my customer?” A company that writes insurance directly sees things differently from one that sells through agents. An insurer’s customer might be an agent, an independent agent, a policyholder, a third party claims adjustor or even a combination of the above.

Many of the larger insurers are seeing the need to transform and bringing in change agents with titles such as Chief Digital Officer and Chief Innovation Officer. These change agents are working with the line of business owners to reinvent the business. A few of these trailblazers are embracing Journey Science as a way to deliver measurable business results, quickly. They are recognizing that Journey Science provides the ability to easily and somewhat painlessly look at areas where existing systems contribute to a suboptimal user experience, create excess call center or agent interaction, and/or result in a negative Net Promoter Score, which is highly correlated with increased churn.

In this respect, leading insurance companies are building on the decades-long learnings of industries such as banking, telecommunications, and utilities, all of which demonstrated how Journey Science reaps business value. Faced with complex infrastructures and more agile startups, these businesses “fought back” and used Journey Science to improve their customer-centricity. In the process, they were able to realize annual savings between $5 and $100 million. We expect that many of these same results will be realized by insurance companies.

Ultimately, Journey Science will empower insurance companies to leverage their experience, policyholder base, underwriting acumen and claims expertise to “disrupt the disruptors” as they show that they can survive and thrive in this digital, 24x7 world.

Read more about Journeys in Insurance:

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Written by Jonathan Kalman

Jonathan Kalman is a General Partner with Eos Venture Partners, having previously served on its Investment Committee. Jonathan has 18 years of FinTech and InsurTech investing experience, as Chief Executive Officer and Managing Partner of Jaguar Capital Partners, and prior to that as Chief Executive Officer and Managing Partner of Katalyst, an Internet Accelerator.

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