How Carriers and MGAs Can ‘Kick the Tires’ and Stay On Point with Their Tech Investments

Car enthusiasts know there’s nothing quite as exhilarating as driving off the lot with a brand-new automobile. That moment when you hit the open road for the first time marks the culmination of an exciting and sometimes exhausting process. There’s intense research, discerning test drives, shrewd negotiation, and finally, success.

In many ways, the car buying experience is similar to the tech-buying journey many carriers and MGAs will undertake. Cars have evolved rapidly over the years (self-driving auto, anybody?) and insurtech solutions have changed dramatically, too. Today’s top cloud-based systems deliver a level of performance not thought possible even a few short years ago.

If you’re evaluating technology solutions for your company, it’s time to get up to speed. Ready to start your engines?

When to Trade Up

Knowing the right time to upgrade your existing technology has many similarities to knowing when to trade in your trusted family automobile. Three sure signs that it’s time to begin your buying journey include:

1. It’s harder to get products out to market quickly. When your car starts to slow down or doesn’t corner like it used to, you start looking for new options. The same is true with legacy systems. If it takes months or even a year for you to launch new products due to old-school technology, it’s a telltale sign you need the speed and flexibility offered by newer solutions.
2. IT costs are increasing. When your car needs repairs at the local garage every three or six months, the costs of keeping it start to outweigh the costs of buying new. The same is true with your insurer’s tech solution. Every carrier or MGA should expect their IT costs to decrease over time. If IT costs are increasing relative to processing volumes, it’s time to upgrade.
3. Written premium is static or declining. This is more of a subtle sign, similar to a tiny oil leak that grows over time. But if you wait until premium declines become severe, you run the risk of disengaged customers and lost market share that you can’t regain; like an oil stain that never comes out of the garage floor or your driveway.

Seeing the Road Ahead

Much like the temptation to hang onto your beloved first car — no matter how much it’s groaning and making noises — sometimes executives are compelled to stick with technology that’s long past its prime. After all, it’s human nature to be comfortable with things we are familiar with, even if they are woefully non-performant!

The reality is, dated technology, like an old car, keeps your insurance company in a low gear. Yet progressive carriers and MGAs are likely to be speeding past while you are stuck in the slow lane and yet still guzzling a disproportionate amount of gas! Forward-thinking insurers are always scanning the horizon for new or alternative solutions that can help them outperform the competition.

If your legacy technology is a decade old or more, it’s time to stop looking in the rearview mirror and start peering through the windshield. Many legacy systems were built long before online customer interaction became the norm, and the reality is you can’t innovate with technology designed for a world that communicated only with landline telephones and emails.

Choosing the Right Options

In car and technology buying, options matter. Three must-have insurtech options that will prepare carriers and MGAs for their current and future needs are:

1. Interoperability. Any new system you choose must exchange information with your current systems seamlessly. If your systems can’t play nicely with one another, it will stymie your ability to innovate.
2. Data mobility. You must be able to own your own data and exchange it freely not only with your own front- and back-office systems, but also with your data warehouse. If you can’t extract your data from a system, it’s a serious red flag.
3. APIs. Open application programming interfaces (API) are the foundational elements of all modern software solutions, including insurtech. APIs make it easy to integrate software in a way that benefits the end users.

Finding the Right Dealer

Sometimes, people delay buying a car because they are overwhelmed by choices: price point, makes, models, dealerships, etc. The same can be true with choosing technology solutions. But the market has started to separate into two distinct groups: incumbents and startups.

Be wary of well-established incumbents. Many have recognizable brand names and may even claim to offer some of the latest hallmarks of modern systems, such as low-code platforms. In reality, many of these older systems were developed years ago. In some cases, this can be the equivalent of trying to put a 1979 Ford Pinto engine in a modern F-150 truck; it just doesn’t work. Also, as a rule, if you can only update a system by using code or changing database tables, it’s not a no-code platform, no matter what the salesperson tells you.

Startups can provide carriers and MGAs a faster path to value. In particular, there’s a small group of startups that have achieved exceptional product market fit and matured smartly over the last decade.

When interviewing vendors, ask them to explain how their solution will interact with the big three cloud providers, Microsoft Azure, Google Cloud and/or Amazon Web Services. This will help ensure your new technology is future proofed. Ask about their update process: how frequently updates occur and what the process is like. Legacy systems may tout a “modern” update process, when in reality, upgrades are infrequent, painful and expensive. Updates should be frequent and automatic, requiring nothing resembling a re-implementation of products or features. Also, ask how their solution will use business intelligence and data visualization to help you improve underwriting and drive results.

One other word of caution: Some vendors will extol the virtues of a “rip and replace” approach, offering to replace legacy technology with new systems in one fell swoop. Doing so is high risk and high cost. A more elegant approach is to find a vendor who will help you integrate a new solution over time. This will help you gain aptitude with the new system as you slowly sunset your legacy technology.

Taking a Test Drive

It only takes a quick trip around the block to know whether a car is right for you. With technology purchases, it used to take far longer. But today, carriers and MGAs should expect vendors to prove value within 90 to 120 days, maximum. Making this a contractual obligation can help you reduce risk and buy wisely.

Another smart move is to create a hedging strategy where you choose a second vendor who can evaluate your existing environment and provide comparisons on economics, speed of response, and collaboration with your business teams. This approach will create tension within your supply chain and ensure vendors remain honest after the sale.

Hitting the Open Road

All carriers and MGAs deserve to experience a feeling of satisfaction when their chosen technology solution allows their business to hit top speed. By knowing when to upgrade, choosing the right options, selecting the right vendor and running simulations, you’ll gain an incredible sense of accomplishment and numerous business benefits. The only thing missing will be that new car smell.

Topics Carriers InsurTech Tech Insurance Wholesale