How a shared platform solves the life insurance industry's biggest challenges
Amazon, Facebook, Airbnb, Netflix – these platform business models are changing the world. They are giving consumers more purchasing power than ever before and are challenging traditional business models in many industries.
In this conversation with Rick Hyde, CEO of Insured Connect, we explore how a shared platform business model addresses some of the biggest challenges faced by the life insurance industry in the coming decade.
What is your background and what lead you to be interested in creating a shared platform for the insurance industry?
Over the past 20 years, I have been involved in designing, implementing and supporting web-based wealth management and financial service solutions for North America’s leading banks, life insurance carriers, fund dealers and brokerage firms.
One of the key themes that emerged from this work was the importance of data. Every insurance company I worked with on the financial product side had a unique strategy and wanted to harness technology to automate their strategy. In order to do this, they needed to aggregate data and spent considerable amounts of money and time attempting to do so.
At the same time, ask anyone in distribution about their biggest pain points and access to data is at the top of the list. Product manufacturers have attempted to solve this data problem, but their solutions have been expensive to develop and support, and place the onus on distributors to wrestle with multiple feeds from different carriers, inconsistent formats and naming conventions.
These experiences helped to clarify in my mind that what the insurance industry needed was a low-cost, low-risk shared data platform that could solve many of their biggest technology challenges. The data platform sets the industry up to solve other major challenges (see below), starting with data sharing and by enabling connections and insights into the insurance distribution ecosystem as a whole.
In one sentence, how would you define a platform?
A platform is a business model that allows producers and consumers (and in the insurance industry context, manufacturers, distributors, advisors and consumers) to engage and exchange value with one another.
Why does the insurance industry need a shared platform?
The insurance industry is evolving its technology systems, but for the most part it continues to operate in silos. Distribution organizations deal with dozens of carriers and do the same thing with each of them. The replication and inefficiency is unsustainable. The insurance industry won’t be able to compete with low-cost, technologically integrated market entrants if it doesn’t become much more efficient.
Investment firms and banks, and soon the technology giants, are looking at entering the insurance space in a big way. These industries have well-established networks and platforms that include manufacturing and distribution. Today, these firms are selling the insurance carriers’ products so the carriers are happy to work with them. Long term this does not bode well for Carriers who are being disintermediated from the end customer and pushed farther into the background. Eventually these tech giants will either buy their own carrier or create their own products and eventually push the carriers aside.
The insurance industry is facing a stark choice: it can simply sit back and let some of the new market entrants take over, or it can create its own shared platform that supports their manufacturing and distribution. Once established, such a platform can also be a distribution platform for other investment and banking products.
The insurance industry needs to cooperate just like other industries – data and communications are commodities, so build them out on a shared platform and focus effort and energy on innovation that creates a competitive advantage, such as new products and services or new business automation, initiatives that will actually have an impact on top line revenue.
Some in the insurance industry are responding to the demand to digitize by implementing digital strategies and developing their own independent platform technologies. However, this approach can take considerable development time and be very expensive to maintain and carrier specific solutions don’t support the trend towards independent and 3rd party distribution.
A shared platform, like the one Insured Connect has created for the life insurance industry, offers a single, open-sourced, digital platform that enables the industry to quickly respond to distributor and consumer needs so they can remain competitive in today’s marketplace.
What are challenges that Insured Connect solves for the life insurance industry?
A shared data platform not only provides everyone with access to important information, it is the most effective way to address the industry's three biggest business challenges: data analytics, lack of client communications and dealing with expensive and complex technology solutions.
1. Data analytics
Many Carriers have spent millions of dollars developing analytic solutions, but they are unable to easily leverage and share this intelligence with distributors and advisors. Distributors and advisors are often left to shift through numerous data files in an attempt to collate and interpret the data, making it highly inefficient and susceptible to human error. Without quick and convenient access to data insights, advisors miss out on potential sales opportunities.
A shared platform creates a fast, secure and auditable way to share data analytics so that all parties can focus on their strengths and capitalize on potential sales and service opportunities in ways they historically have not been able to.
Without a connected platform for carriers, distributors, advisors and policy owners communication with one another is often disjointed and inconsistent. For example, carriers currently don’t optimize communication with their advisors or policy owners and struggle to have effective digital relationships with them. Advisors also lack a quick way to communicate with clients and miss opportunities to focus on serving policy owners.
A shared platform can leverage the distributor-advisor relationship and create a digital bridge that carriers can use for digital communications. At the same time the trusted advisor-client relationship can be leveraged to bring clients online and open the door for digital communications between all stakeholders. We live in a digitally driven world, where companies and consumers expect timely, accurate responses – and shared platforms allow them to do just that.
3. Technology chaos
Currently, distributors and advisors are having to learn and use dozens of different carrier tools and systems which is confusing and expensive. Carriers are creating some very innovative new programs but adoption continues to a big challenge.
With a shared and open platform, carriers can embed their technology and business processes into the ecosystem making them easy for advisors and policy owners to access and use. This model helps to solves the user on boarding problem while creating huge efficiencies for users.
This model also supports sharing of existing data, reducing manual entry and costly data entry errors.
Could carries not just build their own platforms?
Absolutely, but it costs millions of dollars and takes years to bring to market. And no matter how impressive the technology is the independent advisor and policy owners will need to come to the carrier to access it. Carriers will need to market the solution, do their own on-boarding, their own training and users will be faced with multiple systems to access and use. Amazon, Airbnb and other platforms are successful because they have created a single access point that provides users with access to a broad range of products and services.
What excites you about the future of the insurance industry?
I have been working in the industry for over 20 years and, without any doubt, the attitudes have just recently changed. Insurance executives are now open to discussion and new ideas and there is a much greater willingness to share. They are motivated and want to move quickly. The movement is underway and it is going to be extremely exciting to see what we, as an industry, can accomplished over the next few years.