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Can Smaller Insurers Achieve Transformational Change?

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Can Smaller Insurers Achieve Transformational Change?

I don’t think any of us would argue that the insurance industry is now facing an inflection point of forces to reckon with such as changing market conditions, emerging technologies and start-up “insurtech” companies. In an environment in which both personal and commercial lines of business are impacted by a digitally-empowered consumer, many insurers are re-thinking their IT infrastructures, distribution networks and communication strategies. The word “transformational” continues to be used to describe our current business and IT environment, yet recent coverage in the media paints a different picture for smaller insurers trying to achieve transformative change.

 

I was struck by a comment made by Tom Benton, VP of research and consulting at Novarica, in an article published by Digital Insurance (and in which I am quoted) called “Smaller insurers lean on partners to navigate disruption.” Benton argues that, while all insurers continue to struggle with limited IT resources, capabilities, and access to specialized skills while facing increased demand for operating efficiency (and hence, the need for innovation), smaller insurers are at a disadvantage when it comes to creating an environment in which transformative change can occur.

 

“Most insurers are focused on three things,” he said, “running IT for the organization, projects that help the organization grow, and transformational projects. Most small carriers don’t have the budget or resources (including talent) to apply to transformative projects.”

 

While it’s true that small property and casualty and commercial Workers’ Comp carriers, municipal risk pools, captives and self-insured groups may be vulnerable to more rigid budgetary concerns than their larger Tier 1 and Tier 2 counterparts, I’m not convinced that transformation is unattainable to them.

 

In fact, the opposite is true. Although smaller carriers may not have the desired resources, they do have ability to set up the organization in such a way as to move quicker on certain initiatives than do their larger competitors. Smaller carriers can make decisions faster, without jumping through all the organizational hoops usually present in a larger company. Plus, they usually have a culture that embodies taking risks, getting faster approvals and moving into a pilot much quicker than larger insurers.

 

Let’s look at the agility of a smaller carrier and add the notion that these employees tend to “wear many hats” (often running IT operations while functioning in another capacity within the organization). Here choosing the right technology partner is critical, and long-term considerations are needed by insurers when making decisions on platform, systems and applications.

 

For example, Maine School Management Association (MSMA), a state-wide non-profit federation that administers various insurance programs to the state’s school systems, replaced a decades’ old process that involved spreadsheets and manual entry, with Connections® cloud-based insurance management software. The decision, made to provide secure and efficient online renewals of property and casualty (P&C) coverage for its 98-member school districts, is transforming the entire renewal process, with improvements in reducing renewal process time and streamlining members’ ability to respond.

 

With just 23 employees, MSMA is an example of an insurance organization that has achieved transformational change due to its commitment to successful risk-taking, a calculated plan to work exclusively with “best in class” vendors that specialize in serving public entities and understand their processes in order to help them meet their goals, and a culture that is committed to innovation-fueled growth.

 

I point to MSMA as a success story, and although not every implementation or established working partnership experience can be 100-percent positive, even less successful experiences serve to inform future operations. We aren’t perfect, and firms that proclaim, ‘not us,’ or ‘we won’t have those issues,’ are either disingenuous or naïve.

 

The call for transformational improvements is growing and upon us, with pressure to innovate using technologies such as cognitive computing tools, machine learning, predictive analytics, robotics processing automation, chatbots and natural language processing.

 

Rather than be at a disadvantage when it comes to creating an environment in which transformative change can occur, smaller insurers are embracing a new level of confidence that maintains that transformation is not only possible, it’s realistically attainable.

Jim Leftwich

Jim Leftwich has more than 30 years of leadership experience in risk management and insurance. In 2010, he founded CHSI Technologies, which offers SaaS enterprise management software for small insurance operations and government risk pools.