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Industry platforms have become more of an insurance discussion point as insurance decision makers, analysts, and consultants consider 2018 and new technology trends. IBM’s collaboration with MetLife and Majesco to create the new IBM Insurance Platform was an impetus for that conversation (if you missed it, check it out here). The IBM Insurance Platform is a milestone for insurers, who now can take advantage of a vertical industry platform that offers a complete end-to-end insurance environment as-a-service for both customers and distributors.
The implications for insurers, software providers, and other insurance ecosystem participants are significant. Benefits accrue to regulators, distributors, and most importantly, to the insureds who trust the industry to handle risk on their behalf. This new platform will transform how risk is managed. Let’s review why this new insurance approach is so groundbreaking — and who it benefits.
Redefining the front-and back-office experience
This new insurance platform is built on IBM Cloud and offered as-a-service, which transforms fixed-cost IT, application provisioning, and business operations into a more variable-cost, scalable solution. It provides product and data structures that are flexible enough to handle a wide range of insurer business strategies and solutions. Businesses can now move away from systems that involve large software license fees and inefficient IT development and application maintenance, and move to a more agile, cost-effective solution.
As more insurers move to a platform approach, economies of scale in back-office utility provision will emerge as well. Infrastructure investments in the platform in areas like security, regulatory compliance, and disaster recovery will accrue to all. These advantages in cost, flexibility, and security will become table stakes for insurers.
The IBM Insurance platform also enables digitalization, helping the industry redefine itself with differentiated customer experiences and faster product speed-to-market. Insurers can now freely experiment with microproduct introduction, since the platform has sufficient product depth and flexibility to handle many product types and structures. Provision on IBM Cloud also means the platform can tap into the industry-leading cognitive experience and tools IBM has invested in and developed over the last decade. This allows insurers to compose differentiated experiences to give end-insureds and distributors unmatched customer experience, support, and risk advice.
Broader platform effects on insurance markets
For insurance ISVs, platform economics has important implications. An industry platform in a given line of business and geography can attract insurers quickly. With the network effects provided by an industry platform, first mover advantage becomes crucial. ISVs who can attract charter customer investments and ally with cloud and cognitive partners will quickly gain traction over ISV options that involve up-front licensing fees and on-premise implementation. Platforms will have a consolidation effect on the ISV space, and ISVs will quickly move to claim platform status without having platform SaaS economics, cognitive integration, ecosystem capabilities, or cloud scalability and security. Such ISVs will rapidly fall behind without access to best-in-class tools for refined user experience differentiation and distinctiveness.
Platform benefits also extend to regulators, who will likely welcome these changes. A common platform, in particular one that is well-integrated with a blockchain framework, will offer unprecedented options for regulatory transparency and oversight. Role-based access to product definitions and underwriting decisions can greatly simplify insurance compliance while preserving the ability for insurance markets to innovate and develop new risk options. Taking the “nuts and bolts” of insurance operations to an efficient platform will level the playing field on costs, lower the barrier to entry for new models, and create more competition in the primary insurance market.
Policyholders can celebrate this disruptive new approach
For customers of insurance companies, this is great news. Insurers can now leverage industry platforms to invest in better customer experiences surrounding risk, and do so much more quickly and economically. The IBM Insurance Platform offers pre-integration of cognitive capabilities, improved mobility, and analytics tools tied directly to insurer operations. These tools can be used to provide great new apps, open insurance to third party ecosystem participation, and bring better advice and broader risk coverage to the policyholder.
As other industries develop vertical platform approaches, insurers will also be able to access permission-based, secure, risk-relevant information from other industries. IoT technology, instant and P2P payment transactions, and wearable devices all offer opportunities to develop new insurance products that link directly to risk – life policies that scale according to exercise habits, or auto policies that reward drivers who are careful in inclement weather. Insurance customers will then benefit from personalized risk assistance. They will have access to products that match their insurance needs much more closely, and will avoid risks in the first place instead of arguing about benefits after a loss.
Embracing change in the industry
This industry platform approach will fundamentally change the insurance marketplace. It will make entirely new models possible for risk assumption and management, a level of innovation not yet seen in the industry. Disruption in the insurance marketplace, whatever your views are on the winners and losers, has arrived. This change can be resisted, at the risk of falling behind, or embraced, positioning and empowering committed insurers to become industry leaders.
Read more about the new IBM Insurance Platform and how it can help your business here.