Tech and your insurance business

The second episode in a conversation with Tavio Roxo, the CEO of OWLS^™  Software, about the relationship between the fundamentals of a successful insurance business and your digitization journey.  

In our last discussion we looked at how we can group these fundamentals together. We now unpack strong financial management and effective risk management, reflecting on how technology can solve challenges in those areas of the business.  

Tavio: When guys ultimately engage with system providers like me, my experience tells me that they typically have what I call a fragmented technology landscape. That is the beginning of the problem or the structural issue that must be solved. 

This is a structural issue because you typically have different technologies that are operating as silos in different areas of the business. A good example is where you onboard a new policy through a CRM (Customer Relationship Management) or a system which allows you to manage contacts, sales, and you then bring them in to incept a policy. When you incept the policy, the fulfilment mechanism of the inception of that policy may be a different system to the CRM system, and that would then be the place where you administer and manage the policy and the documentation associated with the policy, or maybe you have a third piece of technology that just does the document management. 

Now it is on a C drive link to that policy holder, with a unique folder and it is not integrated into system one or system two, it is just a standalone in a C drive and you can have access to it. You then have another system which allows you to lodge a claim and a fifth system, which is now operating to process that claim. You then have a sixth piece of technology, which would be a data lake or a data warehouse, where you take all the data that is living in your CRM system, your claims management system, your performance system, your policy administration system, and you cycle that information into a central place. You then try and normalize it or transform it into a readable, consumable piece of data. You dump it into a data warehouse, and now you have another, an eighth piece of technology, which is the reporting function, which takes that information out. Then a ninth piece of technology takes information that is sitting in your data warehouse, and it puts it into an accounting system. Then you have another accounting system, one or two or just one, which will be utilized to prepare your monthly management accounts and income statements and potentially your balance sheet transactions. You then possibly have yet another system, which is where you prepare your annual financial statements.  

You can see there is quite a plethora of technologies in this landscape that people struggle with. They struggle with it because there is no holistic integration amongst all of them, where you can understand that Tony, as a policy holder for insurance company A, has various products, and different associations with the company. Tony could be a broker, a policy holder, a claims assessor, you could have multiple interactions with Tony. So, this is complex from an IT perspective, which is why people have not solved it in the past. 

So, how does a technology stack assist a company? The first thing that you are doing when you are trying to bring everyone into a technology journey, is to start at the beginning and then work in the same technology all the way through to claim stage or policy termination. You can then immediately identify Tony as one person. You can identify how he fits in from a life product or from a short-term product perspective. You can understand Tony when his debit order bounces on product A, but does not bounce on product B. You can understand Tony as the broker that you are paying money to because he directed sales to you. This is not you, understanding it by putting it into a data warehouse and extracting it. The data is there, you can understand it and consume it in real time.  

Financial management 

From a financial management perspective, you then extend that very same theory where you are trying to perform all the functions within the same system or in the same technology architecture, and you then start at voucher level. You start at bank statements, that is where you start. Ultimately you build up your transactions from there.  

For me, and at least from our software perspective, for us the key feature is every month to reconcile back to bank, down to a balance of zero. Then you know that you are dealing with a financial tool that will give any CFO (Chief Financial Officer) in that business comfort. 

When you are working at a voucher level, you are working at the most basic data point, and you are extrapolating up from there. That then gives the business the ability to rely on what has been outputted by the system. And once they can rely on it, they can start making decisions and utilizing it. 

Underwriting and Risk Management 

Another aspect, critical for insurers, is obviously the underwriting and the risk management.  

When you bring someone in to understand that Tony already has nine products with you, and that there is four short-term and five long-term products, and that, when you are giving him the fifth short-term product, you have an understanding that you are exposed to him in multiple places in your business.  

So, , you have to have that underwriting and risk matrix living in your system, or you have to have it living in a place where there is an automated API running between your black box and your underlying system so, that you can immediately identify that Tony is too risky and you do not want to give him anymore risk cover. 

That can only be done where you understand Tony as one, and you can only really understand that when you have a similar technology stack, or you have an API between multiple technologies, in a seamless flow. This is the only way you can ever build true scale. 

Tony: I guess you can then understand your exposure per client, per region, Per segment of industry, per type of product, all of those. You would be able to extract that, compare exposure, and see what is worth your while and what is not, what is costing you money, where your risk is too high, where you are mispricing, all of those. 

Tavio: Yes, and you can do that dynamically, on the fly. You can do that, not after the fact, not after I have taken Tony’s 10th risk on, and then realized I should not have taken that on. You do it at the point of inception and say, ‘sorry Tony, we are already overexposed to you. But that must be automated there. That cannot be an eyeball relying on an eyeball, especially in a complex big insurance business with multiple verticals, multiple products, and hundreds, or thousands of employees.  

There is just no way that you can do that without having some tool that is able to consolidate it, so that you can understand it.