You often hear the expression that insurers are spending most of their money to “keep the lights on.” But, in truth, the plethora of systems of record that most insurers use is just keeping the lights flickering. You get the feeling that at any moment the lights will stop flickering, possibly produce a last-gasp of momentary brilliant illumination, and with a loud and unsettling crackling pop, go off.
Scraped too often. Suffocated by being buried in too many layers. Listless from too many of their innards extracted to feed market -facing UIs too many times.
Searching for the Goldilocks strategy
The demands of operations and information initiatives are constantly in conflict. Both are equally important to run an insurance company. However, a cynical observer could be forgiven for thinking that doesn’t seem to be the situation given insurers’ seemingly perpetual investments in business acquisition systems and systems of record.
Where and which resources should insurers allocate to operation and information initiatives? What is the “just right for the strategic intent” mixture that enables an insurer to support the existing book of business while simultaneously supporting initiatives to generate revenue from new customers in existing markets and from new customers in new markets?
What is the “Goldilocks strategy” insurers should have to move well beyond just keeping the lights flickering?
A cornucopia of customers?
Technology vendors providing systems of record solutions to insurers are fully aware of the situation. But I wonder if they have approached sizing the market in an appropriate manner.
There are thousands of P&C insurers conducting business around the world. Many of the P&C insurers sell more than one major line of business. Each insurer needs business acquisition systems and systems of record for each of the lines of business it sells. Seems a straightforward manner to estimate the size of the market.
But beware before jumping into a market-sizing trap. After you get some estimates of each of the aforementioned elements, and factor in estimates of age and replacement rates for each type of system, you might think you can now create a relatively clean market size for the business acquisition systems or the systems of record.
Not so fast….
Inertia and Return on Patience Factors Also Needed
There is another element you must include. And this element is based on the reality that many insurers build the business acquisition and/or systems of record functionality in-house. You need an “inertia factor” for your market-sizing models.
And, I suggest that technology vendors create a “Return on Patience” factor for the market-sizing models.
Now you can gather all the factors together and create – and periodically adjust – a series of estimates on some periodic basis.
What factors do you think technology vendors should use to size a market?
What factors do you think an insurer should use to determine when it’s time to enhance or replace a system (and you can’t use the number of years until you retire so it will be someone else’s problem)?
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