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SMB Insurers: Wake-Up To What’s Possible

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SMB Insurers: Wake-Up To What’s Possible

[vc_row][vc_column][vc_column_text]There has been a lot of press lately about how innovation can help insurers overcome growth obstacles. It’s no secret that the insurtech start-ups of the world, for which digital innovation is their hallmark, are garnering the attention—and funding–of venture capitalists and larger carriers, but how is innovation affecting small to medium business (SMB) insurers?

 

In some ways, SMB insurers are vulnerable to a similar fate being experienced by department stores such as Kmart, JC Penny or the local bookshop, which hang on by a thread as the online and big box retailers flagrantly take control of the market.

 

Market demographics contribute to this dilemma, as emerging generations of new customers with demands for anytime, anywhere digital access to policy, claims and account information put an additional burden on these carriers.

 

Following that theory, it’s no wonder that SMB insurers may feel overwhelmed at the thought of keeping up with the likes of IoT, machine learning, business intelligence or robotic process automation. That’s not to say that these technologies don’t have their place in insurance enterprises of all sizes, but the fact of the matter is, many SMB insurers assume (incorrectly) that they don’t have the resources necessary to climb aboard the innovation train.

 

To elaborate, consider the business culture in which SMB insurers (small mutual insurers, commercial Workers’ Comp carriers, municipal risk pools, captives and self-insured groups) operate. These carriers work within a known and predictable entity where budgets are firm, often the result of a formalized, collective group mandate.

 

Smaller self-insured pools, such as public entities, under the scrutiny of their not-for-profit state-controlled state insurance departments, are also frequently held to a more stringent set of business performance and accounting standards and metrics. Like their larger counterparts across all lines of business, they are expected to be efficient, productive and successful in every aspect of their operations, including core systems (underwriting, billing, claims), financial management and CRM/workflow.

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Unique Challenges

But due to the financial and cultural boundaries under which they operate, many of these insurers, as well as many other types of small insurers, still must rely on Microsoft Office products or cobbled together aging home-grown legacy solutions to support day-to-day business functions.

 

This may mean that a single technology solution provider or perhaps the insurer’s own, in-house IT staff is solely responsible for the health and well-being of the organization’s technology footprint, architecture, back and front office, distribution, networking, communications and security. And lately, those that rely on outside help for their IT function are faced with confusion and potential service delays as the surge in vendor merger and acquisition results in their trusted partner being gobbled up by a technology behemoth. The SMB insurer’s SLAs may remain intact, but the larger vendor undoubtedly will start pressuring the carrier to rethink outdated hardware and software. This pressure, along with the potential drop in personalized service that typically accompanies a large M&A deal, add to the SMB insurers’ challenges to remain competitive.

 

If it sounds like I’m insinuating that smaller insurers should rightfully claim a victim mentality, that’s not the case. Because by playing a critical role in providing society’s risk management checks and balances, these carriers need, more than ever, to remain relevant.

 

And they need to get the job done in the midst of the issues I mentioned above, as well as in a business environment where the talent pipeline is drying up due to a retiring workforce. To replace these workers, what’s the likelihood that SMB insurers will be able to recruit top technology talent that will be responsible for an outdated AS/400 linked to a client/server front end?

 

The bottom line is that these SMB insurers will not be able to overcome innovation-related growth obstacles until they better understand and embrace affordable technology innovation options that will make their jobs a lot easier.

 

The first and logical step in this process is gaining an understanding of what’s possible, such as an affordable pay-as-you-go, as-needed migration of core systems and data to a Software as a Service hosted environment, a gradual sun-setting of existing hardware, and the gradual move to a digital platform that pulls all necessary functionality together for reliable, secure front- and back-end operations.

 

From there, SMB insurers can implement predictive analytics for use in claims, proactive health communications and even cross-selling. And even at a small scale, machine learning and artificial intelligence can serve to help these carriers improve their claims function, customer service capabilities and more.

 

The risk management issues related to changes taking place within our marketplace, such ongoing legislative issues, changing—read younger—demographics and related culture, the sharing economy and the growing presence of disrupters, will impact all lines of business, and all sized insurers.

 

The SMB insurers that will remain relevant will be those that hear the wake-up call and understand the path to innovation, choose a stepped approach to business and technology relevance, and greet the future with an openness to what’s possible.

 

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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.